Corporate reputations can be destroyed, workers and CEOs can face jail time in Canada
In a global business environment, it’s becoming common for Canadian businesses to send their employees abroad, both on short-term negotiating trips and for long-term expatriate assignments. Being brought into close contact with people of different cultures presents myriad challenges and risks, not the least of which are bribery and corruption.
Corruption, as defined by Transparency International, a global coalition against corruption active in 90 countries, is the “abuse of public power for private gain.”
In the coalition’s 1997 report The Fight Against Corruption: Is the Tide Now Turning?, corruption was called one of the greatest challenges of the contemporary world.
“It undermines good government, fundamentally distorts public policy, leads to the misallocation of resources, harms the private sector and private sector development and particularly hurts the poor,” the report said. “Controlling it is only possible with the co-operation of a wide range of stakeholders in the integrity system, including most importantly the state, civil society and the private sector.”
While handling business risks in areas of endemic bribery and corruption may appear particularly daunting, it must be remembered that corruption is pervasive. It exists everywhere, with some places being better able to hide it than others. Rather than being a country-specific cultural problem, corruption is an attribute of global culture. It manifests itself as a global economic problem, one that transcends national social, political, economic and cultural systems.
There are many ethical reasons to contain corruption, but there are also many practical ones, which speak to the business sector. Corruption has an impact on corporate performance and adds to shareholder risks. While productivity and profitability are essential to the sustainability of business, it has become unacceptable to reach these through unethical behavior.
The chief differentiator in business is reputation. It takes years to build an organization’s reputation but only moments to destroy it. Corruption can lead to social unrest, both within organizations and within the communities in which they are established, and can present real questions for the long-term viability of a company.
There is growing awareness, on the part of corporations, with regard to the risks posed by bribery, as well as the growing expectation on the part of the public for greater integrity on the part of the corporate sector. The good news is that, while corruption is one of the principal impediments to doing business, the effects are not something that business has to handle on its own. There is not only shared responsibility for the many factors that lead to corruption, but also for the prevention and curbing of corruption.
Canadian employees sent abroad to ethically challenging environments can work most effectively if they are aware of a number of support mechanisms in place. First and foremost, their corporation must have a living code of conduct — one that does not sit on the shelf but with which employees are intimately familiar and includes specific anti-bribery clauses, sanctions and independent audits. Often risks exist with the use of agents or representatives, as well as suppliers, and it is necessary to have them also comply with a company’s code of conduct.
Included in pre-departure training for employees should be a review of the Corruption of Foreign Public Officials Act (CFPOA), Canada’s legislation in response to the Organization of Economic Cooperation and Development’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD anti-bribery convention). Under CFPOA, Canadian companies caught bribing foreign public officials face up to five years in jail for both the perpetrator and the CEO (whether or not the latter was aware of the bribe) and unlimited fines. Refusing to pay a bribe is made easier when an employee can say with certainty that the company’s code of conduct does not allow it and he might go to jail if he were to participate in such an activity.
The OECD anti-bribery convention is one of a number of conventions (the newest being the United Nations’ Convention against Corruption) signed by governments, with which companies in the signatory countries must comply. But the private sector also has a role to play in initiating integrity in business conduct. The International Chamber of Commerce (ICC) has produced the ICC Rules (1977; 1999), which apply to particular circumstances in which businesses operate, and has published Fighting Bribery: A Corporate Practices Manual.
The ICC Rules are broader in scope than the OECD anti-bribery convention since they also include private-to-private bribery and cover the demand as well as the supply side. As difficult as it may seem, companies can also enter into general agreements not to bribe — collusion for the good of all. One example is the creation of the Wolfsberg Anti-Money Laundering Principles signed by the top 12 international private banks. There is room and need for both international law and voluntary mechanisms to curb corruption, as each reinforces the other.
While certain strata in areas of endemic bribery and corruption continue to reinforce the conduct in new and inventive ways, the working people of these countries are tired of taking part. Day in and day out, they must bribe to receive those services, such as health care, telephone connectivity, education, honest police forces and judiciary, which should be their due.
It has been estimated by Transparency International “that systemic corruption can add 20 to 25 per cent to the costs of government procurement and frequently results in inferior quality goods and services and uneconomic investments or unnecessary purchases.”
Recouping the costs of bribes has significant ramifications. Lives can even be lost, for example, when poorly built bridges or roads collapse.
Canadian companies can play a role in ensuring corruption is curbed wherever possible. Globalization means isolated existence is no longer a viable option. Businesses can be scrutinized from a number of quarters. Transparency, however, can be used to a corporation’s advantage, as can the building of coalitions among the public, private and civil society sectors.
By working together and monitoring each other, and employing the various tools available, the risks of doing business in areas of endemic bribery and corruption can be significantly reduced.
