Note:  Professor Juliet Sorensen (Northwestern University School of Law) and Northwestern Law students Akane Tsuruta and Jessica Dwinell are attending the Fifth Conference of the State Parties (CoSP) to the United Nations Convention against Corruption in Panama City, Panama.  See here for a live feed of the States Parties’ discussions.

This post regarding the proceedings is by Akane Tsuruta.

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Companies can be agents of change.  But it is better if they act together, and act with a focus.

Representatives from the World Economic Forum`s Partnering Against Corruption Initiative (PACI), the OECD, the Basel Institute on Governance, and Siemens agreed on the need for collective action by companies against corruption and “transformation mapping” as an innovative way to focus their action.

Collective action in the corruption context is a “coordinated, sustained process whereby businesses and their partners jointly tackle the problems of corruption that affect them all.”  To be successful, action requires trust, time, and a joint understanding of the risks and potential areas for change.  But in an area as complex as corruption, companies and their collective endeavors may not know where to start.

Transformation mapping is a method to figure that out.  It “helps companies be more efficient about where to engage in collective action.”  It works by first brainstorming central topics and then radiating outward by identifying related issues, stakeholders, solutions, and challenges, until there is a “constellation” of ideas.  Such a visual may build understanding by illuminating connections and gaps between the various points – areas where company action may be especially impactful.

Yesterday at the CoSP , state delegates and observers tried transformation mapping corruption.  Some ideas that emerged were:

• Corruption as an interaction between human beings and a system.  Human beings create the system but also react to it.
• Corruption is the big elephant in the room, and the best way to tackle an elephant is bit by bit.
• Language is important.  Just like visual mapping may build understanding, visual words may also better aid the emergence of new ideas.  Language may also be an indicator of business and country readiness to engage in real anti-corruption initiatives.  For example, if a company’s compliance officer cannot bear to say “corruption” and prefers “circumlocution,” the company might not be ready to take effective action.
• Balancing collective action and anti-trust allegations. Collective action among industry competitors may raise eyebrows.  In the course of collective action, company competitors may need to discuss details that would verge on collusion.
• Effective anti-corruption collective action may be realistically limited to companies who together hold a significant share of their market.  If competition abounds, a small band of small companies may not make a difference – bribe solicitors can just go to someone else.
• An anti-corruption “tone from the top” should come from business leaders and government leaders, but anti-corruption recommendations should also be sensitive to the real consequences in some countries of “sticking your head above the parapet.”

In an area like corruption, where the target is always moving and adapting, transformation mapping may be a valuable means of gathering experts–whether CEOs or state delegates—and identifying the gaps where corruption may not exist now, but has the potential to spring up like a weed in the future.

Note:  Professor Juliet Sorensen (Northwestern University School of Law) and Northwestern Law students Akane Tsuruta and Jessica Dwinell are attending the Fifth Conference of the State Parties (CoSP) to the United Nations Convention against Corruption in Panama City, Panama.  See here for a live feed of the States Parties’ discussions.

This post regarding the proceedings is by Jessica Dwinell.

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To date, most governmental anti-bribery efforts focus on either the offering or giving of bribes. However, on Monday afternoon, members of governance institutions and the business community discussed an innovative approach to prevent demand-side bribery solicitation by public officials: the “High Level Reporting Mechanism” (HLRM). The Basil Institute on Governance and the OECD developed the HLRM concept—a mechanism dependent on public-private partnerships—in response to company concerns regarding the extent of bribery solicitation and extortion, and their fear of retaliation should they report illicit public official activity. According to the HLRM Concept Brief submitted by the OECD and Basil Institute on Governance, the HLRM seeks to mitigate such concerns by “allow[ing] companies faced with bribery solicitation to report these to a dedicated and high-level institution that is tasked with responding swiftly and in a non-bureaucratic manner to reports.”

