Business principles for countering bribery: An effective tool for the private sector?

Frank Vogl, Jean-Pierre Mean, Daniel Ivarsson, Karina A. Litvack, Laurence Cockcroft, 10th IACC, Workshop report, Private Sector


Frank Vogl, TI Vice-Chairman and President of Vogl Communications


  1. Jean-Pierre Mean, Societe Generale de Surveillance, General Counsel

  2. Daniel Ivarsson, Federation Internationale des Ingenieurs-Conseils, Managing Director

  3. Karina Litvak, Friends Ivory & Sime, Director Research Governance and Socially responsible Investment

  4. Laurence Cockcroft, Chairman TI UK, Consultant Economist

Jean-Pierre Mean of the Societe Generale de Surveillance presented the case of SGS whose reputation was seriously threatened when the company became involved in a high-profile corruption case in Pakistan. The company quickly realised that as an issuer of inspection certificates, SGS's integrity, which is its stock and trade, had been damaged and would have to be restored. To achieve this, SGS focused on the development of a code of conduct and a thorough process of implementation throughout the company.

Mean mentioned some of the common obstacles to fighting bribery in an international company such as dysfunctional tendering, tea money, red envelopes and sponsoring. He described management's assignment in implementing an ethics policy in a company is the following:

  • setting values for leadership not profit

  • establishing and adhering to good governance rules, regulating disclosure, oversight of management by the board of directors and oversight by the audit function

  • accountability of directors and officers

  • transparency (accounting and documentation, no payment in cash, no artificial transactions

  • full management support (the highest level of management should drive the ethics policy)

Mean emphasised that the underlying principle of the SGS code of conduct was that it is being implemented through a top-down approach. He stressed the importance of securing employee commitment, of training and retraining employees of multiple reporting routes and protection of whistleblowers and safe harbour rules. Mean concluded by saying that a corporate ethics programme is a continuous programme. He added that such a programme must have the full support of the board of directors and finally that integrity is an asset that cannot be bought but must be created.

Daniel Ivarsson, Managing Director of Fidic (Federation Internationale des Ingenieurs Conseils) made a presentation on behalf of Mr Felipe Ochoa who was unable to attend the workshop. Mr Ivarsson explained that Fidic's anti-corruption programme was intended for the developed world as well as the developed world. He clarified that the Principles of Integrity Management developed by Fidic are both a process standard and a systems approach. The BMI are meant to be useful practical, and can be subjected to certification. He reported that Companies in Canada and Nordic countries are currently rolling them out.

Karina Litvak from Friends Ivory and Sime (FIS), an ethical investment firm spoke on FIS's approach with the companies they hold i.e. they engage in discussions with companies to see how they manage risk. New European regulations on pension products in the UK, France, Germany and the EU's Green Paper on Corporate Social Responsibility are now forcing companies to take a more holistic approach to risk management and is forcing fund managers to take a look at materiality and risk management systems. FIS has gone from avoidance to engagement and focus on financial materiality as well as governance and management systems. FIS engages with academics, NGOs, fellow investors to identify best practice. FIS's focus on corruption centres around questions such as whether risk is material, whether profits will suffer and how the effectiveness of corporate ethics policy can be measured. Litvak mentioned that fund managers have indicated that corruption resulting from poor governance is associated with a 20% risk premium. She explained that in selecting companies the first consideration is macro issues and that corruption is then factored but added that the risk calculus is now changing. She concluded by saying that FIS looks for evidence of operational systems for training, performance measurement, audits and whistleblower protection.

Laurence Cockcroft, chairman of Transparency International UK, presented the TI draft Business Principles for Countering Bribery which are now being developed under the supervision of a multistakeholder Steering Committee which was convened almost two years ago by Transparency International and Social Accountability International. He first presented the overarching principles which deal with issues such as bribes, agents, suppliers, kickbacks, subsidiaries, joint ventures, compliance with Principles as condition for partnership, political contributions, philanthropic contribution, facilitating payments, gifts, hospitality and expenses. Laurence Cockcroft indicated that the level of application of the Principles is intended to be discretionary.

The value to companies in adopting the Principles is:

  • positive participation in the campaign against corruption

  • risk management tool

  • meeting stakeholder expectations

  • reputation management

  • meeting pre-qualification criteria

  • benchmarking

  • mitigation in case of litigation

Cockcroft explained that the Steering Committee currently overseeing the development of the Principles includes a majority of private sector companies working alongside with verification experts, academics and NGOs. He added that the Principles were being given exposure through a consultation project whose results would contribute to further refinement of the principles along with the findings of an upcoming field test. He indicated that a decision would be made in 2002 by the Steering committee regarding the means of rolling out the Principles and the possible creation of an independent structure to oversee the Principles and their on-going development. He also indicated that in a later stage the other issues such as money-laundering, transfer pricing might be added to the Principles.

One of the participants asked about the role of civil society in the formulation of the Principles. Panellists responded that it had strengthened the process and that it might have contributed to crystallising the issue in view of the fact that much of the debate on globalisation is about multinationals. A participant commented that the principles would not apply to SMEs and was critical of the fact they only covered bribery and not the wider scope of corruption. He suggested the organisation of a field test of the principles with an SME. Another participant echoed the comment on lack of relevance of SMEs. It was suggested that business associations could perhaps be convinced of making the adoption of the Principles by members compulsory. The same participant suggested also that the SEC should adopt the Principles or that banks could demand of SMEs that they adopt the Principles. Some participants although they were supportive of the Principles expressed reservations about external verification and the burden it could represent for companies. With regard to SMEs, Laurence Cockcroft responded that the Principles had been intended to be applicable to SMEs and acknowledged the suggestion about business association. He added also that certification might not apply in the case of anti-bribery standard as it does in the case of environmental or labour standards. Karina Litvak suggested that materiality of payments should be included in the next draft and that she could see banks requiring companies to adopt the Principles. With regard to co-operating with industry associations to disseminate the Principles, Jean-Pierre Mean agreed that it was a good idea but cautioned that simply signing up to Principles was not enough and that systems had to put in place to implement them. Mr. Ivarsson from Fidic indicates that that their principles were developed for the bulk of member associations, most of which are SMEs and that certification is not compulsory. A participant, Matthew Murray informed the group that the Russian government was in the process of writing a non-binding national code of business conduct. Given that the code is silent on the subject of bribes, he called on Transparency International to submit comments to the Chairman of the Federal Commission responsible for the development of the code.

docBusiness principles for countering bribery: An effective tool for the private sector?

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