THE FIGHT AGAINST
BRIBERY AND CORRUPTION
GUIDE FOR EMPLOYERS
INTERNATIONAL ORGANISATION OF EMPLOYERS
OCTOBER 2009
WHAT IS BRIBERY AND CORRUPTION?
According to the Oxford dictionary, "bribery" is the dishonest persuasion of someone to
act in one's favour by paying them or giving other inducement and "corruption" means
the will to act dishonestly in return for money or personal gain. The characteristics of
corruption could be defined as:
Abuse of power inherent in a position of authority
Those who through participating in the abuse of power gain advantages
Third parties are the ones who suffer
Transactions take place in secret
It is not always a question of money; there could be other favours such as job,
services or gifts
Bribery is a means by which corruption occurs. Bribery could be described as any kind
of gift bestowed to influence the recipient's behaviour (e.g. money, goods, property,
preferment, privilege, emolument, valuable object) to induce or influence the decision,
action, vote, or behaviour of a person in an official or public capacity.
Several other definitions of corruption exist. For instance, the Swiss State Secretariat for
economic affairs gives the following one:1 “corruption is any abuse of a position of
trust to gain an unfair advantage. This includes both corrupting someone else and being
corrupted oneself.”
Corruption could exist between individuals, between private companies or between any
entities with public authorities or any mix of these. This last form is often the most
known by the public and is also the one mentioned in most literature on this issue.
CORRUPTION: A PROBLEM FOR ALL
As stressed by the Organization for Security and Cooperation in Europe (OSCE)2, “No
country, however democratic, is free from corruption. This social ill touches
government officials, politicians, business leaders and journalists alike. It destroys
national economies, undermines social stability and erodes public trust.”
Corruption appears as a major problem in many countries, even if in some cases the
situation has improved over recent years. However, one major difficulty is how to
measure corruption and bribery. The internal perception of bribery and corruption in
one’s own country is very often different. Most countries underplay the extent and true
impact of corruption and bribery in their society. Defining it appears very difficult, as
does ascertaining the line between corruption and legal activities. Some policies
concerning gifts or lobbying also show some ambiguities. There is also a perception that
the presence of corruption is linked to the informal economy (grey economy) rather than
the formal economy where laws are applied.
1
2
SECO, “Preventing corruption, information for Swiss business operating abroad”
OSCE: “Best practices in combating corruption”
-1-
Corruption distorts access to public services and leads to the unlawful enrichment of
individuals, thereby causing tensions in the society. It undermines the rule of law and
provides fertile ground for organized crime. It leads to a general loss of confidence in
public institutions. This in turn gives rise to a sense of powerlessness, indifference, and
cynicism, which can jeopardize the basis of democracy. It leads to wasting funds that
have been earmarked for public services or works. It shakes the confidence of investors
and means that long-term investments in particular will be transacted elsewhere. It
distorts competition, hampers transparency, and thus leads to an inefficient distribution
of resources.
THE UN RESPONSE
The recognition of the need to combat corruption is increasing linked with the ongoing
globalisation of the world economy. This fight exists now in all countries. Before the
1990s, bribery was often seen as a normal practice3; it was even tax-deductible in some
countries (e.g. Switzerland). This is now contrary to the “UN Convention against
Corruption” which was adopted by the UN General Assembly in 2003 and entered into
force in 2005. Article 12 of the Convention is focused on the private sector and contains
measures which concern and affect business. At the company level, large companies
have also developed strategies to combat corrupt practices. Corruption and bribery are
clearly now seen around the world as economic and social costs which have to be
fought against.
THE UN GLOBAL COMPACT4
The United Nations Global Compact is a strategic policy initiative for businesses that
are committed to aligning their operations and strategies with ten universally accepted
principles in the areas of human rights, labour, environment and anti-corruption. The
10th principle is the following: “Business should work against corruption in all its forms
including extortion and bribery”. It emerged from the adoption of the UN Convention
against corruption in 2003 and sets out to strengthen core values with regard to respect
for the role of law, probity, accountability, integrity and transparency. It also addresses
the loss of confidence corruption brings in institutions as well as its “de-legitimization”
of government.
The UN Global Compact suggests to participants to consider the following three
elements when fighting corruption and implementing the 10th principle:
- Internal: as a first step, introduce anti-corruption policies and programmes
within their organisations and their activities
- External: report on the work against corruption in the annual Communication
on Progress and share experiences and best practices through the submission of
examples and case studies;
- Collective: join forces with industry peers and with other stakeholders.
3
Despite efforts by the International Chamber of Commerce which in 1977 issued the first version of its Rules of Conduct to
Combat Extortion and Bribery (revised in 1996).
4
See IOE “UN Global Compact - Employers Guide”, 2004 (revised)
-2-
This principle is under the auspices of the United Nations Office on Drugs and Crime
(UNODC) in collaboration with Transparency International (TI), the International
Chamber of Commerce (ICC), the World Economic Forum Partnership against
Corruption Initiative (PACI) and the World Bank Institute (WBI). Examples of
responses are provided on the UN Global Compact website5.
THE WORLD BANK
The World Bank views good governance and anti-corruption as important to its poverty
alleviation mission. Many governance and anti-corruption initiatives are taking place
throughout the World Bank Group. They focus on internal organizational integrity,
minimizing corruption on projects funded by the World Bank, and assisting countries in
improving governance and controlling corruption.
Daniel Kaufmann, World Bank6, who estimates the cost of corruption at USD 1 trillion,
explained the difference between governance and anti-corruption – a narrower concept
– and the importance of fighting corruption everywhere. He describes myths related to
corruption which are often used as excuses to avoid action. For instance, contrary to
current beliefs, he affirmed that corruption can be measured, that poor countries can
fight corruption, that it will not take generations to solve it and that the problem
concerns all actors and not only public authorities.