Successful implementation of an HLRM depends on several factors, including access to high level reporting, institutional independence, ability of the institution to address concerns quickly, country-specific procedures, and, perhaps most importantly, public and corporate trust in the host institution. However, as panelists Rafael Merchan (Secretary for Transparency in the Office of the President of Colombia) and Enery Quinones, (Chief Compliance Officer of EBRD) underscored, HLRM implementation is not a cookie-cutter process and the mechanism procedures can vary greatly.

For instance, Mr. Merchan explained that prior to implementing the HLRM in the area of procurement, companies faced with bribery solicitation by Colombian officials had three choices: (1) seek a judicial remedy which could take four to five years to resolve and never adequately address corporate concerns; (2) pay the bribe and risk prosecution; or (3) refuse to invest in the country. To address this prisoner’s dilemma—one in which all companies would be better off should they collectively refuse bribery solicitations—Colombian officials proposed an HLRM. Specifically, the Colombian pilot program consists of a group of experts dependent on the Secretary for Transparency (thus providing high level access), yet independent from the agencies that make procurement decisions. Complaints of solicitation are sent directly to Mr. Merchan, who maintains confidentiality and prevents press leakages. In return, companies sign transparency pacts in which they agree to engage only in public procurement meetings, not to offer gifts to public servants and refrain from hiring public officials until two years after the completed transaction. Though the HLRM has yet to receive a complaint, the Colombian government has shown a clear political will to fight corruption and fifteen companies have voluntary signed the transparency pacts.

Ukraine’s proposed HLRM—designed in large part to address private sector concerns in an expedient manner—differs vastly and, as Ms. Quinones explained, its creation “has been a very difficult process.”  When the Ukrainian government realized that it was struggling to attract foreign investors, and the European Bank for Reconstruction and Development (EBRD) considered withdrawing its investments entirely, Ukrainian officials had to listen to investor concerns. Thus began the process of detailing an HLRM completely independent of the government. Though such independence proved the “first stumbling block,” Ms. Quinones told government personnel, “businesses will not trust this [HLRM] process if [Ukrainian officials] are controlling it.”

As a result, the proposed mechanism would consist of a director, two deputies and staff members tasked with both receiving and resolving business complaints and publicly monitoring and reporting on the actions—and non-actions—of government agencies. These individuals would not serve as law enforcement, they would not investigate allegations and they would not act in a judicial capacity. Rather, they would focus on providing a “way for businesses to feel confident in bringing complaints,” and would offer the means for resolving bribery solicitation complaints in a timely and effective manner. For instance, rather than seek to blame an individual or assess liability in cases of customs bribery solicitation, Ms. Quinones explained that the HLRM would focus on helping companies delayed at customs for failure to pay a bribe seek release of their goods. Since private sector concerns, rather than State political will, drove the creation of the Ukrainian proposal, its aims focus first and foremost on addressing businesses’ immediate concerns.

The panelist’s business representatives generally supported implementation of HLRMs. Javier Lozada, (Vice President and Regional General Counsel of Philips Latin America) stressed that for business, “any reporting mechanism that can help level the playing field, . . . particularly in growth markets . . . is more than welcome.” Dominique Lamoureux (Vice President of Ethics and Corporate Responsibility of Thalès) likewise recognized that you “need two to tango” and that businesses appreciate the HLRM concept.

Nevertheless, both individuals identified potential obstacles from a business perspective. First, they underscored that it may take considerable time for companies to fully trust that filing a complaint in accordance with the HLRM will not provoke retaliatory action. Second, the HLRM’s failure to offer—or protect—confidentiality in reporting mechanisms may dissuade companies from coming forward. And third, companies may fear that competitors who have lost a tender will simply manipulate the system to delay the procurement process.

How Colombian and Ukrainian officials will react when the first complaint is filed remains to be seen and the mandates of the HLRMs will have to clearly outline measures—if any—intended to protect confidentiality and prevent manipulation. Yet, as Mr. Merchan underscored, the process to combat corruption and discourage bribe solicitations will move forward on a “trial and error” basis. Though the HLRM may not be the solution, it is at the very least an additional piece of the puzzle.