Companies have a long way to go in dealing with international bribery and corruption
Paying a bribe is a gamble. You could be lucky and the gamble pays out, but in the long run if you keep doing it gambling develops into a nasty habit.
The individuals and corporates that pay bribes support corrupt regimes and make problems worse for themselves. Encouraging this behaviour also creates extreme inequality in markets and threatens the development of societies. Bribe payers also run the risk of fines and a ruined reputation.
Yet bribery is far from uncommon and many corporates don't take the risk seriously. Sadly all too often bribery is an accepted way of doing business, particularly in the poorer parts of the world.
The problem is by no means exclusive to the developing world. Britain has been harshly criticised for its poor performance on anti-bribery measures. A recent survey, conducted by Transparency International and sponsored by Ernst & Young to mark the UN's anti-corruption day, found that amongst 26 countries France, Australia, the US, Spain, Italy and others, were all more likely than Britain to have companies engage in bribery when doing business abroad.
The emerging markets also performed poorly, Brazil, Russia, India and China were amongst the most likely countries to harbour businesses that engaged in bribery overseas. The survey offered little in the way of comforting news. Most importantly the results show that bribery remains a routine company practice for all sectors around the world.
The OECD Anti-Bribery Convention, which came into force in 1999, is a crucial legal instrument in the fight against international bribery. A major concern, highlighted by the bribe payers survey, was that three quarters of senior business executives indicated that they were not at all familiar with the convention. A clear indication of the lack of leadership from the top.
The survey also poured shame on the most guilty business sectors. The type of businesses most likely to pay bribes to public officials or political parties in order to influence policies were construction, property and the extractive industries, such as oil and gas and mining.
In Africa and the Middle East it was the police that senior executives thought were most likely to accept a bribe, in the rest of the world politicians were seen as the most corrupt.
“In the worst parts of the world, bribery tends to be in low level areas.
Defending his business, Jeremy Bradshaw, compliance director, BP, said it is unsurprising his sector is at the top of the guilty pile because resource rich countries tend to be poorer with less developed governance standards, which sets up the conditions for corruption. Cobus de Swardt, managing director of Transparency International said if anything that means those companies that wish to do business in these regions are obliged to do more to help improve the situation.
Outside of the US—which takes enforcement of the Foreign Corrupt Practices Act very seriously—convictions for bribery or corruption are rare and the fines so laughable that the benefits of bribery sometimes outweigh the risks.
Britain has come under sharp criticism from the OECD for its weak anti-bribery laws and lax enforcement of them. The Serious Fraud Office, the UK's body charged with prosecuting corporate crime, defended its role and insisted it is funnelling resources into the anti-bribery division. ‘There will be many more prosecutions as a result of this increase in resources,’ warned the SFO's Richard Alderman.
In the worst parts of the world, bribery tends to be in low level areas. Companies have to be brave to take a stand against it. For example, a sea captain that refuses to grease the palm of a Customs official is potentially putting himself, his ship and crew in danger. That is a difficult rule to put into practice.
But the alternatives for the business are worse. The bar of public opinion on matters to do with corruption has been raised considerably and major scandals have dealt severe blows to share prices. Directors, while they're obviously not quaking in their boots, should be aware of the consequences of not taking action against bribery. In September, the chief executive of a former Halliburton subsidiary, KBR, agreed to a seven year jail term and a multi million dollar fine for illegally paying bribes to Nigerian officials in order to win high profile contracts. 'Bribery is a criminal behaviour and businesses have to change the way they do things,' said Swardt. The damage to organisational culture and integrity if a company gives in to bribery should not be underestimated.
The aftershocks of the financial crisis could actually drive home the message on corporate ethics and governance. Inevitably there will be increased emphasis on regulatory enforcement and possibly even more willingness to listen for the sounds of whistleblowers. All this could encourage more compliance with international anti-bribery rules.
For those companies that want to take the risk there's a lesson here from the gaming table. When you gamble sometimes you lose. And the loser always pays the price.
See also: Emerging markets most likely to bribe