Consequently, he called on governments to assume their responsibilities, including by
ratifying the UN convention against corruption, and he also stressed the responsibilities
of multinationals “Much more should be done to ensure that transnational corporations
refrain from bribery abroad, and that they contribute to improved governance practices
in host countries. Corporate initiatives promoting general principles against
corruption, or voluntary codes of conduct, may raise awareness, and at times have a
modest impact, but much tougher incentives and measures are called for, to encourage
the private (including multinational) sector to refrain from engaging in bribery”.
The presence of corrupt public service could be so significant that it has become very
difficult to establish new healthy business. Corruption of public service fosters the
informal economy with implications for workers. The World Bank sees corruption as
one of the greatest hindrances to development and an effective cause of poverty in the
world. The fight against corruption should be considered in parallel with the World
Bank Doing Business to measure the potentiality of business in a country. The higher
the incidence of corruption, the lower the rate of Foreign Direct Investment (FDI).
IOE MEMBERS
Given that the negative impact of corruption is recognized as needing urgent attention in
order to improve the business environment and attract Foreign Direct Investment (FDI),
enterprises should play a major role in the fight against corruption. Most employers'
organizations also recognize the seriousness of the problem and that it will be a long
term challenge – even if the problem seemed endless.
5
http://www.unglobalcompact.org/Issues/transparency_anticorruption/index.html
6
World Bank, “Myths and realities of governance and corruption”, 2006, available at:
http://siteresources.worldbank.org/INTWBIGOVANTCOR/Resources/2-1_Governance_and_Corruption_Kaufmann.pdf
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Corruption is then a societal problem. IOE members recognize that business has always
seen itself as having an important role, alongside other actors, in the economic and
social development of its communities. Business is an integrated part of any society and
is committed to operating in a responsible and sustainable manner7. To respect this
commitment, both companies and their organizations need to be active in national
efforts to combat corruption.
Some large companies are at the forefront. For instance, to define the concept and to
combat it, Shell provides a manual entitled "Dealing with Bribery and Corruption – a
Management Primer"8 describing corruption through examples and dilemmas as well as
providing advice.
DILEMMAS
The perception of corruption is not easy, not only for companies but also for
individuals. This following example, which comes from the Shell training materials
mentioned above, perfectly illustrates the problems often faced on the ground by
employees.
You are an expatriate in a developing country. Friends of yours happen to live in the
area, about a day’s ride away. They have just had a baby, and you decide to pay them a
visit. On the way there, you run up against a semi-official roadblock set by the army.
The armed soldiers demand that you pay then USD 25 to get through. Everyone knows
that the army does this to supplement their meagre wages. Such roadblocks have often
been the scenes of shootings.
What do you do? Pay? Refuse? Refusing is clearly risky.
Imagine that the soldiers demand USD 1000. Does the amount of money make the
situation any different?
The soldiers are clearly part of an armed rebel militia. Does this change the situation?
Imagine, instead, that you are on a business trip for Shell. Does this change the
situation? Do you pay and then report it?
Source: Shell, “Dealing with Bribery and Corruption – A Management Primer”,
second edition, 2002
The fight against bribery and corruption is full of dilemmas for business. In many
instances, those most negatively affected are finding themselves having to engage in it.
Where corruption is very prevalent, not participating is difficult for a single business
hence the need for employers' organizations to engage as a group.
7
8
IOE Position Paper “The Role of Business within Society”, 2005
http://www-static.shell.com/static/responsible_energy/downloads/society/dealingwithbriberyprimer_final.pdf
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Corruption could be seen by some investors as an easy way to avoid administrative
problems in a country and see no "interest" in fighting that corruption. This perception
is completely false. Different studies (e.g. World Bank, Transparency International)
show the ineffectiveness of corruption and that the cost of corruption spirals. The more
one is willing to pay an illegal road toll, the more illegal toll stations emerge. If you
start paying, you will never stop paying. Corruption thus becomes an additional cost, a
kind of informal tax. It is therefore easier to prevent than to expect people to change
behaviour. Moreover, it leaves the door open to blackmail and even violence such as
kidnapping.
If a company complies with bribery, a lot of risks are involved. First, it does not have
the option of complaining or seeking legal redress if it pays and does not get what it
paid for. There is also the high risk of being open to blackmail and to a future escalation
of threats. Given the difficulties of terminating this corrupt relationship, threats could go
as far as physical violence.
CONDITIONS OF CORRUPTION
No country in the world can claim to have succeeded in stamping out all corruption.
Corruption in its various forms exists to various degrees everywhere, but there are some
common elements, which foster the conditions, which encourage and support
corruption. While corruption could be seen as part of a national culture, the data now is
clear that in all countries corruption could be fought and reduced. Very often, they are
the same conditions that explain the presence of a huge informal economy - i.e. absence
of or poor enforcement of the law. Corruption is seen by the public in some instances as
a "failure" of democracy. The presence of corruption in their everyday life further
undermines their support for the political and judicial system and the government
administration. It can become a vicious spiral.
Socio-economic conditions and the management of the State also feed corruption.
Complicated and burdensome bureaucracy (red tape) and a complex and difficult tax
regime can foster corruption. It looks so much easier to hand over a bank note rather
than having to queue to obtain an official paper. In some countries, driving licences,
building licences, etc can be bought, despite the obvious risks to the population in terms
of security and safety. A regime based on cumbersome licence and registration
processes with no transparent, ethical and fair control encourages the presence of
corruption as people seek ways to avoid the lengthy processes. The debate has also
raised the problem of the low level of wages of civil servants, which can encourage the
practice of corruption in public administration. However, corruption is unlikely to be
eradicated by merely addressing one of its elements.
Similarly, the absence of legislation, the lack of information and political instability are
also conditions which can encourage corruption as can lack of regulation.
