Corporate Integrity: Has the Penny Dropped?

by Tanya Barman

Posted: 30 Nov 2010

In April this year the UK Bribery Act was passed into law and in April 2011 it will be enforced, bringing the UK into step with the OECD guidelines on anti-corruption. The Ministry of Justice has just completed its consultation on guidance for companies, which will be released early in 2011.

At this point many organisations are still revisiting policies and procedures internally; a challenge particularly for SMEs, but even the largest corporations are tussling with how to ensure such guidance is embedded in the organization. Directors will need to evidence that they have set up processes throughout the business that are both robust and reflect six principles, including top level commitment and effective implementation. Companies will be liable for the corrupt activities of associated third parties, as well as their own staff, and the Act applies to both UK and foreign companies with operations in the UK and has international jurisdiction.

So, paying lip service to anti-bribery - or waving a dusty policy document or employee guidance online - is not a sufficient defence if an illegal act by a wayward individual is uncovered. Transparency International, the global civil society organization that fights corruption, is ahead of the game having issued their own guidance for companies on adequate procedures; including a comprehensive checklist for companies that don't want to wait for government guidance.

Organisations that already 'live' their codes of conduct and stated values, that apply their codes of ethics and related policies in their day-to-day operations, will have an easier time. Leadership and implementation is about going beyond 'paper compliance' to embedding an anti-bribery culture; through interventions such as on-going communications, meaningful training, reward strategies and down to the types of people you hire, retain and promote.

For those who don't, there is cause for alarm.  There isn't much time to get their houses in order and this reiterates the importance of managing businesses well. Re-orienting an organization and its moral compass can take a long time, and will be nigh on impossible without the right leadership traits - as recent corporate downfalls have played testament to.

Being caught out, can take you out: or a quote I use more and more now -"if you can't be a good example, then you'll just have to be a horrible warning". Despite the risks of being caught out, and the reputational and financial costs, companies still cross the line. Think of Siemens. Their recent corruption scandal came to an end with a settlement of US$1.3bn, and custodial sentences for some of the Directors. On the upside Siemens is now leading on raising awareness around corruption issues and particularly championing collective action initiatives globally.

The costs are higher than reputational damage and financial consequence for the firm. As Richard Dowden, Director of the Royal African Society argues - "the more public funds, some of them our taxes, that are stolen and go into the offshore bank accounts of corrupt official and politicians, the less goes on health, education and development".

On a day-to-day basis, it is estimated that bribery and corruption can add 10% or more to the costs of business in many parts of the world; with the World Bank having stated that it's a US$1trillion industry. It has a huge social cost, and in development terms corruption kills. Complying with the law should not be the main motivator. Companies should seek to create a culture of integrity, which is increasingly recognised as also improving organizational performance in the long term.

The world is changing and companies need to change with it.  This means that companies and all those who serve them will, from April, need to ensure that they are not supporting any "act done with an intent to give some advantage inconsistent with official duty and the rights of others" - in sum: abusing a position of power for personal gain.

Unless, that is, you don't want to worry about doing the right thing. After all, there's plenty of time for that when you've been fired. Or worse, still in custody. With up to ten years under the new Act there'll be plenty of time to reconsider your ethics.

CIMA, in partnership with Global Witness, have issued a briefing document on the Bribery Act as well as a survey for members and the business community. Together with St Paul's Institute, CIMA will hold an event to discuss how companies have implemented adequate procedures in April 2011, which will form the basis of a future report.

About this author

Tanya Barman is the Ethics Manager for the Chartered Institute of Management Accountants (CIMA).


The opinions expressed in this article are those of the author, and do not necessarily represent the views of St Paul's Institute or St Paul's Cathedral.