Tag Archives: transparency international

The Challenge of Anti-Corruption Compliance for Emerging and Frontier Market Firms

ti-report-release

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“Among a people generally corrupt, liberty cannot long exist.” - Edmund Burke

Until recently, corruption has been accepted and treated as a cultural norm in countries across the world. Increasingly, thanks to the efforts of organizations like Transparency International (TI) and a range of business groups, nonprofits, and government initiatives, the private sector is now openly talking about corruption. But to make significant progress, not just multinationals but also domestic companies in emerging and frontier markets need to believe in the business case for anti-corruption compliance.

As a community we are at a crossroads, as a wide range of actors have not only come to realize the destructive nature of corruption but are putting their heads together to create the conditions necessary to combat it.

TI-USA’s new report on Verification of Corporate Anti-Corruption Programs, the project of extensive research and consultation, marks an important step towards a unified vision of what successful anti-corruption compliance programs should look like. At a July 24 event presenting TI’s key findings and recommendations on corporate compliance, Andrew Wilson, CIPE’s Deputy Director for Strategic Planning and Programs, shared his views as part of a panel that included speakers from TI, Siemens AG, and Tyco.

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CSR and Anti-Corruption: New Report from Transparency International

We often hear that corporate social responsibility, or corporate citizenship as it is often called in the business community, is more than philanthropy.  Its easy to agree with this statement.  But what does this “more than philanthropy” mean?  What is good corporate citizenship beyond financial contributions to a legitimate cause?

A new paper by Transparency International argues that fighting corruption is good corporate citizenship.  One of the issues highlighted in the paper is that in move towards non-financial reporting on companies’ activities, reporting on anti-corruption strategies is often lacking.

In 2007, TI commissioned a survey to probe company reporting on practices to combat bribery and corruption. The study, Transparency in Reporting on Anti-Corruption – A Report of Corporate Practices (TRAC) assessed the extent to which close to 500 leading companies have reported the strategies, policies and management systems they had in place for fighting bribery and corruption. In spite of some exemplary practices, only seven of the 486 companies reviewed achieved the top score while 151 received the lowest.

Overall, the paper is a good summary of the evolving field of social responsibility, various developments in the anti-corruption field, and how an aggressive stance against corruption by companies can be part of good corporate citizenship.

Exporting Bribery

A few years ago, while in Tanzania, I was interested to hear (from journalists that come from various countries in East Africa) that one of the main reasons for widespread corruption in Africa is the international community – both multilateral development agencies and multinational corporations.  At the same time some lauded the efforts of Chinese companies that were quite active in a variety of infrastructure projects.

Perceptions matter.  But they can also be misleading.

According to the latest Bribe Payers Index, developed by Transparency International, out of major global economies, companies from BRIC countries and Mexico are most likely to bribe when engaging in business operations in other countries.

In revealing that companies from Russia, China, and India are the bottom feeders of the Bribe Payers Index, TI report also highlights the evident lack of knowledge of the OECD Anti-Bribery convention in many of the OECD companies (at the senior executive level).  Still, despite the implementation gaps, the OECD countries and companies have made notable progress in becoming more transparent over the past few years, while companies from Russia, China, and India have much work to do to catch up.  Their countries’ signing of the OEC anti-bribery convention can certainly help in bringing more transparency to business operations.

Back to Tanzania and its neighbors.  Earlier this year, Chinese President went on small tour of East Africa, touting new aid packages and investments.  While such capital infusions are tempting, especially as the booming trade between China and African countries is helping the continent weather the economic storm, African governments, business community, and citizens more broadly must not forget of the strings attached – bribery that comes with it.  And, considering all the long term developmental costs of corruption that African countries know first hand, such bribery is something to worry about.

Just say ‘Nyet!’ – Corruption in Russia

In yesterday’s International Herald Tribune, Brook Horowitz (executive director of the Russian office of International Business Leaders Forum) penned a very interesting article  – Just say ‘Nyet!’ - about Russia’s new President Dmitri Medvedev’s first decree as president to to create and chair an anti-corruption committee.  It has caused quite a stir in a country that has been persitently dropping in Transparency International’s Corruption Perception Index.  Horowitz notes:

Largely unnoticed, many Russian companies are beginning to do something about corruption even before new legislation is put into place. They are starting by getting their own houses in order. They are strengthening corporate governance by creating clearer separation of board and management competencies and responsibilities, introducing International Financial Reporting Standards (IFRS), greater transparency of accounts and disclosure of shareholders, and nominating independent directors to the board.

CIPE and our partners in the Russian business community have been advocating for these types of reforms for a some time.  The Russian Institute of Directors, for example, has been very active in developing human capital needed to ensure effective boards of directors.  We’ve worked on the other fronts as well.

Just this past week CIPE Partner the Saratov Region Coalition of Business Associations scored a major victory in the fight against corruption. All 42 municipalities of the Saratov region have adopted the anti-corruption municipal program developed by the Saratov coalition. The Saratov Chamber of Commerce and Industry has helped train experts to analyze municipal legislation for corruption potential. The effort aims to reduce corruption throughout the region by the elimination of “holes” in legislative and statutory acts that encouraged the growth of corruption. The municipal programs are a result of an October 2007 CIPE workshop that trained legal experts in the methodology of examining statutory acts.

It’s great to see that our work at the regional level is trickling up to the federal government.  It will take time to see how effectively these reforms are followed, but let’s hope for the best!  Click here to learn more about the work CIPE is doing in Russia.