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IMPACT OF CORRUPTION ON BUSINESS
Despite old beliefs, corruption does not speed things up9. Firms that have paid more in
bribes are also likely to spend more – not less – management time negotiating
regulations with bureaucrats. Companies that bribe also face a higher cost of capital.
The business community can benefit from laws and collective initiatives that strengthen
its ability to say “no” to bribery. This is where employers’ organizations have a major
role to play including by issuing a statement regarding an ethical approach which is at
broader level than company level. This should include a chapter on the fight against
corruption
Companies with corrupt practices are now exposed by international agencies such as the
World Bank and NGOs10 or become subject to media scrutiny. The reputation of a
company can be seriously damaged in the eyes of business partners, staff, customers
and the public at large. In this period of globalization, the reputation of a company is
increasingly important and more of a focus for its management.
The fight against corruption is now seen by many as part of its social responsibility
initiatives and a prerequisite for good governance. Increasingly, the active role of some
NGOs and media on this issue forces companies to be aware of the risk of corruption
and to be part of the fight against it. The addition of a 10th principle to the UN Global
Compact has further highlighted this issue for business.
Bribing foreign public officials abroad may have consequences for a company in the
country of origin in terms of image, but also in terms of judicial proceedings. It is
considered a criminal offence in the country of origin in some countries (e.g.
Switzerland or United States).
LOBBYING VERSUS CORRUPTION
The process of attempting to influence policy through lobbying is part of democracy
and no one asks to forbid it. It is a form of advocacy to change laws that affect business
and individuals. On the other hand, the border of such practices and corruption can be
easily crossed when lobbyists are seen to be too close to legislators who are overly
receptive to free hospitality or to other forms of gifts.
Most legislation recognizes that lobbying is a legitimate activity that lies at the heart of
the political process. Specific rules are sometimes established such as a registration of
lobbyist (e.g. US, UK).
9
See the survey done by Daniel Kaufmann and Shang-Jin Wei at http://www.nber.org/papers/w7093
See “Transparency in Reporting on Anti-corruption – a Report on Corporate Practices (TRAC)” by Transparency International
which assesses 500 leading companies
10
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Under the auspices of the Office of the Commissioner of Lobbying of Canada1, the
2008 Lobbying Act defines activities that, when carried out for compensation, are
considered to be lobbying. Generally speaking, they include communicating with
public office holders with respect to changing federal laws, regulations, policies or
programs, obtaining a financial benefit such as a grant or contribution, in certain
cases, obtaining a government contract, and in the case of consultant lobbyists,
arranging a meeting between a public office holder and another person. Public office
holders include employees of the federal public service, Members of Parliament,
Senators and many others in government. The Lobbying Act provides exemptions for
certain types of communication, such as simple requests for information, and for
certain individuals, such as members of another level of government in Canada.
This Act is based on four principles:
Free and open access to government is an important matter of public interest
Lobbying public office holders is a legitimate activity
Public office holders and the public must be able to know who is attempting
to influence government
A system of registration of paid lobbyist should not impede free and open
access to government.
In addition, a Lobbyists' Code of Conduct has been established. Its purpose is to
assure the Canadian public that lobbying is done ethically and with the highest
standards with a view to conserving and enhancing public confidence and trust in the
integrity, objectivity and impartiality of government decision-making.
NATIONAL RESPONSES
As corruption is on the political agenda, several types of responses exist. In nearly all
countries, specific instruments (e.g. laws, tax codes, mandatory property declaration for
public employees, etc) and codes exist on corruption although enforcement could pose
problems in some countries.
A means to act against corruption is the design of a national anti-corruption strategy
where business and employers’ organizations have a role to play.
The OSCE promotes the concept of a national integrity system where all actors of
society have their own and specific role. The following table11 presents the principal
means of action of each actor of the society as well as their main objective.
11
OSCE: “Best practices in combating corruption”
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ACTORS OF SOCIETY
ANTI-CORRUPTION
INSTRUMENT
MAIN GOAL
Society at large
Elections
Achieving integrity by
evicting corrupt politicians
Parliament
Anti-corruption laws
Empowering anticorruption enforcement
Judiciary
Courts
Punishing the corrupt;
corruption-free judiciary
Government
Anti-corruption reforms;
Integrity of the executive
adopting integrity regulations
branch of government
and policies
Public service
Codes of conduct; autoregulatory instruments
Limiting corruption and
purging the service from
corrupt officials
Business
Codes of professional ethics
Corrupt-free economy
NGO sector
Watchdog activities
Preventing corruption
Media
Publications, electronic
programs
Exposing corruption;
enhancing integrity
standards
The approach is to move to a system of horizontal accountability in which power is
shared, where no one has a monopoly and where each person is separately accountable.
This leads to a virtuous circle where each actor is both a watcher and is watched. The
system manages conflict of interest in the public sector, effectively distributes power
and limits situations in which conflicts of interest arise or have a negative impact on the
economy. The ultimate goal is to make corruption a high-risk undertaking that yields
low returns.
The World Bank promotes different alternatives to change laws and to define a specific
role for all actors12.
12
See Amar Azfar, World Bank, “Disrupting corruption”, 2007
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CIVIL SOCIETY
As indicated in the table, several NGOs are active in combating corruption. The best
known at international level is Transparency International (TI). Transparency
International was created in 1993 and collaborates with leading international agencies
and some business bodies, including national employers' organizations. Transparency
International annually publishes its now famous Corruption Perception Index (first
edition in 1995), which assesses the state of corruption in countries around the world
and attributes a rating from 0 to 10. TI has also developed some specific tools for
enterprises such as the business principles (2003, revised in 2009) and the Transparency
International’s Self-Evaluation Tool (TI SET) which is a checklist that enables
companies to examine the design of their anti-bribery programme and assess its
effectiveness. To respond to SMEs needs, TI issued a specially designed edition of the
Business Principles for Countering Bribery.13.
