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Corporate Liability in the fight against International Bribery and Business Actions to Prevent Corruption

Corporate Liability in the fight against International Bribery and Business Actions to Prevent Corruption. François Vincke Lawyer Chairman ICC Anti-Corruption Commission . Structure of intervention 1.- Place of business in the integrity debate

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Corporate Liability in the fight against International Bribery and Business Actions to Prevent Corruption

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  1. Corporate Liability in the fight against International Bribery and Business Actions to Prevent Corruption François Vincke Lawyer Chairman ICC Anti-Corruption Commission

  2. Structure of intervention 1.- Place of business in the integrity debate 2.- Why would business bother about bribery: 8 reasons 3.- Risk policy, integrity policy 4.- The role of the Board of Directors 5.- Full fledged integrity programs: 7 steps 6.- The pitfalls 7.- Private v public 8.- The threats

  3. 1.- Place of business in the integrity debate as a direct actor : the corrupting party in public and private corruption as a direct victim : the solicited or extorted party as an indirect victim : the losing and not compensated competitor as an indirect actor : through corrupt members of staff (private corruption) as a tax payer : through higher taxes caused by a corruption induced increase in public spending as a disenchanted investor in front of all pervading corruption

  4. 2.- Why would business bother about bribery ? (I) • A.- Bribes may be totally inefficient • What is the capacity of the (candidate) bribee? • Will he ever reach the goal you have in mind • Shareholders’ money well spent? • Risk assessment/risk management problem • B.- The “bribe market” is opaque • Paying too much or too little? • There are no listed prices or quotations • Costing/purchasing/pricing problem

  5. 3.- Why would business bother about bribery ? (II) • C. -Your accountant’s nightmare • How do you enter a bribe in your accounts? • No entry or a false entry: false accounting, false reporting • Accounting policy problem • Financial reporting problem • D.- Your lawyer’s headache • The “bribery contract” is either unwritten, or, if written, is null and void • It cannot serve as evidence in court • One cannot uphold the contract in arbitration • (corruption contrary to international public order)

  6. 4.- Why would business bother about bribery ? (III) • E.- “Hidden treasures in the islands” • Slush funds in far away (or closer by) countries • No or limited knowledge by the executives • Money laundering risk • Control policy problem • F.- “Thou shalt not serve two masters” • Bribee (often) makes kickbacks to employees • Divided loyalties among co-workers • Corporate governance problem/HR problem

  7. 5.- Why would business bother about bribery ? (IV) • G.- Bribery undermines free competition, based on fair pricing, quality of goods and services, motivation of staff, expertise, talent, continuous research and development and is based merely on the generosity of obscure payments • H.- Criminal/civil law risk • high fines, jail sentences • debarment • civil damages • reputational risk • liability and responsibility

  8. 6.- Risk policy and integrity policy Companies have to take position on bribery and economic fraud: there is a need for defining a risk policy and an integrity policy These policies to be decided by the Board, managed by top executives (“Tone from the top”) and practically implemented by compliance team (and legal), internal (external) audit and the operational people

  9. 7.- TheBoard and risk policy (I) “d.The Board should fulfill certain key functions, including: 1. Reviewing and guiding corporate strategy, plans of action, risk policy […]” (OECD Principles of Corporate Governance, 2004, p. 24) Risk policy belongs to the core responsibilities of the Board members, because their fiduciary duties require that they act on a fully informed basis, in good faith, with due diligence and care. (OECD Principles of Corporate Governance, 2004 Annotations, p. 59)

  10. 8.- The Board and risk policy (II) “[Risk] policy will involve specifying the types and degree of risk that a company is willing to accept in pursuit of its goals. It is thus a crucial guideline for management that must manage risks to meet the company’s desired risk profile” . (OECD Principles of Corporate Governance, 2004 Annotations, p. 60)

  11. 9.- The Board and integrity policy (I) “ The Board should apply high ethical standards” (OECD Principles of Corporate Governance, 2004, p. 24) “High ethical standards are in the long term interests of the company as a means to make it credible and trustworthy, not only in day-to-day operations but also with respect to longer term commitments” . (OECD Principles of Corporate Governance, 2004 Annotations, p. 60)

  12. 10.- The Board and integrity policy (II) “Companies are also well advised to set up internal programs and procedures to promote compliance with applicable laws, regulations and standards, including statutes to criminalize bribery of foreign officials that are required to be enacted by the OECD Anti-Bribery Convention and measures designed to control other forms of bribery and corruption” (OECD Principles of Corporate Governance, 2004 Annotations, p. 63)

  13. 11.- Full fledged integrity programs: the 7 steps (I) • Setting up compliance standards capable of preventing illicit acts (the code of conduct) • Assigning high-level personnel to oversee compliance (part or full time compliance officers) • Avoid hiring or promoting individuals unlikely to be compliant; abstain from designing HR policies incompatible with the code of conduct • Communicating standards and procedures to employees

  14. 12.- Full fledged integrity programs: the 7 steps (II) • - Implementing monitoring, auditing and reporting systems (whistleblowing) • - Using disciplinary mechanisms, such as sanctions, to enforce standards and procedures • - Taking steps to respond after an offence has been detected, including amending the compliance program

  15. 13.- The pitfalls • “Memories from the past”; old contracts, new problems • The odd (small scale) diversification • Rogue employee(s) (bonus v. values) • The parallel organization • Box ticking or bureaucratic compliance • Dilution of responsibility (matrix organization)

  16. 14.- Public v private Corporate compliance cannot work without regulation and enforcement Regulation without corporate response is an empty exercise Ping pong game between enterprises and authorities, cross fertilization Need for continuing cooperation at all levels: global, per sector and for individual corporations

  17. 15.- The threats • - Economic fraud shows no reduction • Present financial crisis will increase the temptations • The OECD Convention risks being weakened by exceptions • Still no full monitoring mechanism in place for UN Anti-Corruption Convention; will there ever be a level playing field • ICC Executive Board of September 12, 2008 authorized a project of CEO statement

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