Update Spring 2011
Welcome to the Spring issue of Update.
Following the delay in publishing guidance on Adequate Procedures, Justice Secretary Ken Clarke has confirmed that the Act will not be watered down and that the government is committed to implementing tough anti-corruption laws. GoodCorporation welcomes this announcement.
Our sources in the Ministry of Justice are now suggesting that the guidance on the Act will come out shortly. The Act will come into force three months later.
Ken Clarke’s statement confirmed that legitimate businesses have been ‘frightened’ by the Act. Media coverage has fuelled those concerns by claiming that the Act could damage UK competitiveness abroad at a time when the country desperately needs growth.
Much of this concern has focused on corporate hospitality and managing third parties and suppliers.
We take a look at these issues and consider whether companies are right to be worried or not.
GoodCorporation’s Anti-Bribery and Corruption (ABC) Framework was originally developed four years ago and has been regularly updated since then, as best practice has emerged. The draft guidance on the Bribery Act set out six principles to help companies put in place ‘adequate procedures’ to prevent bribery, and the GoodCorporation ABC framework was updated early this year to reflect the new guidance.
Our assessment work has included a review of anti-bribery controls since 2001. We have also developed decision trees to help decide on corporate hospitality and to decide on whether and how to screen suppliers, agents and other third parties.
We hope you find this information useful.
Michael Littlechild
Why the Bribery Act could be good for British Business
The government is concerned that implementation of the Bribery Act might damage British competitiveness and impede the UK’s recovery from recession. In recent weeks, organisations such as the OECD and Transparency International have condemned the government’s delay in implementing the Act. The OECD is even threatening to blacklist UK exporters if the Government delays any further. Much has been written about the supposed damage to UK plc if the Act is enforced, less publicity has been given to the UK business case for the Act.
Here are a number of reasons why the Act could be good for business and why the Government should implement the Act carefully to ensure that it benefits UK businesses.
* The UK government can use the Act to pursue and prosecute foreign firms that are currently competing unfairly against UK businesses. The way the US administration is using the Foreign Corrupt Practices Act (FCPA) highlights the point. Eight of the top ten monetary fines imposed by the US have been on European headquartered corporations, not US ones.
* UK firms are using the Act to push suppliers, agents and intermediaries in developing countries to put in place stronger anti-corruption controls. This is already having the impact of making these companies less corrupt and easier for other UK firms to compete with.
* Bribery is already illegal and UK companies should not be paying bribes; the Act does not change this in any way. The delay makes this situation less certain and may actually leave UK firms in a position where illegal activity is effectively condoned by management.
* Corrupt markets lead to insecure contracts and inflated costs that can eliminate or reduce profitability.
* Foreign companies with any link to the UK are already changing their procedures to comply with the Act – again helping UK businesses to compete fairly with them.
* Foreign governments are aware of the Act and already there is debate in the US and other jurisdictions about strengthening their anti-bribery legislation to meet the standards being set by the UK Act, helping to create a truly level playing field.
* Clarity in the UK legislation will help UK companies to resist demands for bribes and will put greater pressure on foreign governments and companies to operate clean procurement processes.
Forget the moral case for the Bribery Act – if it is implemented and scrutinised well, the Act could and should be good for British competitiveness.
In Brief...
GoodCorporation strengthens ABC framework
To help businesses test the efficacy of their Anti-Bribery and Corruption procedures, GoodCorporation has strengthened its anti-corruption framework.
Designed in the same way as the GoodCorporation Standard for corporate responsibility, the Bribery and Corruption framework has a list of 60 good management practices that companies should follow to protect themselves from the risk of malpractice from inside or outside the organisation.
Over the past 10 years, GoodCorporation has tested anti-corruption practices for major corporations in some of the world’s most challenging environments.
Gifts or Bribes?
Media speculation that the Bribery Act will damage the UK’s corporate hospitality industry reached fever pitch at the start of the year, with some claiming that its introduction would be the end of sports such as Formula 1.
Clearly there can be some grey areas, but the issue is not as complicated as has been suggested.
Entertaining clients can legitimately remain part of business life, but companies can ensure that hospitality is proportionate if they set out a clear and simple decision-making process.
Who do you do business with?
Fear that the activities of a third party could land board directors in jail is causing business leaders to call for greater guidance on the forthcoming Bribery Act. The Act states that an act of bribery can be undertaken by the company itself or through a third party. Therefore if a supplier commits bribery on behalf of a client then the client could be prosecuted under the Act.
The simple idea of knowing who you do business with seems to be causing much concern. GoodCorporation has produced a decision tree that helps businesses to analyse the potential risk in any supplier relationship.
Ethics in the Construction Industry
Representatives from some of the world’s leading construction companies met at the House of Lords recently to participate in GoodCorporation’s debate on Ethics in the Construction Industry.
With the UK Bribery Act due to come into force in April, much of the discussion focussed on corruption. The development of Adequate Procedures and robust systems to ensure compliance with the new law were keenly debated. But the discussion also touched on labour standards, supply chain management as well as cover pricing and collusion in bidding.
When asked if construction companies were doing enough to meet the ethical challenges they face, the vast majority felt that the industry could do better.
News and views
For the latest GoodCorporation views on ethics and responsible practice you can read our thoughts on the goodblog. Just go to our website and click on goodblog. We are also on Twitter. Click on twitter to become one of our followers.