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UK Bribery Act pushes firms to pursue ethical corporate cultures

Thomson Reuters Foundation - Fri, 1 Jul 2011 09:20 GMT
Author: David Greenberg
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By David Greenberg

The UK Bribery Act takes effect today, meaning that organizations all over the world need to translate analysis and discussion into action. A key dividing line will be between companies that respond with rules and procedures alone, which by themselves are destined to be inadequate, and companies that realize preventing corruption is fundamentally a matter of corporate culture.

Understandably, much of the focus of the new Act is to try to understand what kind of “adequate procedures” will meet the law's requirements. This is fair enough, but establishing procedures and genuinely preventing corruption are two very different challenges. Procedures, policies, rules and systems won't work unless they are supported by a culture that is truly geared toward doing the right thing.  

So before getting into specific recommendations about adhering to the Act, let’s take a step back. What is corporate culture? At its essence, culture is “the way things really happen around this place.” What is most rewarded? How are conflicting priorities reconciled? What happens when short-term business objectives run counter to company values? When people see something wrong do they come forward or hold back in fear? Culture is a very powerful force – hence the observation that “corporate culture eats strategy for lunch.”

Clearly, organizations should recognize that establishing adequate procedures means more than just setting rules and enforcing them. With the UK Bribery Act in place, leaders need to go beyond telling employees what they can and cannot do. Now more than ever, organizations must establish a strong ethical corporate culture.

How can this be achieved? For each company, the transformation will look different. As you map the right path for your organization, there are a number of tools already within reach – for example, the UK government's interpretation of the Act’s requirements. Following are some additional questions and guidelines to keep top of mind, but never forget that underpinning all your action must be a focus on getting your culture right.

Have you thoroughly assessed your risks?

Assessing bribery risks, as well as ethics and compliance risks more generally, should become a regular part of business planning. Periodic risk assessments should be carried out to ensure appropriate policies and procedures are in place to identify and guard against bribery risk. These risk assessments should focus on many factors, including operating territories, organizational structure, financial controls and use of intermediaries. Culture risks are just as important – e.g., does the company support employees who come forward to report problems? Is the pressure to achieve business results so intense that employees get the message: “Just get it done, no matter what?” Do the actions of senior leaders support the words they use to express the company's aspirations?  

Do you have a Code of Conduct and effective procedures in place?

The foundation of a company's commitment to doing the right thing, as well as the guiding light for its ethics and compliance initiatives, is often expressed in its Code of Conduct. Effective policies do not simply state a set of rules; they also communicate a set of values that engage employees in the enterprise. Moreover, policies should move beyond high-level concepts of “paying no bribes,” and include specific guidance for difficult situations tied to the risks and opportunities employees face in their day-to-day work, such as entertaining, gift giving and dealing with customs officials.

Having completed your due diligence on others who provide services to your business, how will you reinforce your corporate values and culture?

Companies must ensure they have effective messages and procedures to make certain that agents, advisers and other parties that provide services to the business do not pay bribes on their behalf. These include processes for gathering background information and reputation before they are hired. All agents should work under a written contract that includes appropriate anti-bribery language and the firm should educate agents about their responsibilities, and the firm’s expectations, in this area.

Have you launched an internal communications program and ensured your staff has the correct level of education?

Policies are useless if they are not communicated or understood. Effective education cannot merely be a recitation of these rules, but must be stimulating, engaging and filled with relevant examples. There should be clear accountability for compliance, and senior managers should create a non-threatening environment so that employees can bring suspected breaches to their attention.

Do you have an ongoing mechanism to monitor and review your performance?

Mechanisms to monitor conduct are essential. This means reliable and effective auditing and a clear process for investigating and responding to possible wrongdoing. In addition, compensation systems should recognize ethical business conduct and principled performance, not just sales and financial results.

Do you have top level commitment?

Above all, there must be a commitment from leadership at all levels, top to bottom, communicated regularly through word and deed, to doing business ethically and not just complying with the law to avoid problems.

With the advent of the UK Bribery Act, senior managers must refocus their attention to ensure corporate culture, ethical behavior and leadership remain top priorities. But in complying with the Act, your firm may also see other positive changes. After all, a sound corporate culture is essential to achieving business growth, optimizing costs, stimulating innovation and building strong customer relationships.

The time to start is right now. Are you ready?

David Greenberg is Executive Vice President of Knowledge and Solutions at LRN, www.LRN.com, a company that helps businesses develop ethical corporate cultures and inspire principled performance.

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