Update Autumn 2012

Compliance is no panacea.

While politicians and commentators have been calling for greater corporate responsibility to restore trust and boost economic growth, many leading businesses have been taking action and have been looking at increased compliance.

Although some high-risk or highly regulated industries have well-established compliance departments, for a significant number this is a new function. This move is being driven by several factors, the most influential being the Bribery Act, with its tougher corporate offence of failing to prevent corruption.

Of the 18 new companies we have been asked to work for since January 2012, all FTSE 100/250 or equivalent, the vast majority are working on compliance issues, be it measuring adequate procedures, benchmarking anti-corruption practice, developing effective compliance programmes or managing human rights or anti-trust issues. GoodCorporation is advising these organisations on implementing values-based rather than tick-box compliance to embed a culture of good behaviour that will minimise risk and protect reputation.  As our Business Ethics debates are showing, values-based compliance is is increasingly being regarded as best practice.

This edition of Update looks at some of the current thinking and best practice in ethical business management and compliance.

Michael Littlechild

Do business ethics add value or cost?

GoodCorporation’s second Business Ethics Debate in Paris looked at whether or not business ethics and compliance functions can be said to add value to an organisation, or are they simply additional costs.

The debate explored the role of ethics and compliance from a number of angles; as a necessary measure for protecting reputation; as part of a company’s marketing strategy; a means of creating a virtuous circle to improve a business as a whole or simply the right way to do business.

Many felt that we are seeing a tangible shift in favour of ethics and compliance as the central part of a strategy to restore trust and protect reputation.

GoodCorporation is seeing an increasingly important role for the ethics and compliance function in screening and monitoring the activities of suppliers and other third parties. Many more companies are starting to evaluate suppliers seriously in terms of anti-corruption policies, human rights, labour standards and environmental performance.

We also see the best ethics and compliance functions adding to a ‘virtuous circle’ in their organisations. This circle is based on a simple logic that as stakeholders are treated well, this treatment is returned in terms of loyalty, recommendation and ‘licence to operate’.

Conversely, those companies that rely heavily on a compliance function that follows the letter rather than the spirit of the law and ignore wider ethical issues, often struggle to create good cultures. Instead they can create an environment in which no one feels responsible for protecting the organisation’s reputation.

A full summary of the debate can be read on the goodblog.

GoodCorporation welcomes Transparency International Corruption Study

While defence budgets are coming under intense scrutiny in Western Europe and North America, the pressure is increasing on defence companies to sell into higher risk markets with weaker anti-corruption controls. So Transparency International’s Defence Companies Anti-Corruption Index, which showed that two thirds of the world’s largest defence companies do not provide enough evidence of the steps they take to combat corruption, is of real concern.

Mark Pymen, head of defence at TI and the lead author of the study, is right to say that the degree to which a company is willing to publish details of its anti-corruption safeguards is directly linked to the effectiveness of its anti-corruption effort.

However, this is only step one. What is especially worrying about this report, particularly in a sector that has repeatedly and regularly faced charges of corruption, is that developing and publishing anti-corruption safeguards and policies is the easy bit.

The real test of a robust anti-bribery and corruption (ABC) programme is the effectiveness of its implementation.

From the work we do, including assessments in the defence sector, we know that there is often a gap between policy and actual practice. In addition to developing anti-bribery practices and communicating a zero tolerance towards corruption, companies need to carry out regular checks to see how their ABC programme is actually working on the ground.

Transparency International’s defence company study is therefore a welcome initiative that could have a significant impact on raising ethical standards in this sector. We hope to see it embraced by the sector as a whole, with companies seeking to improve their grading year on year.

Click here to read our full report on the TI study

In Brief...

Watching out for whistleblowers

Businesses striving to establish an ethical corporate culture are encouraged to set up an effective speak-up system. Working on what is now a clearly established truth that misconduct damages corporate reputations, a good whistleblowing system can act as a company’s eyes and ears, providing an early warning system so that real reputational damage can be averted.

But the whistleblowing stories that have hit the headlines in recent weeks would indicate that all is not as it should be.  We have seen stories of government regulators insulting whistleblowers and asking them never to contact them again. There have also been reports of routine dismissal, despite the fact that such individuals are protected by UK law.

In an ideal world, organisations should not need a whistle
to alert them to problems before any damage is done.

However, as more companies recognise that an effective speak-up system can be crucial to managing risk and protecting reputation, GoodCorporation is increasingly being asked to advise on how this can best be achieved.

Our guidance on how to get this right is now available on our website.

Logistics companies exposed under UK Bribery Act

This summer GoodCorporation conducted a survey of leading logistics and freight forwarding companies which revealed that twelve months after the Bribery Act was passed, a significant number have insufficient procedures in place to prevent corruption.
A third of the companies surveyed had no published anti-corruption policy or statement and more than half make no public statement at all regarding facilitation payments.
This flies in the face of Ministry of Justice Guidance on the Act, which states: “top level management commitment to bribery prevention is likely to include communication of the organisation’s anti-corruption stance”.

From the work that GoodCorporation carries out in this area, we know that a failure to publish an anti-corruption policy or statement is likely to indicate that little or nothing is being done to prevent bribery. The fact that the multi-billion dollar logistics industry has failed to take this first step is very worrying.

Logistics is one of the most exposed sectors to corrupt activities, with companies in this field often working in some of the world’s most ethically challenging environments.

The full report and resulting press coverage are available on our website.

News and Views

For the latest GoodCorporation views on ethics and responsible practice you can read our thoughts on the goodblog. We are also on twitter.