Improving Corporate Governance in Ukraine’s State-Owned Enterprises

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This blog was originally published on the Center for International Private Enterprise’s (CIPE) Development Blog.

On May 1, 2016, the law, On Introduction of Amendments to Certain Legislative Acts of Ukraine Regarding Protection of Investors’ Rights (No. 289-VIII), came into effect. It introduced a number of new aspects to Ukrainian corporate law including the right to shareholder derivative actions, direct payment of dividends to shareholders, and –perhaps the most relevant to reducing corruption and privatizing state owned enterprises– the establishment of independent directors.

In many developed economies, independent directors serve as a source for ongoing advice for senior management, set the strategic direction for the company, and provide investors (both public and private) confidence that their interests are represented through additional oversight, strategy development, and the scrutiny of major decisions undertaken by management. In state owned enterprises and family owned firms, independent directors serve as additional checks on the company from the perspective of the public or nonvoting family members, respectively, among other functions key to the long-term sustainability of such enterprises.  Read More...

Transparency International Releases 2016 Corruption Perceptions Index

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Photo Credit: Transparency International

The interplay of corruption and inequality feed off each other to form a destructive cycle between corruption, unequal distribution of power in a society and unequal distribution of wealth. This is the main conclusion from the recently published Transparency International’s (TI) 2016 Corruption Perceptions Index (CPI), which highlights the connection between corruption and inequality.

TI’s CPI Index scores and ranks countries based on how corrupt a country’s public sector is perceived to be. The composite index uses a combination of surveys and assessments of corruption by a variety of independent institutions specializing in business climate analysis. Each country is scored on a scale of 0-100, with a 0 indicating highly corrupt and a 100 representing very clean.

Of the 176 countries covered in the 2016 CPI, over 120 scored a 50 or below, with the global average at an alarming 43. Less than a third of the countries managed to score above the midpoint.  Read More...

The Challenge of Compliance in State-Owned Enterprises

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Photo Credit: Puro Periodism

Last month I was in Panama, attending the 17th International Anti-Corruption Conference (IACC). Not surprisingly, the Panama papers were looming large over the event and became a major point of discussion. To me, however, an equally important thread concerned another key issue: governance of state-owned enterprises (SOEs) and its significance for fighting corruption.

The highlight of the conference was Transparency International presenting its Anti-Corruption Award to the Operation Car Wash (Lava Jato) Task Force from Brazil. The Lava Jato scandal, involving the country’s state-owned oil & gas giant, Petrobras, began as a money laundering investigation and has grown into a large investigation uncovering cases of egregious corruption. Brazilian prosecutors from the Task Force have been bravely investigating these cases, resulting to date in more than 240 criminal charges and 118 convictions totaling 1,256 years of jail time, involving influential politicians and businesspeople.

Prosecutorial successes obviously are something to celebrate as an important step toward ending impunity.  Read More...

The Federation of Korean Industries Needs Anti-Corruption Reforms

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Photo Credit: Wikipedia

Business associations, as advocates for the private sector, play important roles in promoting good governance and sound policy-making, maintaining the private sector as the engine of economic growth, and helping create an open society and transparent government. However, recently, the Federation of Korean Industries (FKI), one of Korea’s five largest business associations, found itself at the center of a political scandal between the Korean government and the chaebol, Korea’s family controlled conglomerates.

The so-called ‘Choi Soon-sil Gate’ originated in 2016 when the FKI was caught engaging in suspicious fundraising activities to establish the Mir Foundation, which promotes Korean culture, and the K-Sports Foundation, which fosters elite athletes. In the course of raising funds, the FKI served as a lobbying group and conduit to transfer chaebol funding into these organizations. Lee Seung-cheol, vice chairman of the FKI who led the fundraising efforts, initially maintained during a parliamentary hearing that FKI’s member corporations voluntarily participated in the fundraising campaigns.  Read More...

France’s Renewed Fight against Corruption

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Photo credit: Flickr

For years, France has faced international criticism for its loose enforcement towards corruption. As a result, the U.S. Department of Justice (DOJ) has imposed severe sanctions on French companies. On November 8, 2016, France sealed the first step in a renewed campaign to tackle the problem of corruption by adopting a new anti-corruption law named The Law on Transparency, the Fight against Corruption and Modernization of Economic Life or the Sapin II. Named after the French Minister of Finance Michel Sapin, who championed the legislation, the Sapin II aims to bring France’s anti-corruption regime up to the highest international standards.

Central to the Sapin II law is the firm obligation to prevent and detect corruption risks. The law mandates that French companies that have over 500 employees and generate revenue exceeding 100 million euros adopt a compliance program. Some 1,600 companies in France fit this profile and will have till May 2017 to implement their compliance programs.  Read More...

ISO 37001: A Game Changer in Global Anti-Bribery Efforts?

