Friday, July 19, 2019 /09:55AM / By Center for International Private Enterprise
In many countries fighting corruption seems to be an impossible battle, especially for mid-sized companies with limited resources. While there is a broad global consensus that corruption suppresses competition and innovation, thus hampering entrepreneurship and economic growth opportunities, countering it presents a challenging task due to resistance to reform in corruption-tainted business environments. In many cases anti-corruption rules and regulations may be weak or unevenly enforced, government led steps to fight corruption remain insufficient or ineffective, and bribes are a widely accepted part of doing business.
Yet, businesses committed to anti-corruption are not helpless. They can lead by example by improving their own safeguards against corruption and act together to create a movement for integrity that makes clean business conduct the norm, not the exception. For three decades, the Center for International Private Enterprise (CIPE), an affiliate of the U.S. Chamber of Commerce, has worked with such businesses through its partner chambers of commerce and business associations around the world.
In Thailand for example, partnering with the Thai Institute of Directors (IOD), CIPE has helped to train hundreds of businesses on best practices in anti-corruption compliance and to establish a coalition of companies committed to integrity. Members of the coalition – which now represents roughly 20 percent of the country’s economy – sign a declaration that lays out tangible and specific steps a company must take to proactively reduce corruption-related risks in its operations. These commitments are subsequently verified by an annual outside audit, which, when passed, leads to certification. As a result of taking the initiative to comply with anti-corruption standards, coalition members have begun to see direct benefits to their business operations by becoming more trustworthy and attractive business partners, especially to multi- national corporations.
The Thai example is just one of many where CIPE has worked to design a locally driven solution that is effective even in highly corrupt markets. Through its extensive worldwide network of partner organizations representing the needs of diverse companies, CIPE can effectively reach these companies with anti-corruption solutions tailored to their size and the local context.
In today’s globalized world, where international value chains stretch across borders and continents, anti-corruption compliance provides a vital competitive advantage. Ethical companies tend to have higher valuations, are more attractive to potential investors and employees, and are more likely to be engaged in long-term arrangements with their business partners. Increasingly, companies are expected to ensure not just the integrity of their own operations but also the conduct of their suppliers, distributors, and agents wherever they may be. Evidence of this comes from high-profile prosecutions of multi-national firms that are not only subject to significant fines but also risk loss of share value and reputation.
For instance, in 2010 Alcatel-Lucent and three of its subsidiaries agreed to pay a combined $137 million settlement to resolve a Foreign Corrupt Practices Act (FCPA) investigation into worldwide sales practices that relied extensively on consultants and agents who bribed local officials in pursuit of business opportunities. As part of the settlement, Alcatel-Lucent and its subsidiaries agreed to implement rigorous compliance enhancements, which also covered third-party conduct. An example of lost share value is Wal-Mart’s stock falling nearly 5 percent in 2012 following the launch of an investigation by the U.S. Department of Justice into a bribery allegation against the company’s Mexican subsidiary. Wal-Mart lost $10 billion in its market value in a single day. Stock of Wal-Mart de Mexico, traded separately, plummeted more than 12 percent.
To date, the most vigorous enforcement of anti-corruption laws governing firms’ behavior abroad has been in the United States and Germany, with China also stepping up investigations of bribery-related misconduct within its borders. This trend is likely to broaden globally as major economies like Canada, Brazil, and even Russia are showing signs of readiness to take similar enforcement action. Meeting such high standards can be a challenge for companies, especially for mid-sized firms in emerging and frontier markets where corruption remains widespread. But it is also a significant opportunity. A clear commitment to integrity and demonstrable steps taken toward anti-corruption compliance are key selling points. By adopting internal anti-corruption controls, companies gain a powerful tool for burnishing a brand or attracting new business partners.
This CIPE guidebook is aimed specifically at mid-sized firms, an audience underserved by existing resources on anti-corruption compliance that tend to serve the needs of large firms. The guidebook seeks to supplement the knowledge needed by directors, executives, legal counsels and managers of mid-sized companies in order to develop and implement an effective compliance program and capitalize on the opportunities that access to global value chains offer.