The OECD recently released this study titled “Corporate Anti-corruption Compliance Drivers, Mechanisms and Ideas for Change.” The study largely relies on results of a survey “to better understand the extent to which companies are currently motivated to take measures to prevent and detect bribery and other forms of corruption in their business dealings.”
The survey size was very small (only 130 survey respondents – largely individuals in a legal or compliance role in their companies – with the U.S. having the most respondents – with the largest number of respondents in the healthcare industry). As a result the survey was not representative as even the report recognized: “a company that does not have a compliance program probably would not have an interest in participating in a study of such program – thus it is important to remember that the percentage of respondents who indicated that their companies have such a program is not at all indicative of the percentage of overall companies in the world that have such programs.”
Even as to this survey group, as highlighted below several survey responses caught my eye and call into question whether “soft” enforcement of the FCPA (and related laws) has been successful (see here for the article “Has the FCPA Been Successful in Achieving Its Objectives”) or whether compliance can best be incentivized with a compliance defense (see here for the article “Revisiting an FCPA Compliance Defense”).
For starters, why do business organizations establish an anti-corruption program? According to the survey, the decision to establish a program “was most often taken because of one of the following three reasons: (a) a government agency required the company to establish the program (perhaps as a result of an investigation or prosecution, 26 of the 124 respondents with an anti-corruption compliance progra, or 21.0%), (b) the company board asked the company to establish the program (37 or 29.8%), or (c) the company’s executive management made the decision to create the program(41 or 33.1%).
According to the survey:
“The overwhelming majority of survey respondents (100, or 80.7%, of the 124 respondents whose companies had an anti-corruption compliance program) indicated that avoiding prosecution or other legal action was a “significant” or “very significant” factor in their decision to establish the program. An even greater percentage (110, or 88.7%, of the 124 companies) indicated that a desire to protect the company’s reputation was a “significant” or “very significant” factor.”
According to the survey:
“About two-thirds of 123 respondents with an anti-corruption compliance program (79 respondents, or 64.2%) indicated that their company undertook a risk assessment prior to establishing its anti-corruption compliance program.”
This is an interesting result – given the above description of the survey respondents – because conducting a risk assessment is widely viewed as the first step in compliance from which most everything else flows.
Of those companies which engaged in a risk assessment, the survey indicates the following areas of risk.
What areas of risk did survey respondents perceive to be the highest for their companies? According to the survey:
What is really interesting about this list is that several of the top categories (obtaining permits, moving goods into or out of the country, obtaining visas, setting utilities) were recognized by Congress in enacting the FCPA and exempted from the reach of the statute. (See here to learn more).
What do “foreign officials” want? According to the survey:
Given the type of companies that responded to the survey, the following survey results were surprising.
Once again, given the type of companies that responded to the survey, the following survey results were also surprising.
What subject matter specific policies and controls do companies have? According to the survey:
What happens when the companies suspect misconduct? According to the survey (notice the low percentage of companies that voluntarily disclose).
Who within a company has oversight responsibility for the compliance program? According to the survey.
Other survey results that caught my eye:
“About half of the survey respondents (60, or 46.2% of the 130 survey participants) indicated that they had heard of an employee or agent of their company being solicited for a bribe at some point in time. Forty of those who reported a known solicitation indicated that the bribe was not provided, while 11 indicated that the item requested was provided (7 of those 11 noted that the item was provided without company approval and later discovered). Of course, these responses need to be viewed with caution, as companies may be unlikely to report solicitations or bribes given, even in an anonymous survey. What the responses to these questions can tell us, though, is that a good portion of respondent companies do receive solicitations for inappropriate benefits.”
What are the challenges for implementing anti-corruption programs? According to the survey:
- Seventy-six of the 130 survey respondents (58.5%) indicated that the “perception that a compliance program is not needed” was either a significant or very significant hurdle when developing and implementing an anti-corruption compliance program.
