Clean Business: A choice companies must make

CEBU, Philippines - Corruption has grown into a major global problem, impeding competition, skewing level playing fields and destroying innovation. For companies, bribery and corruption are incompatible with good governance and harmful to value creation, both at a macroeconomic level and at a micro level with individual businesses.

In Asia, where corruption is a major challenge, tackling corruption has assumed new vigor, driven by calls from business and civil society for governments to tackle it seriously, as seen in recent high profile cases in China, Hong Kong, the Philippines, Thailand, Indonesia, Bangladesh and South Korea.

Globally, governments in both advanced and emerging markets are stepping up efforts to combat corruption and moving rapidly towards proactive enforcement of anti-corruption laws. Such efforts include updating and introducing new rules and legislation to combat corruption such as the recent adoption by the European Parliament of amendments to the accounting directive in 2014, effectively requiring all European companies with more than 500 employees to publish an annual report detailing their anti-bribery policies.

The new rules are evolving into more demanding standards for companies with stricter interpretations of corruption, right down to the operation levels. More stringent standards mean the definition of bribery is not restricted to just interactions with government officials but also – rightly so – covers all manners of commercial bribery including those committed through agents and facilitation payments. Also, numerous countries are joining hands to improve enforcement against corruption through initiatives such as the G20’s Anti-Corruption Working Group.

Important is also for people and politicians to understand that rooting out corruption requires following the evidence no matter where it leads. It could also mean punishing friends and allies, since it is not confined to any sector of society.

Beyond a prudent regulatory framework and effective enforcement, public expectations are on the rise for companies to assume proactive roles in tackling and preventing corruption. Seen as the supply side of corruption, companies can clearly make a significant change by saying no to bribery. Movements like the Integrity Initiative in the Philippines urge companies to adopt clean business, sign the Integrity Pledge and take serious action against corruption.

For companies, particularly the boards that set policy and perform oversight, there are three things they and their boards must do:

1. The board must recognize that clean business is a choice. It is a choice that companies can and must make to set a clear tone from the top about how the company is going to conduct its business.

2. The board must be regularly updated on anti-corruption policy and local regulations as well as steps being undertaken to comply with requirements of the anti-corruption policy. The company should regularly review the Code of Conduct along with procurement and supply chain policies.

3. The board must be aware of the ever-increasing expectations by company stakeholders and investors for the company to have a clear stance on bribery and corruption.

In ASEAN, disclosure of a company’s anti-corruption policy and procedures is incorporated as criteria in the assessment of listed companies’ compliance with corporate governance standards, under the ASEAN CG scorecard aimed at promoting ASEAN listed companies as an asset class.

Therefore, companies cannot be complacent about anti-bribery and anti-corruption measures just because they think they themselves are clean. They do need to demonstrate to the public that they have in place anti-corruption policies and adequate internal procedures backed by regular updating, monitoring and reporting.

Have I convinced you? If you have not joined the Integrity Initiative yet and wish to sign the Integrity Pledge, contact [email protected] (FREEMAN)