As part of the principles, TI has developed a Six-Step Implementation Process14
describing each action to undertake step by step with an indication of the primary
responsibility, a description of the process and a calendar. The six steps are:
1.
2.
3.
4.
5.
6.
Decide to adopt a no bribes policy
Plan Implementation
Develop anti-bribery programme
Implement programme
Monitor
Evaluate the performance
This Six-Step Implementation Process can be modified to take into account the size and
capacities of the company.
Other international NGOs like TRACE are also active in combating corruption but it
seems that some donor agencies such as USAID prefer working with national and local
NGOs.
Like all society actors, the media are more and more involved and ever ready to
organize publicity (such as TV shows15) to denounce corrupt practice in companies.
They are an important component of the momentum to address corrupt practices as they
have generated pressure on governments and companies. Of course, they too have to be
independent and free of corruption to avoid manipulation.
A national strategy can be created through the use of or establishment of national
entities. Specific bodies have been established by public authorities in some countries
sometimes in cooperation with stakeholders, but they are mainly at government level
(e.g. Sweden). The evaluation of the work of these bodies is often encouraging, but not
always successful. Before establishing one, the scope of the problem has to be identified
as well as the forms of corruption and the strength and weakness of the current system16.
13
All documents available on TI website : http://www.transparency.org/
See :http://www.transparency.org/global_priorities/private_sector/business_principles/six_step_implementation_process
15
TV shows such as “Fiks Fare” in Albania or “Slavi Trifunov” in Bulgaria.
16
See Doig A. Morgan, “Business planning for anti-corruption agencies”, 2001
14
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Employers’ organization, as representative of all companies, should be member/partner
of such entities. This could also lead to changing the image of business which is,
sometimes, seen as “an unreliable partner” by international agencies which fight
against corruption17.
Examples of these bodies are:
State Public Administration Council (e.g. Hungary, Romania)
Special Anticorruption Commissions (e.g. General Prosecutor's Office or
President level in Azerbaijan or at Parliament level)
Office for Prevention of Corruption (e.g. Latvia)
Office for Tax Control with a specific department in charge of corruption (e.g.
Slovakia)
Special Investigation Service (sometimes with the participation of civil society
like in Lithuania)
National institute (with active participation of private sector such as the Mot
Motor Institute in Sweden)
EMPLOYERS' ORGANIZATIONS RESPONSE
The issue of corruption is still quite a recent issue for many IOE members. However,
this debate has been a real issue in the priorities and concerns of a number of
employers’ organizations in the last two decades. In general terms, employers'
organizations are expected to be independent, voluntary and transparent organizations
with no direct funding from government and financed by their members and their
services. To be active in the fight against corruption, they must themselves be a model
of transparency and good governance. They should remain apolitical and should not be
involved in any direct political activities.
Employers' organizations have roles at different levels. It is important to encourage the
development of a business culture based on ethical values and behaviour including the
culture of responsibility and fairness. With companies, they should aim at creating and
maintaining a trust-based internal culture in which bribery and corruption are not
tolerated.
At the enterprise level, they can advise their members investing abroad. They could also
provide services to foreign companies on the situation at national level, the applicable
laws and regulation.
At national level, they should consider lobbying their government and relevant public
authorities to inform them of their position and to support or propose laws, codes or
institutions to fight corruption and monitor the effectiveness of these efforts. They
should help building trust and confidence in business and political institutions. They
should promote a sound environment for companies with fair and workable competition
in which the rule of law prevails. Employers’ organizations and their members should
openly communicate details of their anti-corruption efforts and should be responsive
and accessible to all parties that have an interest in these activities.
17
OSCE: “Best practices in combating corruption”
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For instance, efforts could be done on:
Studying and assessing the current situation (could be done by the employers’
organization or by independent experts) in order to identify forms and extent of
corruption at national and sectoral levels18.
Establishing internal standards and codes of conduct19.
Developing activities or a plan of action to promote governance and good
practices to its members (training, information data, guidelines, brochures).
• Inside the country: efforts can be made on lobbying national authorities,
raising awareness in the country by public campaign including media
coverage on employers’ activities20, on promoting the UN Global
Compact, on designing a national response with other stakeholders to
defend business interests (NGOs, trade unions, international agencies,
business schools).
• Outside the country, they can provide assistance and guidelines to
companies investing abroad. For instance, the Confederation of
Norwegian Enterprise (NHO) issued a brochure to assist its members21.
Exchanging experience and good practices between employers' organizations
through the IOE network and through other international assistance (ICC tools22,
TI case studies, etc). For instance, the Pan African Employers' Confederation
adopted a code of good governance. The Adriatic Region Employers’ Centre
(AREC) has also organized several activities in order to combat corruption in
parallel with the IFC Doing Business to promote a sound business climate.
COMPANIES’ RESPONSE
Corruption may have a huge impact on companies and on their activities both in their
home countries and when they operate abroad. However, while some companies have
developed internal tools, others – a large majority – are not equipped. They may be
helped by employers’ organizations or by their governments. The following practical
points which could guide a company in addressing corruption are taken from a brochure
published by the Swiss Secretary of State for Economic Affairs to assist Swiss
companies23. Advice includes to:
Ensure transparent business practices, stipulate procedures in writing and record
them.
Ensure that every employee has a proper job description with clear
responsibilities.
Identify activities and jobs that are especially at risk in relation to corruption,
reduce risks by applying the principle of dual control and by requiring the
counter-signature of commitments.
18
For instance, IOE members in Colombia, Costa Rica or Russia have done research on corruption in their respective country.
For instance, CONFINDUSTRIA (Italy) or the Confederation of Lithuanian Industrialists (LPK) have adapted ethics code. The
Japan Business Federation has adopted a Charter of corporate behaviour.