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On December 9, International Anti-Corruption Day, the Center for International Private Enterprise (CIPE) in partnership with the Association of Women in International Trade (WIIT), co-hosted a panel discussion on the International Organization for Standardization (ISO) 37001, a new standard on anti-bribery management systems designed to help organizations fight bribery and promote an ethical business culture. The panel, moderated by CIPE Regional Director for Asia John Morrell, consisted of Worth MacMurray, Principal at Governance and Compliance Initiatives, Shruti Shah, Vice President of Programs and Operations at Transparency International-USA and Jesse Spiro, WorldCheck Research Manager at Thomson Reuters.

After brief opening remarks from WIIT President Evelyn Suarez, Morrell started the event by highlighting CIPE’s work in combating the institutional side of bribery and corruption. The discussion began with MacMurray, who worked on the new standard, giving an overview of the ISO 37001. The ISO 37001 is meant to be widely applicable to all organizations of any size in the public, private or not-for-profit sectors.  Read More...

Watch for Mosquitos

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Photo Credit; Flickr

This blog was originally published on the Society of Corporate Compliance and Ethics’ (SCCE) “Compliance & Ethics Blog”.

I was fortunate last week. While exhibiting at Transparency International’s International Anti-Corruption Conference in Panama City, Stephanie Gallagher and I were able to visit the Panama Canal. May Jane Coulson, the Canal’s ethics officer, whom I interviewed for the SCCE magazine about a year ago, made it all happen.

As every school child learns, it is a masterpiece of engineering, and seeing it up close reinforces the impression. What few learn (or I forgot) was that the genius started before the engineering really began. And, as I learned on my visit, the US succeeded in building it not just because of better technology and engineers. It was because the Americans grasped that one scientific accomplishment had to be completed first to help increase the likelihood of success: they needed to figure out a way to stop tropical diseases from killing thousands of workers.  Read More...

The International Commission Against Impunity in Guatemala Celebrates its 10th Anniversary

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Photo Credit: Clamor Por Guatemala-Jouse Goge

Today marks the 10th anniversary of the International Commission Against Impunity in Guatemala, known by its Spanish abbreviation as CICIG (Comisión Internacional contra la Impunidad en Guatemala). On December 12, 2006, the United Nations and the Government of Guatemala signed an agreement to establish CICIG to assist the Public Prosecutor’s Office, the National Civilian Police, and law enforcement in investigating organized crime and its connections with state institutions. CICIG has a unique hybrid structure. On the one hand, it is an independent international entity comprised of judges, prosecutors, and law enforcement officers from over 20 countries. On the other hand, despite its sovereignty concerns, the Government of Guatemala gave CICIG the authority to investigate and assist in prosecutions of corruption and other crimes under national law. This innovative structure does not have any precedent in the history of international anti-corruption initiatives. In its 10 years of existence, CICIG has achieved notable victories on different battlefields, including prosecuting over 200 corrupt officials, reforming Guatemala’s anti-corruption laws, building local capacity of investigative authorities, and, most importantly – mobilizing the business community and civil society against corruption.  Read More...

South Korea’s renewed focus on anti-corruption

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Photo Credit: Creative Commons

Seoul has been a site of massive protests following the revelations of President Park Geun-hye’s controversial ties to her friend, Choi Soon-sil, accused of trying to extort Korean companies and using undue influence to solicit business donations for a non-profit fund she controlled. This rather bizarre corruption scandal has brought renewed attention to Korea’s cozy relationships between politicians and business. The headlines may obscure, however, the progress that South Korea is making toward limiting corruption in business. In particular, the new laws.

The South Korean government first enacted anti-corruption laws in the late 1990s. In 1998, South Korea enacted the Preventing Bribery of Foreign Public Officials in International Business Transactions Act (FBPA), the South Korean version of the U.S. Foreign Corrupt Practices Act (FCPA). It was implemented as part of South Korea’s commitment to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business TransactionsRead More...

Private sector in Ukraine makes strides toward curbing corruption

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When one thinks about Ukraine in the context of corruption, the picture typically does not look rosy. The headlines about corrupt oligarchy and continued graft easily come to mind – including recent revelations about the riches disclosed by top officials in their asset declarations. This wealth stands in stark contrast with the financial condition of most ordinary Ukrainians, causing public outcry. Not surprisingly, Ukraine was ranked 130th out of 167 in the latest Transparency International’s Corruption Perceptions Index.

Yet, an overly pessimistic view of Ukraine’s anti-corruption prospects runs the risk of overlooking important positive developments. Last week I attended a conference in Kyiv organized by CIPE and its partner, the Ukrainian Corporate Governance Professional Association (UGCPA), with support from the American Chamber of Commerce in Ukraine and the Commercial Law Development Program (CLDP) of the U.S. Department of Commerce. This event, which gathered over 150 participants, shed a spotlight on an often underappreciated aspect of Ukraine’s anti-corruption efforts: what the private sector is doing to limit the opportunities of corruption in how businesses operate.  Read More...