The Bribery Act - Creating an anti-bribery culture

18th September 2011

How best to comply with the 2011 Bribery Act? Following the old medical adage that an ounce of prevention is worth a pound of cure, surely the best response that companies and managers can make is to make certain that they comply fully with the law, now and in the future. In other words: don’t give or take bribes. But as Morgen Witzel, FSN writer and honorary senior fellow at the University of Exeter Business School, companies need to build a strong anti-bribery culture as well.

But many companies – especially those with operations in parts of the world where legal systems are weak and corruption is commonplace – will find this much easier to say than to do. I hear repeatedly from students and colleagues about countries where, they say, it is impossible to get a contract or import goods or hire people without first paying off government officials. Their argument is: if we don’t pay bribes, we won’t get the business. 

Most businesses of any size – and especially most large multinationals – already have their own codes of ethics which already forbid bribery. Their leaders are adamant that their companies will behave in an ethical manner. That is the position at head office. Now let us move from the top of the company down to the struggling regional sales manager in a foreign remote location, who has targets to hit and is under pressure from his bosses to bring in business. No matter what the code of ethics says, no matter what pronouncements come down from head office – and no matter what the Bribery Act says – people like him will continue to be under pressure to pay bribes to get business. 

And even though there are risks including prison, fines and long-term reputational damage, some people will succumb – probably without head office ever knowing about it. Barings Bank was only one most high-profile example of how a key member of staff went over to the ‘dark side’ without anyone at head office knowing until it was too late. 

How can this risk be reduced? Advice from government is to know the risks in advance and to ensure that staff are given anti-bribery training. Another British organisation, the Bribery Centre, recommends five key policies:

  • a clearly stated zero tolerance anti-bribery policy
  • a senior manager with specific responsibility for preventing bribery
  • an effective anti-bribery communication strategy
  • clear and concise guidance on the nature of gifts, hospitality and expenses
  • a definitive anti-bribery training programme for all employees 

It is quite true as the government says that the nature of the risk should be understood in advance. When moving into new overseas markets, for example, it is imperative to understand whether those markets are governed by strong and effective legal systems and, if not, how prevalent corrupt practices are. Organisations like the Bribery Centre can help with risk assessment if needed. Otherwise, anecdotal evidence gathered from personal observation, conversations with competitors and other organisations already in that market and with area or industry experts added to the picture. Such conversations can also help to identify likely business partners with good reputations, with whom it will be possible to do business legally and honourably. 

Anti-corruption training, provided internally or by organisations such as Transparency International or the Global Infrastructure Anti-Corruption Centre, can help to make staff aware of these risks. It can also help them to understand the pressures and ambiguities that they might face. One common case study runs as follows: you are running a famine relief programme and need to get a consignment of food to people before they starve. A government official refuses to allow you to move the food until you pay a bribe. What do you then do? Training programmes help to make people aware of the consequence of both decisions and of the risks they and their organisations run. They also help them to make informed decisions rather than ones based on emotional reactions. 

These things are necessary, but not sufficient. No matter how much money is spent on risk assessment and similar initiatives, these will be only token gestures unless the company’s leaders support them and create a culture in which it is firmly understood that bribery is wrong. Leaders must be prepared to lead by example and give strong support to staff placed in difficult positions.

 

And staff will be placed in difficult positions. The example given above is only one of many; nor do we need to go so far as the Middle East to find industries and sectors where dubious practice – to say the least – is commonplace. In such cases, legal sanctions such as those embodied in the bribery act will not be enough.

 

In 2004, research by Professor N. Craig Smith of London Business School and colleagues from America and Taiwan showed that the threat of legal sanctions does not carry much weight with many executives. Some believe they are clever enough to get around the law and not get caught. Others argue that ‘the law’ and ‘right’ are not always the same thing. Like the famine programme manager above, they argue that there are times when it is okay, even necessary, to break the law.

 

It absolutely is not enough to simply throw a set of rules at staff, tell them to comply or else, and then expect them to get on with their jobs. Staff in risky positions must be supported.

 

One key point that leaders need to make, over and over again, is that making money does not take precedence over compliance; in other words, if getting a deal involves engaging in corrupt practices, then that deal should be turned down now. Think of the number of British companies that did business in Libya following the thaw in relations a few years ago – and are now finding those deals coming back to haunt. Actually, most of those deals were clear and above board. But the stench of corruption from the Gaddafi regime is coming back to haunt them. With hindsight, they might have been better off turning down the deals and losing money.

 

In other continents, where corruption in both business and public life is a severe problem, wise leaders make this point over and over to their people. N.R. Narayana Murthy, the founding chairman of Infosys, often makes the point that ‘I would rather lose a hundred million dollars, if it meant that I could sleep at night.’

 

And – and this is critically important – when situations arise where staff are asked to pay or give bribes, they must know that they will have the full support of their bosses and the rest of the company is right behind them.

 

Ratan Tata, the outgoing chairman of the Tata group, makes the point that one of the core values of the Tata brand is trust. He insists that the Tata group must be honest and must live by its word. The Tata group operates a zero tolerance policy on corruption, meaning that employees who engage in corrupt activities are summarily dismissed.

 

But the group also encourages positive action by employees. Employees have been known to ring up the anti-corruption police on their own initiative when asked to pay bribes, not even bothering to inform their superiors. One group of young managers at Tata Tea in Bengaluru even launched their own anti-bribery campaign, trying to raise public awareness of the problem through television advertisements and a public petition. These stories are well known around the group.

 

At Tata, the message that bribery is wrong is reinforced over and over again: during staff induction and training, through values days, through corporate communications, and most of all by the attitude and pronouncements of senior executives, who constantly pronounce on the need for trust. When a recent scandal broke in India regarding the awarding of 3G mobile phone licences, Ratan Tata was the first come forward and give evidence regarding his own company to the Indian parliament.

 

One point is that even in difficult environments, it is possible to do business without paying bribes. Ratan Tata and his colleagues admit that in the past this has cost them money, when they refused to pay bribes and contracts were awarded elsewhere. But they also run India’s largest and most respected business group. A good reputation will pay dividends in the long run.

 

The second point is that people will only reject bribery if they realise that this is the right thing to do. The Bribery Act is not a complete solution to the problem. The prevention of bribery will only come about when people realise the harm that bribery does: to themselves as human beings, as well as to others. A strong corporate culture can change the way that people think. And that means that everyone, not just the chairman, can sleep at night.

 

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