20
APINDO (Indonesia) launched a Good Corporate Governance campaign
21
NHO, “Standpoint Corruption”
22
The International Chamber of Commerce (ICC) issued their Rules of Conduct and Recommendations for Combating Extortion
and Bribery (last edition in 2005) available at http://www.iccwbo.org/policy/anticorruption/id870/index.html
23
SECO, “Preventing corruption, information for Swiss business operating abroad”
19
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Add an integrity clause to contracts (e.g., orders and employment contracts).
Sensitize employees to the issue and consequences of corruption.
Provide special training to employees who are particularly exposed. Job rotation
can reduce the risk of corruption.
Draw up and distribute to staff a checklist with the standard signs that indicate
corruption.
Set up a contact point (contact person, mailbox, etc) that employees can use
anonymously to report sources of risk or suspicions of corruption and to receive
further information.
Pay employees appropriate salaries.
The best precautions make little sense if they are not properly implemented and
supervised. Check on compliance with rules as well as contractual and
accounting provisions by conducting regular inspections and random tests.
Test employees’ level of knowledge to identify areas of weakness (different
scenarios).
Evaluate problems that arise and any incidences of bribery in a systematic
manner and revise practices as required. Compile a collection of successful
solutions to difficulties (best practices).
In the selection of a business partner in a country, it is also important to follow some
simple rules such as to research information on their reputation and on the organization
of the potential business partner, checking of financial data (in most countries there are
specialized websites) and checking of its rules and policies.
INTERNAL ANTI-CORRUPTION STRATEGIES
To fight corruption, a company should then develop an internal strategy which has to be
well known internally to all staff and externally to suppliers, to clients and to partners.
An internal strategy to fight corruption could be based on the following items:
Senior management board commitment and involvement
Written policies and guidelines
Internal financial controls (e.g. multiple signatures process)
Auditing (audit committee)
Business integrity measures
Available communication channels
Accountability
Awareness and training
Third party checks
Investigations and availability of books/record
Creation of an anti-corruption culture for all staff24
Exchange of best practices with other companies, employers’ organizations or
international partners
Due diligence on new suppliers, contractors or other business contacts.
Implementation of international guidelines (e.g. ICC, OECD)
24
For instance, Shell has developed the FASTRACK culture for: Flexibility to accept mistakes (no blame
culture), Alertness to new or potentially situations, Standing firms on obvious cases, Transparency,
Release of creativity, Anticipation of situations that can invite corruption, Commitment by management
and staff, and Knowledge.
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Partnership with NGOs specialized on ethics/corruption
Report to the UN Global Compact (see below)
Report to company’s board
External information on a company’s efforts to fight corruption should be published
within the home and/or the host country. This can help to improve the image of the
company in the society. Companies could also set internal standards to measure their
practice against. On the other hand, it means that companies should be more transparent
with regard to audit and financial reports vis-à-vis their shareholders and the public in
general.
The preparation of manuals for companies on complying with laws and fighting
corruption and a marketing campaign against corruption (posters, stickers, media) could
also be part of an employer strategy.
HUMAN RESOURCE MANAGEMENT
As just mentioned, the fight against corruption starts within the company. It is important
that staff is made aware of the issues. It is then important to:
Train employees to sensitise them to the issues and consequences of corruption,
in particular those who could be exposed to such situations.
Brief new staff
Practise regular job rotation
Prepare a checklist for staff
Design a focal point or committee that can be used by employees to report cases
of corruption
In some cases, verify that employees do have the right practices.
Evaluate risks that may arise and compile them with appropriate solutions.
Restrict access to computer system or areas containing sensitive information.
Segregate duties (e.g. between ordering and paying for goods and services).
Regularly communicate guidelines on conflict of interest, gifts and
entertainment.
Regularly inform staff about the internal reporting policy, internal and external
reporting channels and how they work
Regularly inform staff about internal investigation capacity
Refuse to penalize an employee for losing business because he/she has refused
to pay or to accept a bribe.
Many companies have adopted codes of conduct. They normally contain general
principles, rules of conduct to prevent corruption from arising, and instructions on how
to proceed in a specific case. It is better to involve employees in the drafting of such
codes, especially those employees who have had to face such experience. They can
include:
The stance of the company’s management regarding corruption and the
involvement of its employees.
The basic principles of the company’s relations with third parties (public
authorities, clients and suppliers).
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The contact point in the company where corruption or suspected corruption can
be reported (anonymously).
The definition of what is permitted (e.g. gifts).
The consequences for failure to comply with the code of conduct.
The balance between monitoring and sanctions, training, dialogue and positive
incentives should be determined by the company itself. Experience has shown that there
is no unique approach. Nevertheless, no company can be expected to perform with
professionalism in the absence of qualified and motivated personnel. One of the most
destructive features of corruption is when people are appointed or promoted based on
their connections rather than on their capabilities (e.g. risk of nepotism and cronyism).
One of the main issues is still how an employee interprets the code of conduct. He/she
has to be able to correctly interpret situations and find the right solution. He/she has to
have the right skills and knowledge in assessing situations and identifying alternatives.
Signs showing a possible case of corruption by employees (they are not by themselves
evidence of misconduct) include:
Unusual behaviour (excessive secrecy, weekend working, staff not taking full
holiday entitlement25)
Expensive lifestyles not commensurate with earnings (e.g. expensive holidays or
cars)
Staff in sensitive positions who have become addicted to gambling
Reluctance to move jobs or accept promotions
Low staff morale
Results that are too good to be true
Managers should be conscious of the areas of corruption risk. For instance, Shell
published in 1976 its Shell General Business Principle (SGBP) where the ground rules
are unequivocally stated. In addition several structures have been established: the Group
Audit Committee, the Social Responsibility Committee and the Internal Audit
Committee as well as letters of information sent to the Managing Directors – the
Country Chair letter and the Business Assurance letter. The SGBP has its own website
where information and exchange are shared among employees26. Guidance and training
are also provided on this website.