- A majority of respondents (80, or 61.5%) indicated that a lack of executive commitment was either a “significant” or “very significant” challenge to companies seeking to effectively implement an anti-corruption compliance programme.
- Sixty-three respondents (48.5%) cited inadequate financial resources as a “significant” or “very significant” challenge for companies. Seventy-one respondents (54.6%) cited inadequate personnel resources as a “significant” or “very significant” challenge for companies.
What were some of the “most mentioned requests company representatives had for their governments and for the internal community in general”? According to the survey:
- “Several study participants shared their desire to see enforcement against a broader group of persons involved in corrupt conduct. There seems to be a feeling that enforcement agencies go after the companies that provide corrupt benefits but do not hold individual bribe-givers or bribe-takers to account.
- Companies also want to see enforcement authorities take steps to hold the public officials who solicit or receive bribes accountable.
- Companies want to see corruption investigations and prosecutions come to a timely resolution. As one company representative noted, “Our judiciary system doesn’t work. Our trials are too long, and people often don’t feel that there is a sanction at the end of the trial. During the last few years, our law has changed a lot with regard to corruption, and currently we have a broad regulation that prosecutes both private and public corruption practices. Unfortunately, this is still not enough.”
- Another company representative noted that it was still in the process of an enforcement action from years before; although his company had long since completely revamped its anti-corruption compliance program immediately following the incident, the eventual settlement of the occurrence continued to hang over the company.”
See here and here for prior posts for the percentage of DOJ and SEC corporate enforcement actions that result in related individual FCPA charges against company employees. See here for how long FCPA scrutiny lasts.
Other interesting snippets from the survey:
As noted previously, the “lack of laws and regulation about [the] need to implement a defined anticorruption program” can be a challenge to implementing a program. Companies want “practical guidelines” and “tools” for compliance. Compliance personnel are often dealing with business counterparts who may not fully understand the legal basis for compliance and want clearly-defined rules; they want to know that if they take X action, that they will be protected from prosecution. Unfortunately, when dealing with corruption risk, it may be difficult to set such rules, since liability often turns on whether a bribe was paid, not whether a company had a compliance program in place. To the extent that governments are able to provide clearer guidance about what actions businesses should take to protect themselves against liability for corrupt conduct, survey respondents and interviewees indicated that this would be highly welcome. Not only would this help compliance personnel directly as they develop their programs, but it would also provide them with evidence to show their boards and management teams why the steps are important. As one survey respondent noted, “Check-lists of “need-to-have” is very important when requesting resources in the budget.”
Clear standards start with clear legislative requirements for companies. As one survey respondent explained, I am afraid the most effective tool is to implement the correct legislation. My experience is that companies are willing to move into the right direction if the hard law requires them to do so. . . . It is not a matter of disinformation. There are enough tools and publications to be properly advised on the matter.
Incentives for compliance A number of study participants noted that it is difficult to justify the outlay of resources needed to establish an anti-corruption compliance program, since the benefits may not become clear until an incident occurs. Several survey responses and interviewees suggested that governments develop an incentive program for companies that “do the right thing” before an incident occurs. At a minimum, companies would like to see the establishment of an effective compliance program as a defense, should a bribe be improperly provided. However, several study participants also asserted that governments should also provide positive incentives to “virtuous companies,” as is done in other areas (such as for companies that adopt green technologies). This could be in the form of tax incentives, rebates, or public accolades for their anti-corruption efforts (e.g., a list of companies considered to have top compliance programs). As one survey respondent explained, “[T]he government should provide symbolic incentives such as public recognition to companies that stand out in the implementation of the compliance program as well as tax or fiscal incentives.” Another respondent suggested that the government “could publicly highlight the work of companies that have implemented compliance programs to external audiences (users, customers, competitors).” Communicating these “best in class” ratings would also assist investors in making decisions about which companies to support. One survey respondent suggested that governments could even more directly support companies by providing them with low-cost loans for developing compliance systems.”
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