Business Against Corruption - A Framework for Action - International ...

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6 Business Against Corruptionwith many other actions that increase thecapacity of countries to implement theirown anti-corruption laws.This changing environment of law,regulation and enforcement makes it moredifficult for boards and business managersto assess and quantify the legal risks towhich corruption exposes their operations.Change brings uncertainty. Of particularsignificance for many large companiesis the degree to which they may be heldresponsible for agents and other intermediariesacting on their behalf in othercountries. What may yesterday have beenconsidered an independent agent—forwhom the principal company carried noresponsibility—may, today or tomorrow, besomeone for whose actions the principalcompany may be held legally accountable.The United Kingdom’s Bribery Act 2010, forexample, creates liability for corporationswhen a person “associated” with the corporation(including third-party associates)bribes another person to obtain business ora business advantage for the corporation.The only defence is that the company had“adequate measures” in place to preventbribery. Furthermore, the Act expresslyprovides for board and senior executive liabilityin certain circumstances.As mentioned in Clean Business is GoodBusiness, a joint publication of the UNGlobal Compact, TI, the ICC and the WorldEconomic Forum—PACI, an increasingnumber of companies are implementing effectiveanti-corruption programmes, whichinclude detailed policies on company-specificbribery issues and strong managementsystems. But they are still a minority.■■Reputational risksBased on the experience of recent years,companies whose policies and practices failto meet high ethical standards, or that takea relaxed attitude toward compliance withlaws, are exposed to serious reputationalrisks. Often it is enough to be accused ofmalpractice for a company’s reputation tobe damaged, even if a court subsequentlydetermines that the company has not beeninvolved in corrupt practices. It is of criticalimportance for a company to be able toquickly quash any unfounded allegationsby demonstrating that it acts transparentlyand has in place policies and proceduresdesigned to prevent corrupt acts. Theargument that a company’s actions wereconsistent with the way business was donein a particular country, even though thoseactions are illegal, is not an acceptable excuse.Nor is it sufficient to claim that othercompanies and competitors have engagedin similar practices.■■Financial costsAccording to the World Bank, over US $1trillion is paid in bribes each year aroundthe world. There is clear evidence that inmany countries corruption adds up to 10per cent to the cost of doing business andthat corruption adds as much as 25 percent to the cost of public procurement.This undermines business performance anddiverts public resources from legitimatesustainable development while leading topotentially lower-quality results.■ ■ “Known as clean”and repeat demandsThere is growing evidence that a companyis less likely to be under pressure to paybribes if it has not done so in the past. Oncea bribe is paid, repeat demands are possibleand the amounts demanded are likely torise. Conversely, a company that takes afirm and principled stand against all formsof corruption will become known for this,and the risk of its employees’ being exposedto demands will decrease.■■Blackmail, no recourseand security risksBy engaging in corrupt practices, companymanagers expose themselves to blackmail.Consequently, the security of staff, plantand other assets is put at risk. Companiesface “casino risk”—i.e., a lack of legal remedies—ifa counterpart does not deliver asagreed where corruption was involved.■ ■ Erosion of internal trustand confidenceIf a company engages in or toleratescorrupt practice, it will soon be widelyknown internally and externally. Unethicalbehaviour erodes staff loyalty to thecompany, and it can be difficult for staffto see why high standards should be appliedwithin a company when they do notapply in the company’s external relations.It may also become more challenging tohire and keep talent.
7■■Companies have a vested interest insustainable social, economic andenvironmental developmentIt is now clear that corruption has playeda major part in undermining the world’ssocial, economic and environmental development.Resources have been diverted toimproper use, and the quality of servicesand materials used for development hasbeen seriously compromised. The impact onpoorer communities struggling to improvetheir lives has been devastating and inmany cases undermines the very fabric ofsociety. Corruption has also led to environmentalmismanagement, underminedlabour standards and restricted access tobasic human rights.Business has a vested interest in socialstability and in the positive economicgrowth of local communities. It has thereforesuffered, albeit indirectly, from theimpact of lost opportunities to extendmarkets and supply chains. The businesscommunity can and should play its part inmaking corruption unacceptable.It is important to recognize that corruptiondiverts resources from proper use.Financial resources that were intended forlocal development may, as a result of corruption,end up in foreign bank accountsinstead of being used for local purchasingand the stimulation of local economies. Atthe same time, corruption distorts competitionand creates gross inefficienciesin the public and private sectors. In mostcases where corruption occurs, the servicesor products being purchased are inferiorto what had been expected or contractedfor. In some cases, corruption has led tothe loss of lives. Its effects have been seenwhen buildings collapse because of shoddyworkmanship. According to a January 2011study reviewing the past 30 years of deathscaused by the collapse of buildings inearthquakes, 83 per cent of several hundredthousand total deaths have occurred in“anomalously corrupt” countries 2 . The longtermsustainability of business depends onfree and fair competition.Corrupt practices also accompany andfacilitate drug-dealing and organizedcrime. Money-laundering and illicit internationalmoney transfers are used as supportmechanisms for international terrorism.Global businesses must be constantlyvigilant to avoid being associated withthese major international challenges. Asshown on the following pages, companiesthat engage in the fight against corruptionindividually and collectively will stand togain benefits to their businesses, directlyand indirectly.2Ambraseys, N., & Bilham, R. (2011, January 13). Corruption Kills. Nature, 469, 153-55. doi:10.1038/469153a
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Page 5 and 6: 3Introduction: The pressure continu
Page 7: 5The case for fighting corruptionBu
Page 11 and 12: 9Practical steps to fight corruptio
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Page 23 and 24: 21• The Financial Action Task For

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