Special efforts should also be undertaken for SMEs which are just as much victims of
corruption as larger companies and less equipped to combat it. SMEs have limited
resources and time to understand existing laws on corruption and bribery. They may
have difficulties understanding the impact of corruption on a longer term.
GIFTS POLICY
The issue of gifts (and hospitality) is one of the most complex issues as individuals and
companies often have a different perception and policies.
25
Some experts (OSCE, Shell) acknowledge that staff who do not take holidays, may be work-obsessed,
but they may also be anxious to prevent relieving staff from seeing their files.
26
http://www.shell.com/home/content/aboutshell/who_we_are/our_values/sgbp/sgbp_30032008.html
- 14 -
Bribes and gifts could be perceived differently. Bribes are often secret and done through
a third party which is not normally the case of gifts. Moreover, bribes create an
obligation on the recipient who then becomes subordinate to the donor and who is
encouraged to alter his or her behaviour in some way. Nevertheless, the border is
confused and it leads some entities to refuse any kind of gift including trinkets. It is
essential that clear rules are established within a company as the decision whether or not
to accept a gift or benefit should not be on an individual employee. It could be seen as
acceptable to receive gift of limited value, but it should be up to the company to decide
if a gift is of limited value as well as the reason for giving it.
Some basic rules could be respected:
Refuse any gifts which would be difficult to justify to work colleagues, family
and media. It is possible that it creates a sense of obligation and even an
expectation that something will be given in return.
Refuse any gift, payment, entertainment or benefits when this may influence an
imminent decision (form of manipulation).
Refuse any gift, payment, entertainment or benefits not offered publicly. Discuss
in advance with your hierarchy the acceptance of such things if possible.
Understand local customs for the giving and receiving of gift, payment,
entertainment or benefits.
Do not differentiate between a gift, payment, entertainment or benefit given by
an intermediary or directly.
Only gifts or entertainments of little value might be used to support a working
relationship.
Establish a register of all gifts offered whether accepted or not. Such register
could include date, time and place of the incident, contact details of the person
involved, the response of the employee and signature.
Inform your partner of the business rules regarding gifts. Make it clear from the
start what the imposed limitations are for your own business.
As it is sometimes difficult to refuse a gift, some companies or organizations consider
that any gift should become the property of the company. It becomes the responsibility
of the company and not the individual. It could also be donated to some charity. A letter
of explanation may be sent to the giver to explain the company policy.
Some companies or organizations (e.g. ILO) have adopted a very strict policy by
refusing any kind of gift in order to protect their employees. An advantage of such
policy is that people who offer gifts are less likely to be offended by a refusal as
employees can decline offers by explaining that acceptance would be against company
policy and that they have no discretion in this area.
Similarly, the same prudence should be adopted when a company decides to offer gifts
to anyone (public authorities have specific rules) or to cover travel expenses to some
customers (limited number and costs) or to propose favours such as an invitation letter
to get a visa given the risk of being liable for any action by the beneficiary.
In addition, companies should disclose all charitable contributions and sponsorships –
both of which could in any case be profitable in terms of image building. Companies
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should receive guarantees that such contributions are not linked to business agreement
and do not constitute bribes. Companies have to assess risks and make their policy
clear.
WHISTLEBLOWERS
One of the main sensitive issues regarding potential corruption is the way to bring it to
the attention of responsible managers. If they are themselves the cause of the problem,
there must be a mechanism for employees to complain to a truthful and competent body.
The issue is complex as they may feel that they could lose a lot – jobs, friends – if they
inform of potential corruption. The sensitivity about the issue of whistleblowing is
different from one country to another.
In some countries, there are specific laws to protect – and to encourage –
whistleblowers27. Even some NGOs are involved to encourage and to assist them such
as Public Concern at Work (PCaW) in the UK28. However, any legislation or rules
should prevent false allegations and restore damage caused by them. An employee has
to act in good faith. In some other countries, the image of whistleblowers is rather
negative because of cultural or historical reasons.
To avoid problems, some companies have established internal mechanisms to protect
whistleblowers. For instance, Shell has developed a helpline in the USA on ethics and
compliance issues which is open all the time. Shell has also developed similar
mechanisms in Nigeria or in the UK (“SPEAK OUT” policy inspired by the UK’s
Public Interest Disclosure Act). Shell staff are encouraged to raise issues with
management, but an externally managed helpline also exists.
There must be a real commitment within the company to act upon disclosures and to
protect those making them. Any internal reporting system should be widely publicized
within the company. Large companies may have also an ombudsman or mediator to
supervise this issue.
USE OF INTERMEDIARIES
The use of intermediaries is often used by foreign companies investing abroad
(sometimes it is obligatory). This approach could lead to corrupt practices. First of all, a
company will be responsible if any money given to the intermediary is used for bribes
(OECD conventions). Secondly, the company will still be exposed to risks related to
corrupt practices as described earlier. It is preferable that companies issue clear rules
concerning the use of intermediaries. A company should know all about the
intermediary before hiring him/her including not only his/her background and
qualifications, but also any connections with government position (e.g. family member),
form of his/her company or public image. It should undertake properly documented due
diligence before appointing intermediaries. It is also preferable for instance to avoid
payment in cash or to a third-party or to a foreign bank account. On the other hand,
intermediaries should respect company rules and provide information (invoices, books)
if necessary.
27
28
For instance, in the UK, the Public Interest Disclosure Act (1998)
http://www.pcaw.co.uk/
- 16 -
Similarly, facilitation payments should ideally be avoided and, if they are paid, be
recorded and reported. This form of payment has to be differentiated to legal forms of
payment such as first class mail or VIP services which are recognized and transparent.
