Culture key in anti-corruption

by 13 Dec 2006

THE COMMITMENT of senior leaders and personal convictions are the most important drivers in company decisions to strengthen anti-corruption programs, according to a US report.

Companies rarely cited a business case, like the cost of doing business or brand equity, as the key reason for establishing or enhancing the scope of their anti-corruption systems.

Instead, they believe that it is part of a larger effort to build a culture of compliance within the company –“one that is rooted as much in the company’s system of values and beliefs as in the need to respond to the developing global legal and regulatory regime that is transferring much of the anti-corruption prevention, detection, and enforcement burden to the companies”, said Ronald Berenbeim, principal researcher at The Conference Board, which released the report.

The report, based on a survey of 165 multinational companies, found that one-third said senior management leadership and conviction is the single most important factor in their company’s decision to develop an anti-corruption program.

The most common rationale for anti-corruption programs are legal. For example, general home country prohibitions were the single most important factor by 27 per cent, while 7 per cent said Sarbanes-Oxley was a priority and 13 per cent cited ethical considerations as justifications for investing in anti-corruption initiatives.

“Company anti-corruption practices and procedures have become significantly more widespread, detailed and sophisticated since the 2000 report,”said Berenbeim.

“In some companies, reported incidents of corrupt activity have actually increased, but this is attributed to better reporting systems rather than an increase in corruption. And there is a growing recognition among US companies of the need to adopt an ethics-based approach that emphasises adherence to broad principles rather than narrow compliance to specific rules.”

Anti-corruption programs are subject to high levels of review. More than three-quarters of the survey participants report, or in some cases have dual reporting relationships, to a C-Suite executive, board member or board committee.

In addition, companies are now more likely to seek outside assistance in some aspect of their anti-corruption program. Nearly one-third (32 per cent) use outside counsel and 18 per cent use a consultant.

More than 40 per cent of survey participants do business in China, Brazil, Mexico and India – countries that are at high risk for corrupt practices in business. According to 36 per cent of the companies active in China, that country poses “the greatest overall challenge to the company’s operations because of the level of corruption”.

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