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Are Transparency International’s Defense Company Rankings Defensible?

Imagine FCPA Professor ranked the “Top FCPA Law Firms” and one factor in the rankings was whether the law firms either donated [1] to FCPA Professor and/or had lawyers “graduate” from the FCPA Institute [2].

I sure hope you would look askance at such rankings because they are based on subjective factors that have little relevance to the substantive issue being ranked.

Recently Transparency International UK released this [3] “Defense Companies Anti Corruption Index 2015” – an index that attempted to “assess the ethics and anticorruption programs of 163 defense companies from 47 countries using publicly available information.”  (See also here [4]).

The only companies to receive an “A” ranking were Bechtel, Fluor, Lockheed Martin and Raytheon.

What’s interesting though is that each of these companies are substantial contributors to Transparency International (“TI”).  (See here [5]).

This of course does not automatically mean that Transparency International had a conflict of interest in ranking these four companies. Perhaps the companies are just really committed to Transparency International regardless of whether its financial contributions to the organization could impact such things as the rankings.

However, contributing and/or belonging to Transparency International did indeed elevate a company’s score in the recent rankings.

Such details are found deep within specific company reports.

For instance this [6] specific company report indicates that a factor impacting the company’s “Leadership, Governance and Organization” score was “based on public information, there is evidence that the company is a member of TI-USA …”.  Similarly, this [7] specific company’s score was elevated because “based on public information, there is evidence that the company …  is a member of Transparency International Norway.”

Transparency International is not the only organization that promotes anti-corruption or business ethics with a significant focus on anti-corruption.  Surely, Transparency International factored in a company’s membership or association with all other reputable groups?

Apparently not.

For instance, this [8] specific company report states:

“Based on public information, there is no readily available evidence that the company belongs to one or more national or international initiatives that promote anti-corruption or business ethics with a significant focus on anti-corruption. TI notes the company’s membership of TRACE, but this alone is insufficient evidence” concerning the question of whether “the company belong to one or more national or international initiatives that promote anti-corruption or business ethics with a significant focus on anti-corruption?”

In short, it is troubling that giving money and/or being a member of Transparency International impacted Transparency International’s recent rankings.  It leaves the impression that Transparency International’s scores are a reflection, at least in part, of cooperation in Transparency International initiatives rather than a strict reflection of a specific company’s compliance efforts.

For prior posts critical of Transparency International rankings, etc. see here [9], here [10], here [11], here [12] and here [13].