FINANCING POLITICAL PARTIES
In nearly all countries, the financing of political parties has been one area where
corruption has occurred. There are two models for political financing – the public one
(e.g. preferred in Japan or France) or the private one (e.g. preferred in US or UK). Of
course, no system is exclusively one or the other. Ensuring fair and transparent funding
of political parties and electoral campaigns is mainly the duty of governments, but as
companies are often the main donors to political parties, some rules for companies have
to be respected.
The issue is not to stop such financing, but to fix some rules mainly concerning
transparency of funding. In most countries, a funding ceiling has been established. The
Council of Europe has made recommendations29 on this issue, such as:
That donations from legal entities to political parties are registered in the books
and accounts of the legal entities (Article 5.a.i)
That the State should require the accounts of a political party to specify all
donations received by the party, including the nature and value of each donation.
(Article 12.a)
GOVERNMENT’S RESPONSE
Anti-corruption laws are the responsibility of the government. The fight against
corruption also means that the public administration has to be transparent and follow
ethical principles. It is also the role of business and their associations to promote these
principles to public authorities. They can be summarized as following30:
29
30
Ethical standards for public service should be clear.
Ethical standards should be reflected in the legal framework.
Ethical guidance should be available to public servants.
Public servants should know their rights and obligations when exposing
wrongdoing.
Political commitment to ethics should reinforce the ethical conduct of public
servants.
The decision making process should be transparent and open to society.
There should be clear guidelines for interaction between the public and private
sectors.
Managers should demonstrate and promote ethical conduct.
Management policies, procedures and practices should promote ethical conduct.
Public service conditions and management of human resources should promote
ethical conduct.
Council of Europe, “Common Rules against Corruption in the Funding of Political Parties and Electoral Campaign”, 2003
Quoted from OSCE: “Best practices in combating corruption”
- 17 -
Adequate accountability mechanisms should be in place within the public
service.
Appropriate procedures and sanctions should exist to deal with misconduct.
In addition, public administration – like business – could also adopt codes of conduct or
an Ethics Act (e.g. Queensland State in Australia).
In this period of globalization, information and the image of a country have taken on a
new prominence. It is only through a positive image that a country will be able to attract
new investors to increase economic growth. For this, some measures must be taken to
establish trust between the economic partners. Employers' organizations have therefore
a lobbying role to play in promoting the right economic and legislative environment to
fight corruption.
REFORM OF NATIONAL ADMINISTRATION
Domestic and foreign investors should be able to trust the public administration. If not,
the informal sector will continue to mushroom and foreign investors will invest
elsewhere. Not only companies, but also the public and the administration itself should
recover trust in it. This concerns the administration as a whole, including of course
customs, police and justice officials with specific attention at municipalities’ level.
To do this, the administration should be transparent and effective and work on:
Reduction of inappropriate red tape
Transparency of services to companies and public (online submission)
Improvement of the public procurement procedures (transparency and public
control)
Information to the public
Impartial application of the law
Appropriate wage policy for civil servants and training
Establishment of a Code of Conduct for civil servants with a control of capital,
financial and property holdings of civil servants (high level) as well as
politicians (especially election candidates)
Banning those convicted of offences from holding office or running for election
Identification of civil servants (name tags)
Transparent accountability and decision making process
Improvement of judicial system31
Freedom of expression (press)
Reviewing of licensing regimes (creation of a register)
Antitrust law
Sanctions at company level (compensation, penalties, confiscation of economic
gain, of public licenses, suspension/termination of contracts, individual
punishment (including imprisonment)
Control on the use of middlemen (agents, intermediaries)
31
This is a key point in the fight against corruption, but where the lobby role of business is limited.
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The importance of education in the fight against corruption is very important to change
social and moral attitudes and it should start at school. Specific efforts should be made
to sensitise young people to the problem of corruption.
CUSTOMS ADMINISTRATION
Companies expect transparent customs services and should promote corruption-free
customs administration. In several countries, joint committees exist between private
sectors and customs services; this example could be copied elsewhere.
At the international level, the World Customs Organization (WCO) has developed tools
to promote integrity. The Revised Arusha Declaration (2003) is the focal tool and
central feature of a global and effective approach to preventing corruption and
increasing the level of integrity in Customs. The ten elements contained in the
Declaration provide the most practical basis for the development and implementation of
a range of integrity or anti-corruption strategies relevant to the Customs operating
environment. It includes a call for a partnership with the private sector32.
PUBLIC PROCUREMENT
Procurement of goods and services by public bodies could represent a large part of the
national gross domestic product. Procurement is vital for a large number of companies.
It should be based on transparent processes in order to ensure that the best quality of
goods and services is provided for the price paid. On the other hand, public procurement
is often seen by the public as one of the main area for corruption. Corruption can affect
procurement notably when specifications are tailored to suit certain business, when
information is restricted, when emergency is used as an excuse, when confidentiality is
breached, when the selection process disqualifies potential suppliers, when bribes are
paid or when improper interference occurs during the evaluation of tenders and so on.
To combat corruption, public procurement should be as open as possible and publicly
exposed. National procurement codes have been established in some countries which
promote transparent procedures.
The access to information is vital for companies. Information has to be reliable and
public, especially when it concerns public procurement. The use of Internet is an added
value in most cases.
With regard to international transactions, the OECD Convention on Combating Bribery
of Foreign Public Officials in International Business Transactions33 is a reference on this
issue. It establishes legally binding standards to criminalise bribery of foreign public
officials in international business transactions and provides for a host of related
measures that make this effective.
32
The International Chamber of Commerce has established Customs Guidelines to promote modern and effective customs
administration under a 54-point strategic plan useful for companies. See http://www.iccwbo.org/policy/customs/id538/index.html
33
http://www.oecd.org/document/21/0,3343,en_2649_34859_2017813_1_1_1_1,00.html
- 19 -
APPLICATION OF MEASURES
These measures will be effective only if there is a real will to apply them and to respect
them. Governments are guarantors of the strict application of the law. This means that
real punishment of offenders occurs and is seen to occur. Some accompanying measures
should also be applied, such as the rehabilitation of victims and the protection of
whistleblowers and complainants. These measures must also include improving the
speed of conflict resolution. A national media campaign could be organized to focus the
attention of the population on these measures. Employers' organizations could play an
active role in the monitoring of these measures (e.g. through national committees).
