The ISO 37001: Eight Months Later

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Photo Credit: International Organization of Standardization (via In My Own Terms)

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

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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

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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

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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?

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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

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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...

The Aftermath of the Adam Smith Controversy: What’s Next for UK Aid?

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Photo Credit: DFID (via Flickr)

Although the international development community aspires to noble ends, the firms and organizations therein are not free from the same compliance challenges that face corporations with more naked profit motives. Adam Smith International (ASI), the largest international development contractor for the United Kingdom’s Department for International Development (DfID), can attest to that point. In February 2017, ASI suffered a major blow when DfID froze all future contracts with ASI after uncovering unethical behavior on the part of ASI. These firm-specific compliance issues, however, serve as the entrée to a broader conversation about the roles of ethics, compliance, and the public in the arena of international development.

ASI earned their DfID sanction by hiring an ex-DfID employee who then used their access to proprietary DfID documents to help ASI gain inside information into how to win big DfID contracts. ASI also sought to influence the results of parliamentary hearings by making up glowing letters of support, supposedly from its beneficiaries.  Read More...

The Birth of the New Samsung?

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Photo Credit: NBBJ (via http://www.nbbj.com/work/samsung-r5-research-building-and-landscape/#)

On February 28, 2017, Samsung unveiled the “Business Renovation Proposal” (The Proposal, hereinafter) on its official website. The Proposal contains several measures aimed at strengthening Samsung’s transparency and compliance mechanisms, as a result of the conglomerate’s involvement in the recent political scandal in South Korea. Samsung is suspected to have illegally given approximately $37.8 billion to Soon-Sil, Choi (who allegedly engaged in improper relations with the South Korean government by influencing her “friend”, Former President Geun-Hye, Park.) in order to garner business benefits from the former President.

In the Proposal, there are three notable provisions regarding compliance for Samsung. First, Samsung subsidiaries would engage in self-management, focusing specifically on their own board of directors. This suggests there wouldn’t be any interference from the Samsung Group on their subsidiaries’ business activities. In the same context, Samsung closed their Future Strategy Office, which worked as a control tower (as a large conglomerate, Samsung had a special decision-making unit that crucially affects all subsidiaries in the Group… It has been documented that the control tower took charge of vast areas of the Group’s business such as strategy, planning, HR, etc.) that engaged in the business of all subsidiaries and directed giving illegal support to Choi.  Read More...

Raising the Stakes for Anti-Corruption

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Photo Credit: US Army Europe (via Flickr)

Corruption is like a cancer, draining the health of an economy if it is allowed to spread unchecked. In fact, it’s such an insidious problem that in 2016 the International Monetary Fund (IMF) estimated the direct cost of bribery alone to the global economy to be between $1.5 and $2 trillion annually. And there’s a long list of what that figure doesn’t include: other forms of corruption apart from bribery, indirect costs of corruption like lost tax revenue and lost economic opportunities for the poor, and intangibles like public distrust of institutions and eroded governance. (And a note to the discerning readers – this conservative IMF estimate even factors in methodological considerations such as varied understandings of corruption, perceived vs. actual levels of corruption, and aggregating indices.)

But let’s take a step back for just a moment and consider the why: why is corruption bad?  Read More...

Changing a Culture

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Photo Credit: Jack Kurzenknabe via Flickr

As a longtime fan of the National Football League (NFL) team the Buffalo Bills, I know how hard it can be to change the culture of an organization. The Bills have not made the NFL playoffs since 1999 and as a result have developed a “culture of losing” that has now spanned 18 years. In fact, this last year the franchise earned the embarrassing “honor” of having the longest playoff drought in the four major North American sports (football, basketball, baseball and ice hockey) leagues. Years of festering in the same toxic culture is an important reason why the organization has not advanced and remains in a consistent state of inconsistency. In order for the Bills to reach their full potential they will need a change in culture. The same is true with businesses and corporations that continue to operate in a culture of non-compliance.  Read More...