How to ensure that corruption doesn't thrive in your organisation

27 April 2015 -

A lack of anti-corruption measures in defence firms has emerged from new research by Transparency International. Our best-practice tips will help you to keep ethical lapses at bay

Jermaine Haughton

Corruption can have destructive, long-term effects on business and industry. In the private sector, for example, poor ethical conduct can leave companies vulnerable to organised criminals accessing money, staff and resources. In the public sector, meanwhile, workers can be targeted in ways that disrupt regulatory processes for the benefit of criminal individuals and groups.

According to a report published today by business-ethics specialists Transparency International, only one third of companies in the defence trade operate fully-fledged anti-corruption programmes. Indeed, the organisation’s researchers estimate that corruption in the sector costs taxpayers around the world at least £13 billion per year.

With that in mind, here are five effective methods for protecting your business against corruption:

1. Create and enforce an anti-corruption programme

If there is a risk that staff member or contractor may be exposed to bribery, then adopting a stringent anti-corruption policy is a vital task for any business leader. The programme must include clear staff guidelines on rules around accepting gifts, hospitality or donations, as well as information on how to safely carry out business – including material on conducting contractual negotiations. Firms must also be active in ensuring that staff understand that corruption is not tolerated, by communicating their policies effectively. As threats continue to evolve, so should the programme, which must be regularly reviewed and revised in line with industry changes. (Source)

2. Leave the door open for effective whistleblowing

From Sherron Watkins at Enron to Harry Markopolos’ testimony against fraudulent investor Bernie Madoff, whistleblowers have been instrumental in exposing corruption and malpractice to the public. However, business leaders must create a workplace environment built on safety and trust, which would enable a whistleblower to feel confident about sharing their concerns. Rebecca Doodson – senior conduct and compliance officer at the Association of Accounting Technicians – says that firms should allow whistleblowers to make their claims under anonymity, if they are unwilling to reveal their identity. Secondly, employers must carefully evaluate the evidence provided by whistleblowers, and assess it in accordance with the relevant facts of the case. The recent scrutiny faced by the Serious Fraud Office over its recent poor run of enforcement actions puts a greater onus on companies to do more on this front, given that official bodies are under-resourced. (Source)

3. Conduct thorough due diligence on your frontline agents

Often, companies are not exposed to corruption through internal channels, but from their use of external agents and partners – particularly when dealing with overseas ventures, and especially when they are outsourcing business functions. As such, due diligence is vital for ensuring compliance with international anti-corruption legislation (e.g. the US Foreign Corrupt Practices Act, or FCPA). There are several significant steps that leaders should take when entering business with external agents and partners, from the start of a venture to the approval and finalisation stage. Ultimately, they are bound by one common thread: the need to critically examine risks. Those risks could range from the stability of the country your agent is based in, to background research on other businesses and organisations associated with that third party. (Source)

4. Don’t be afraid to seek help from specialist advisory services

Businesses can also enlist professional assistance from advisory services dedicated to the anti-corruption war effort. Firms such as Aegis Advisory, Covington and Hakluyt consist of teams of lawyers who are able to answer the compliance questions leaders may have, as well as undertake internal investigations on ongoing cases. Most firms also have counselling services that provide on-hand legal analysis at any time over the phone. Although these services can be costly, that expenditure is as nothing compared to the damaging effects of an ethical lapse.

5. Embrace “values-based” leadership styles

In common with the majority of workplace initiatives, precedents should be set from the top. As such, bosses should appreciate and encourage leadership styles that are based around core values. In CMI’s recent business-ethics report The MoralDNA of Performance, Joe Garner – chief exec of BT’s Openreach division – explained how he focused on “values-based” leadership to improve the organisation. “Our challenge,” he said, “is to bring more humanity into the workplace because that’s what our customers are asking for, and that’s what we need to filter through our daily decision-making. We need rules and processes, but rules alone are not enough. I’m asking people to ask themselves if they’re hiding behind the rule or standing in front of it.”

Transparency International found that, of the 163 defence firms it had studied, 42 had improved their ethical standing since 2012. However, report author Katie Fish warned there is still a long way to go: “Two-thirds of the defence contractors in this study, which includes 36 more companies than the 2012 analysis, show little evidence of having ethics and anti-corruption programmes in place.”

Her colleague Mark Pyman – director of the organisation's Defence and Security wing – urged governments to play a greater role in stimulating ethical transformations. “If government contracts are contingent on companies having an appropriate ethics and anti-corruption programme,” he said, “it will create a step change towards greater accountability in the defence industry, and further the positive work being done by many defence companies today.”

Download a full PDF of CMI’s The MoralDNA of Performance.