Cleaning Up the Skies

Tags

, , , ,

Photo Credit: Janak Raja via Flickr

Throughout its forty plus year history, European aircraft and defense group Airbus has been no stranger to controversy. Whether it was the long-running investigation into alleged corruption in an Airbus subsidiary operating in Saudi Arabia or an insider trading investigation involving company shares, scandal seems to follow Airbus, no matter what endeavors the company pursues. However, the latest corruption probe involving the European defense group might be the case that finally forces reforms throughout the Airbus Group.

In August 2016, the UK’s top anti-corruption watchdog, the Serious Fraud Office (SFO), opened a formal investigation against Airbus into allegations of fraud, bribery and corruption in France, Germany and the UK. The investigation is related to irregularities involving third party consultants and the sale of passenger jets overseas. According to the UK’s 2010 Bribery Act, “the bribery risks associated with reliance on a third party agent representing a commercial organization in negotiations with foreign public officials may be assessed as significant and accordingly require much more in the way of procedures to mitigate those risks”.  Read More...

Third Parties don’t have to be the “Third Rail” of International Development

Tags

, , , ,

Photo Credit: Richard Masoner via Flickr

Third parties lie at the heart of corporate compliance risks as 90% of FCPA cases involve external intermediaries. A third party is any person or entity that is not a direct hire or main party to a transaction – typically a contractor or an out-sourced service provider. Examples of third party misdeeds in international aid flows often become stories of national interest, propelling conversations about the efficacy of international development to the point that it is becoming a political third rail. That said, the same practices that mitigate third party risks for multi-national firms are applicable to the international development sector as well. As a result, third parties do not have to be the third rail for donor governments and international development charities and private enterprises.

As in any industry, firms and organizations working in international development cannot directly control the actions of third parties.  Read More...

Open Data: An Innovative Approach to Anti-Corruption Compliance in Brazil

Tags

, , , ,

 

Photo Credit: Micklefield Grade 4 (https://micklefieldgrade4.wikispaces.com/around+the+world)

Anti-corruption compliance remains a big challenge in Brazil, as corruption is embedded throughout Brazilian society, weakening government institutions and the economy as a whole. Brazil currently ranks 79th out of 168 countries in Transparency International’s Corruption Perceptions Index. In the private sector, “the majority of businesses surveyed as part of the Global Competitiveness Report believe that the diversion of public funds to companies, individuals, or groups due to corruption occurs frequently in (Brazil).” According to the 2015-2016 report, “corruption scandals have undermined trust in both private and public institutions.” In addition, “the 2009 World Bank/IFC Enterprise survey reports that nearly 70 percent of surveyed companies perceive corruption as an “major constraint” for doing business in Brazil.”

In 2015, as part of the Group of Twenty (G-20), Brazil agreed on a set of G-20 Anti-Corruption Open Data Principles. These principles aim to make crucial data open to the public, so “civil society can monitor things like the use of public resources including how taxes are spent and how contracts are awarded.” In turn, this open data can play a significant role in combatting corruption, as it would make it easier to hold governments and the private sector to account for their actions.  Read More...

The FIFA Scandal: What We Can Learn about Ethics and Compliance

Tags

, , , , ,

Photo Credit: Wikimedia Commons (https://commons.wikimedia.org/wiki/File:Uruguay)

Soccer (or “football” depending on your geographic orientation) is often referred to as the “beautiful game.” Of late, as recently as this month, the sport has become a bit less beautiful. The Fédération Internationale de Football Association (known as FIFA), the international governing body of soccer, has been embroiled in a corruption scandal that has rocked the organization to its core.

It began in May 2015. Fourteen FIFA officials were arrested and indicted in connection with an investigation by the US Federal Bureau of Investigation (FBI) and US Justice Department into wire fraud, racketeering and money laundering, spanning a period of 24 years. That December, 16 more officials, including two FIFA vice-presidents, were arrested on similar corruption charges. Since then, the events snowballed into a full-blown scandal, with longtime FIFA President Sepp Blatter and other top officials banned from FIFA activities. The investigation into FIFA has revealed a toxic culture of unethical behavior, non-compliance and corruption that started from the top and trickled down to every facet of the organization.  Read More...

The ISO 37001: Seven Months Later

Tags

, ,

Photo Credit: International Organization of Standardization (via Veracity Asset Management Group)

Back in October, the International Organization of Standardization (ISO) released the long awaited ISO 37001, a new international standard designed to help organizations prevent, detect and address bribery. As a potential game changer in international anti-bribery standards, the ISO 37001 can be used by any organization, large or small, public or private, to implement an anti-bribery management system designed to fight bribery and promote an ethical business culture. Unlike the previous ISO 19600, which was drafted as a set of guidelines that organizations should incorporate into their compliance programs, the ISO 37001 is drafted as a set of requirements that organizations must implement if they want to be certified.