Bronwyn Best is president of Heiwa Business International in Toronto and executive director of Transparency International Canada. For more information visit www.transparency.ca.
Corruption, as defined by Transparency International, a global coalition against corruption active in 90 countries, is the “abuse of public power for private gain.”
In the coalition’s 1997 report The Fight Against Corruption: Is the Tide Now Turning?, corruption was called one of the greatest challenges of the contemporary world.
“It undermines good government, fundamentally distorts public policy, leads to the misallocation of resources, harms the private sector and private sector development and particularly hurts the poor,” the report said. “Controlling it is only possible with the co-operation of a wide range of stakeholders in the integrity system, including most importantly the state, civil society and the private sector.”
While handling business risks in areas of endemic bribery and corruption may appear particularly daunting, it must be remembered that corruption is pervasive. It exists everywhere, with some places being better able to hide it than others. Rather than being a country-specific cultural problem, corruption is an attribute of global culture. It manifests itself as a global economic problem, one that transcends national social, political, economic and cultural systems.
There are many ethical reasons to contain corruption, but there are also many practical ones, which speak to the business sector. Corruption has an impact on corporate performance and adds to shareholder risks. While productivity and profitability are essential to the sustainability of business, it has become unacceptable to reach these through unethical behavior.
The chief differentiator in business is reputation. It takes years to build an organization’s reputation but only moments to destroy it. Corruption can lead to social unrest, both within organizations and within the communities in which they are established, and can present real questions for the long-term viability of a company.
There is growing awareness, on the part of corporations, with regard to the risks posed by bribery, as well as the growing expectation on the part of the public for greater integrity on the part of the corporate sector. The good news is that, while corruption is one of the principal impediments to doing business, the effects are not something that business has to handle on its own. There is not only shared responsibility for the many factors that lead to corruption, but also for the prevention and curbing of corruption.
Canadian employees sent abroad to ethically challenging environments can work most effectively if they are aware of a number of support mechanisms in place. First and foremost, their corporation must have a living code of conduct — one that does not sit on the shelf but with which employees are intimately familiar and includes specific anti-bribery clauses, sanctions and independent audits. Often risks exist with the use of agents or representatives, as well as suppliers, and it is necessary to have them also comply with a company’s code of conduct.
Included in pre-departure training for employees should be a review of the Corruption of Foreign Public Officials Act (CFPOA), Canada’s legislation in response to the Organization of Economic Cooperation and Development’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD anti-bribery convention). Under CFPOA, Canadian companies caught bribing foreign public officials face up to five years in jail for both the perpetrator and the CEO (whether or not the latter was aware of the bribe) and unlimited fines. Refusing to pay a bribe is made easier when an employee can say with certainty that the company’s code of conduct does not allow it and he might go to jail if he were to participate in such an activity.
The OECD anti-bribery convention is one of a number of conventions (the newest being the United Nations’ Convention against Corruption) signed by governments, with which companies in the signatory countries must comply. But the private sector also has a role to play in initiating integrity in business conduct. The International Chamber of Commerce (ICC) has produced the ICC Rules (1977; 1999), which apply to particular circumstances in which businesses operate, and has published Fighting Bribery: A Corporate Practices Manual.
The ICC Rules are broader in scope than the OECD anti-bribery convention since they also include private-to-private bribery and cover the demand as well as the supply side. As difficult as it may seem, companies can also enter into general agreements not to bribe — collusion for the good of all. One example is the creation of the Wolfsberg Anti-Money Laundering Principles signed by the top 12 international private banks. There is room and need for both international law and voluntary mechanisms to curb corruption, as each reinforces the other.
While certain strata in areas of endemic bribery and corruption continue to reinforce the conduct in new and inventive ways, the working people of these countries are tired of taking part. Day in and day out, they must bribe to receive those services, such as health care, telephone connectivity, education, honest police forces and judiciary, which should be their due.
It has been estimated by Transparency International “that systemic corruption can add 20 to 25 per cent to the costs of government procurement and frequently results in inferior quality goods and services and uneconomic investments or unnecessary purchases.”
Recouping the costs of bribes has significant ramifications. Lives can even be lost, for example, when poorly built bridges or roads collapse.
Canadian companies can play a role in ensuring corruption is curbed wherever possible. Globalization means isolated existence is no longer a viable option. Businesses can be scrutinized from a number of quarters. Transparency, however, can be used to a corporation’s advantage, as can the building of coalitions among the public, private and civil society sectors.
By working together and monitoring each other, and employing the various tools available, the risks of doing business in areas of endemic bribery and corruption can be significantly reduced.
Bronwyn Best is president of Heiwa Business International in Toronto and executive director of Transparency International Canada. For more information visit www.transparency.ca.
