Top Menu

Perhaps The Executives Are Just Being Realistic

It has turned out to be a statistics filled week on this site.  If you like statistics, Deloitte’s recent “Anti-Corruption Practices Survey 2011” (here) serves up a buffet of delightful morsels. 

Deloitte “surveyed 276 executives to assess how companies are managing their efforts to prevent corrupt practices in their operations around the world and ensure compliance with legislative requirements.”  The Survey found that approximately 90% of executives said their company had an anti-corruption policy that covered a wide range of potentially corrupt activities.

Even so, the Survey seems to portray, as its most meaningful statistic, that “only 29% of the 276 executives … were very confident their company’s anti-corruption program would prevent and detect corrupt activities.”  According to the Survey, “this low level of confidence indicates that many companies may need to evaluate and upgrade their anti-corruption efforts.”

Perhaps.  Or perhaps the 29% figure indicates the stark reality that not even gold standard FCPA compliance policies and procedures can prevent or detect all problematic payments.  In other words, perhaps the 71% of executives who were not very confident their company’s anti-corruption program would prevent and detect corrupt activities are just being realistic.  As even Assistant Attorney General Lanny Breuer noted earlier this year before a compliance audience – “There will always be rogue employees who decide to take matters into their own hands.   They are a fact of life.”  (See here).  Or as the U.K. Ministry of Justice stated in its Bribery Act guidance (see here) “no policies or procedures are capable of detecting and preventing all bribery.” 

The Survey findings on corruption risks also caught my eye.  Executives were asked to cite “significant” corruption risks.  Use of third parties (not surprisingly) was the top concern and “customs clearance and importation of goods” and “entertainment related to government business/relations” were the 2nd and 3rd highest concerns respectively.  These findings confirm my own observations from participating in executive roundtable forums during which I am always struck that business leaders are most worried about issues Congress did not even have on its radar when it passed the FCPA – yet are worrisome issues given the DOJ’s enforcement positions. 

For instance, the enacting Congress specifically excluded from the FCPA’s “foreign official” definition any employee of a foreign government “whose duties are essentially ministerial or clerical.”   The relevant Senate Report states, in pertinent part, as follows. “The statute does not […] cover so-called ‘grease’ payments such as payments for expediting shipments through customs or placing a transatlantic telephone call, securing required permits, or obtaining adequate police protection, transactions which may involve even the proper performance of duties.”  Similarly, the relevant House Report states, in pertinent part,  as follows.  “The language of the bill is deliberately cast in terms which differentiate between [corrupt payments] and facilitating payments, sometimes called ‘grease payments.’ […] For example, a gratuity paid to a customs official to speed the processing of a customs document would not be reached by this bill. Nor would it reach payments made to secure permits, licenses, or the expeditious performance of similar duties of an essentially ministerial or clerical nature which must of necessity be performed in any event. While payments made to assure or to speed the proper performance of a foreign official’s duties may be reprehensible in the United States, the committee recognizes that they are not necessarily so viewed elsewhere in the world and that it is not feasible for the United States to attempt unilaterally to eradicate all such payments. As a result, the committee has not attempted to reach such payments.”

Yet, as the Survey results suggest, executives are indeed significantly worried about such issues and compliance dollars are disproportionately spent on such issues.   

Bribes, the reason Congress passed the FCPA in 1977, was identified as a “significant” risk by only 27% of Survey respondents.

Final statistic of note.  On voluntary disclosure, the Survey states as follows.

“Executives were asked whether they thought that if an executive in their industry (not specifically in their own company) uncovered a significant violation of the company’s anti-corruption policy, they would report it to the SEC or the DOJ. Executives were divided on how they thought the typical executive in their industry would respond, with 36 percent saying it was very likely that an executive would report such a violation, 39 percent thinking it was somewhat likely, and 25 percent saying it was not likely. Only 27 percent saw significant benefits in self-reporting violations, while an additional 43 percent saw some benefits.”


A good weekend to all.

Powered by WordPress. Designed by WooThemes