The standard requires organizations to adopt an anti-bribery policy, select someone to oversee compliance with that policy, implement financial controls, and adopt reporting and investigation procedures. Since the ISO 37001 sets forth specific requirements for companies to meet, it is certifiable by third parties and companies that receive an ISO 37001 certification might potentially have an advantage against competitors that do not have the qualification.  Read More...

The Private Sector-Sized Gap in Our Collective Corruption Libraries

Tags

, ,

Photo Credit: Henri Pitkänen (via Flickr)

A new bookcase spurred me to go through all of my old grad school books, including those from a class on international corruption. I immediately noticed a trend among these books: all of them focused on the role of the government, rather than the private sector, in creating, sustaining, and cleaning up corruption. Leafing through the books I could see that there was a private sector gap in not only my bookcase but also the most cited models of corruption and governance, which means that there is a real opportunity to re-analyze these models through the lens of the private sector.

For example, in one of the most influential books on corruption, “Corruption and Government: Causes, Consequences, and Reform,” Susan Rose-Ackerman concludes that:

“Fundamental change requires commitment from the top of the government and a willingness to follow through as the anti-corruption effort unfolds.  Read More...

Facing the Elephant in the Room

Tags

, , ,

Photo Credit: OECD Integrity Forum (via Flickr)

The Organisation for Economic Co-operation and Development (OECD)’s Global Anti-Corruption & Integrity Forum, held annually for five years now at the OECD headquarters in Paris, is the leading international event on integrity and anti-corruption. I had the opportunity to attend the 2017 edition, learn from the other participants, and share CIPE’s experience in working on anti-corruption. This year, the Forum brought together about 1,300 attendees, including policymakers as well as the private sector, civil society organizations, and academics. The Forum’s theme, “In the Public Interest: Taking Integrity to Higher Standards,” highlighted the importance of combating corruption for better public governance.

In his opening remarks, OECD Secretary General Angel Gurría emphasized that corruption scandals prevalent in both the private and public sectors – and the scale of impunity – have contributed to the global erosion of public trust in business, government, public institutions, and the media.  Read More...

Chaebol Reform: A Top Priority for the Next South Korean Administration

Tags

, , , ,

Photo Credit: Wikipedia (https://en.wikipedia.org/wiki/Hanjin)

What are the primary economic concerns for the next South Korean administration?

According to a poll conducted by Han-kook Research on April 17, “Job Creation” (34.1%) ranked as one of the top priorities for the next administration. “Resolving polarization” (20.6%), “small and medium-sized enterprise (SME) empowerment” (20.4%) and “chaebol reform” (12%) were the next biggest priorities. However, considering the current Korean economic structure, there is no doubt that every economic concern mentioned above is chaebol (South Korean business conglomerate) related. According to statistics in 2015, the combined revenues of the five largest chaebols accounted for 58% of South Korea’s GDP. This figure already seems problematic, but in addition to this fact, it was further revealed by the political corruption case involving the former president that crony capitalism has confused the South Korean market and inhibited the growth of SMEs for a long period of time.  Read More...

Do Millennials Care About Compliance?

Tags

, ,

Photo Credit: VC Voices (http://vcvoices.org/2016/04/millennials/)

A recent Wall Street Journal blog article highlighted concerns about the “me-first” millennial generation pouring into the workplace in the near future. According to the article, millennials seem to care less about institutes and authority and as a result there is a fear that they would be more likely to sacrifice compliance for their own professional needs and self-interests. This prospect might frighten those who are in charge of corporate compliance and therefore incentives must be developed to encourage millennials that engaging in compliance is in fact the best course of action to advance their own self-interests.

We need to remember that corruption is not solely about morale. As Abdul Alkebsi, Deputy Director of Programs at the Center for International Private Enterprise (CIPE)asserts, “corruption is about incentive, not about morale. Everyone knows about morale, but what matters is their incentive for compliance”. If we think this argument makes sense, we need to know how perceptions toward incentives have changed from one generation to another.  Read More...

Building an Ethical Culture

Tags

, ,

Photo Credit: Bureau of Safety and Environmental Enforcement (via Flickr)

For any company to reach its full potential, a change toward a culture of compliance and ethics is needed. This change should start from the top, with management leading the way. However, to truly foster an environment of compliance and ethics, everyone in the organization must be on board. Companies are open systems, filled with various networks and levels of relationships. Therefore, a holistic approach to building an ethical culture is required and must focus on every level of the system (individual engagement and motivation, interpersonal interactions, group dynamics, relationships among groups, and interactions with external stakeholders).

According to Alison Taylor, Director of Business for Social Responsibility, there are five levels at which companies should build an ethical culture: individual, interpersonal, group, intergroup and inter-organizational. At the individual level, employees will likely be more receptive to a culture of ethics if they are rewarded and their performance measured based on compliance and ethical behavior in the workplace.  Read More...