INTERNATIONAL COOPERATION
The business community, especially employers' organizations, should join efforts with
all partners to fight corruption by building corruption-free alliances and common
proposals to combat national problems. They should be assisted by cooperation through
the international business community and international organizations active in this area.
The OECD, the Council of Europe, the World Bank or bilateral donors such as NORAD
(Norway) or USAID (United States) are potential partners. NGOs, such as Transparency
International, could also be possible collaborators.
The role of the UNDP and the ILO in the area of corruption still has to be developed.
This could be done through local assistance by UNDP or by the ILO’s Declaration
Programme – linking the fight against corruption with the promotion of good
governance and the support to employers' organizations. The addition of a 10th principle
in the Global Compact has increased their role on this issue.
The role of the World Bank is more visible and better known. Most IOE members
consult its reports on corruption and World Bank representatives are involved in
national activities led by employers. Other international references exist such as the UN
Convention against Corruption (2003) which is followed at international level by the
UN Office on Drugs and Crime (UNODC)34 while the OECD Convention on bribery
and corruption is better known by companies as well as the ICC guidelines.
At the European level, the Council of Europe plays an important role through the
GRECO. The GRECO was conceived as a flexible and efficient follow-up mechanism,
called upon to monitor, through a process of mutual evaluation and peer-pressure. The
Council of Europe has also adopted a Convention on civil law and corruption.
FUTURE DEBATE ON CORRUPTION AND TRADE
Like the debate on "trade and labour", there is a risk that a failure to address corruption
will encourage a debate led by NGOs in the WTO to also look to address failures of
governance, including corruption through "corruption clauses" in trade agreements.
Whilst such a responses in the immediate future is unlikely in multilateral trade
agreements, bilateral agreements pose a different risk. In the United States, the
34
http://www.unodc.org/unodc/en/corruption/index.html
- 20 -
government has developed the Millennium Challenge Account, which is a Fund
established to assist countries which "govern in a just and fair way, invest in their
human resources and support economic liberty". In these programmes a requirement
was passed for the first time for the applicant countries to have an anti-corruption
evaluation – higher than the average – following the corruption index of Transparency
International.
ROLE OF THE IOE
As indicated previously, strong partnerships can be developed at national and
international level. Specifically for employers, the IOE Secretariat is ready to support
national employers' organizations in the design and development of employers'
responses and initiatives to fight corruption This IOE assistance could be done through
political lobbying, technical assistance, exchange of information, and the establishment
of a specific section on the IOE website containing best practices and useful links such
as codes, guidelines, handbooks and toolkits.
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ANNEXE
UNITED NATIONS CONVENTION AGAINST CORRUPTION
GENERAL ASSEMBLY RESOLUTION 58/4 OF 31 OCTOBER 2003
ARTICLE 12. PRIVATE SECTOR
1. Each State Party shall take measures, in accordance with the fundamental
principles of its domestic law, to prevent corruption involving the private sector,
enhance accounting and auditing standards in the private sector and, where
appropriate, provide effective, proportionate and dissuasive civil, administrative
or criminal penalties for failure to comply with such measures.
2. Measures to achieve these ends may include, inter alia:
(a) Promoting cooperation between law enforcement agencies and relevant
private entities;
(b) Promoting the development of standards and procedures designed to
safeguard the integrity of relevant private entities, including codes of
conduct for the correct, honourable and proper performance of the activities
of business and all relevant professions and the prevention of conflicts of
interest, and for the promotion of the use of good commercial practices
among businesses and in the contractual relations of businesses with the
State;
(c) Promoting transparency among private entities, including, where
appropriate, measures regarding the identity of legal and natural persons
involved in the establishment and management of corporate entities;
(d) Preventing the misuse of procedures regulating private entities, including
procedures regarding subsidies and licences granted by public authorities for
commercial activities;
(e) Preventing conflicts of interest by imposing restrictions, as appropriate and
for a reasonable period of time, on the professional activities of former
public officials or on the employment of public officials by the private sector
after their resignation or retirement, where such activities or employment
relate directly to the functions held or supervised by those public officials
during their tenure;
(f) Ensuring that private enterprises, taking into account their structure and size,
have sufficient internal auditing controls to assist in preventing and detecting
acts of corruption and that the accounts and required financial statements of
such private enterprises are subject to appropriate auditing and certification
procedures.
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3. In order to prevent corruption, each State Party shall take such measures as may
be necessary, in accordance with its domestic laws and regulations regarding the
maintenance of books and records, financial statement disclosures and
accounting and auditing standards, to prohibit the following acts carried out for
the purpose of committing any of the offences established in accordance with
this Convention:
(a) The establishment of off-the-books accounts;
(b) The making of off-the-books or inadequately identified transactions;
(c) The recording of non-existent expenditure;
(d) The entry of liabilities with incorrect identification of their objects;
(e) The use of false documents; and
(f) The intentional destruction of bookkeeping documents earlier than foreseen
by the law.
4. Each State Party shall disallow the tax deductibility of expenses that constitute
bribes, the latter being one of the constituent elements of the offences
established in accordance with articles 15 and 16 of this Convention and, where
appropriate, other expenses incurred in furtherance of corrupt conduct.
*
*
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*
INTERNATIONAL ORGANISATION OF EMPLOYERS (IOE)
26, chemin de Joinville
1216 Cointrin / Geneva
Switzerland
Phone: +41 22 929 00 00
Fax: +41 22 929 00 01
E-mail: ioe@ioe-emp.org
Internet: www.ioe-emp.org
© October 2009