Guidelines aid in fighting corruption
- By Eugene Clark
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E-mail China.org.cn, January 11, 2013
The 18th CPC National Congress emphasized the importance of government and business in fighting corruption. Those seeking guidance and examples of best practice in this area, should take note that in the US a few weeks ago, the Department of Justice (DOJ) and the Securities Exchange Commission (SEC) released the long overdue A Resource Guide to the U.S. Foreign Corrupt Practices Act (the Guide). Given the legislation was enacted thirty-five years ago, it is disappointing that it has taken so long for such a guide to emerge. At the same time, the 120 page document has generally been welcomed by the business community.
From China's perspective the guide is useful to businesses and other organizations dealing in the U.S. market. While there is nothing new in the Guide from the vantage point of experts in this area, it will be useful to senior executives and in-house counsel in providing greater clarity regarding what is required to comply with the act and the approach of the regulatory authorities in enforcing the legislation. More importantly, this development underscores the role of regulatory agencies in general in educating the business community about such important and yet highly technical laws. The checklists and examples are especially useful.
More generally, the new DOJ/SEC Resources Guide underscores the role and importance of organizations, big and small, having a legal compliance program to develop, promote and enforce a culture of legal compliance within the organization. The important point is made that not only will a compliance program help prevent and discover corruption, the existence of an effective compliance program will be an important factor in the DOJ/SEC's decision making of whether to prosecute.
Hallmarks of effective compliance programs
The Guide lists ten hallmarks of an effective compliance program seeking to prevent and deal with corruption.
1. Commitment from Senior Management and a Clearly Articulated Policy Against Corruption. If leaders in the organization do not emphasize the importance of ethical behavior then no one will. Employees need to see that business leaders see ethical behavior as important and expected of all employees.
2. Code of Conduct and Compliance Policies and Procedures. While one size does not fit all, all organizations should have some type of policy and procedures in relation to corruption.
3. Oversight, Autonomy, and Resources
Someone at a senior level in the organization should be given the responsibility, autonomy and resources to develop monitor and regularly audit compliance within the organization.
4. Risk Assessment
A risk assessment should be carried out targeting the major areas of exposure and how these risks can be best managed.
5. Training and Continuing Advice
Employees require training and continuing advice in relation to ethical standards and expected behavior consistent with those standards.
6. Incentives and Disciplinary Measures
There should be carrots and sticks that reward ethical behavior and take action against breaches in the organization's standards.
7. Third Party Due Diligence and Payments
Third parties, including agents, consultants, and distributors, are often used to conceal the pay?ment of bribes to foreign officials in international business. Compliance programs seeking to prevent, discover and deal with possible corruption must also include measures to deal with such third parties.
8. Confidential Reporting and Internal Investigation
The best plans have mechanisms to facilitate reporting of violations and prompt internal investigations of alleged or suspected corrupt practices.
9. Continuous Improvement: Periodic Testing and Review
Compliance plans should not be static. They should be periodically tested, reviewed and improved.
10. Mergers and Acquisitions: Pre-Acquisition Due Diligence and Post-Acquisition Integration
Given the critical role of mergers and acquisitions and the potential for corruption in this context, pre-acquisition and post-acquisition diligence is especially warranted.
Other resources
Another valuable part of this new Guide is a list of useful resources for company executives and compliance officers seeking further guidance in this area. For example, in the document you will find references to the following:
? Asia-Pacific Economic Cooperation—Anti- Corruption Code of Conduct for Business
? International Chamber of Commerce—ICC Rules on Combating Corruption
? Transparency International—Business Principles for Countering Bribery
? United Nations Global Compact—The Ten Principles
? World Bank—Integrity Compliance Guidelines
? World Economic Forum—Partnering Against Corruption–Principles for Countering Bribery
