By Sabrina Basran
The Institute of Business Ethics’ latest Briefing, Concerns and Ethical Lapses, 2010 & 2011 provides an overview of major ethical concerns and lapses in 2010 and 2011, as recorded in the IBE’s weekly media monitoring of business ethics related stories featured in the UK and international quality news media.
Lapses involving bribery, corruption and fraud remain the most commonly mentioned in the news; of 928 news stories, 16% covered this ethical issue. The predominance of lapses in these areas applies to news reports for a range of sectors – including finance (15% of news stories); pharmaceutical companies (over a quarter of cases); extractive (over a fifth of news items); defence & security (half of news stories). What is of most concern however is that the number of news reports on incidents of bribery, corruption and fraud has almost doubled over the period of 2010 and 2011.
In light of the 2010 UK Bribery Act, this trend is somewhat worrying. It may be that being under the spotlight has meant more cases of bribery are being reported on. For years the British government has been criticised for failing to take action over the offence of paying bribes to foreign politicians and officials, but 2010 and2011 have seen some notable prosecutions:
Bridge builders Mabey and Johnson became the first large British company to be convicted of foreign bribery. The firm admitted that it had systematically paid bribes around the world to secure export orders, and it was ordered to pay more than £6.5m in penalties.
Three UK directors of the engineering firm Alstom were arrested following dawn raids by fraud investigators and police officers over allegations concerning the payment of substantial bribes to secure contracts abroad.
These stories show that not only are companies being hit by the effects of corruption, but directors are being held personally accountable.
In February, the arms manufacturer BAE agreed to pay almost £300m in penalties which brought to an end a long running attempt to prosecute BAE over allegations of bribery in a number of countries. The length of time the company was under investigation – and the number of negative news stories written in the media – demonstrates the lasting reputational damage which corruption allegations can cause companies.
Such news reports indicate that despite the flurry of excitement and policy drafting which the enactment of the 2010 UK Bribery Act seemed to generate, businesses have some way to go in effectively embedding anti-bribery and corruption mechanisms into their culture.
Cultural change does not happen over night. It would be naive to think that simply drafting a policy and emailing it to staff can genuinely change the way business is done. Corruption can be so ingrained into a company’s culture as to be considered ‘the way business is done around here’. This can be the case especially for companies who use agents, or who operate in other countries where enforcement of anti-corruption regulation is poor and facilitation payments are seen as the norm for doing business. A recent survey by Ernst & Young found that almost 1 in 5 employees believe it is acceptable to pay bribes to attain or retain business, and more than a quarter of respondents said bribes are commonly used to win contracts in their sector. Getting staff to see that ‘backhander’ is actually a form of corruption, will take time, and requires regular communication and training.
Even then, it is one thing to know the ‘right’ decision to make, but often another to be able to apply that decision. Factors such as fear, ignorance, and real or perceived pressure to meet business targets, or pressure from a more senior figure, can all render individuals or groups incapable of putting ethical decision-making into effect. Visible support from leadership is critical in this instance – the impact of leading by example should not be underestimated. If senior management declare a zero-tolerance approach to bribery and corruption, they must demonstrate that they will support staff if they lose contracts or business in the short-term as a result.
As the news stories included in the IBE media monitoring highlights, both companies and directors can face potentially disastrous financial and reputational consequences if they fail to take effective preventative action on bribery and corruption. Fines of an unlimited amount can be imposed on companies and directors may be awarded prison sentences of up to ten years.
Creating a culture of integrity and openness – where ethical dilemmas arising from doing business in corruption ‘hotspots’ are discussed, and employees feel supported to do the right thing – is a powerful way to help mitigate against the risk of an ethical lapse.
The culture of an organisation is ultimately set by the ‘tone at the top’, whether that be senior management, or branch managers, or team leaders. Leaders who regularly talk about ethical issues, support staff to uphold ethical standards, and behave in an open and transparent way, send the message to all employees, and to the wider world, that the fight against corruption is taken seriously.