Implement Anti-Bribery Policies to Stop Supply Side of Corruption

The human chain on Sarjapur-ORR junction

Fashionistas traded their mascaras for a layer of emissions from exhaust pipes. Employees replaced their jackets with white tees imprinted with “India Against Corruption” slogan. On 24 August 2011, Bangroleans formed a 17-kilometer human chain on outer ring road to protest against corruption. Finally, the middle class Indians have discarded their cloak of apathy. Passion, enthusiasm and commitment to change the system is replacing cynicism, skepticism and disillusionment.

Indian public supports Anna Hazare’s fight for a strong Lokpal Bill. The bill when implemented will hopefully reduce demand side of corruption. In the din, we are forgetting that demand and supply are two sides of the same coin in corruption. We need similar efforts to curb supply i.e. stop the bribe givers, specially the corporate world. If organizations are willing to give bribes, there will always be politicians who are willing to take bribes. Hence, we need an equal focus on supply side.

Business world’s greed to grow bigger is feeding the corrupt appetite of politicians and bureaucrats. Management and employees compromise business ethics to climb the ladder of success. Corporate world must remember that materialism is not equal to fame and success. The torch bearers in corporate world ardently support ethics.

This week two corporate icons resigned/retired and they became so without the desire to be the top of the charts of world rich person’s list. Steve Jobs retired as CEO of Apple and in 1993 he had said in an interview -  

“Being the richest man in the cemetery doesn’t matter to me … Going to bed at night saying we’ve done something wonderful… that’s what matters to me.”  

In India, Narayan Murthy retired as Infosys Chairman, a company he had created that became a leader in corporate governance. He showed the Indian middle class that one could be successful with ethics. His ideology on business ethics is beautifully articulated in the following lines –

“In the end it is always about ethics and all about personal values. That is why it is very important for every society to create checks and balances. That is why it is very important for every society not to create incentives for people to become greedier. That is why it is very important for all of us in the corporate world to create incentives for long-term performance rather than short-term performance. When you create systems that focus on short-term performance, when you create a system that reveres money rather than decency, honesty and respect, when you make it a fashion for youngsters to revel in the power of their wealth, it is inevitable.”

Escalating corruption is severely damaging India’s growth story. The Corruption Perceptions Index 2010 published by Transparency International rates India at 3.3 level at 87th position from the 178 countries in the population. The financial loss due to corruption is huge. Financial Times reported last year that in 2010, the value of scams (2G Telecom, CWG, IPL, Adarsh etc.) could well be over Rs 200,000 crore (USD 43. 24 billion). As the investigation reports show the private sector was hand-in-glove with the politicians and bureaucrats. Hence, implementing anti-bribery policies is the need of the hour.

Concepts of Anti-bribery Policy

Some of the key concepts and aspects an anti-bribery policy must address are:

a) Competitors: How does the company compete in the market? Does the company give excess hospitality or kickbacks to obtain contracts? Does the organization loan out company assets to officials to get contracts?

b) Suppliers: How does company give contracts and make payments to suppliers?  Does management or employees receive excess hospitality or kickbacks to give contracts and payments to suppliers?

c) Employees:  Has the organization set limits for employees to receive/give gifts and entertainment from customers and suppliers? Are employees allowed to give commissions and discounts to relatives and friends purchasing organization products without disclosing?

d) Senior Management/ Board: Do senior managers and board members disclose conflict of interest when organization enters into contracts with related parties? Does the code of ethics apply to senior management and board members in law and spirit? Are there limits to senior managers’ personal expenses being borne by the organization? Are there checks in place to ensure senior managers expense accounts are within their entitlement levels?

e) Legal Compliance: How does the organization handle law enforcement agencies and regulators? Does it respects the law and follows the spirit of the law? Does the organization give excessive entertainment or facilitation and grease payments to authorities?

 f) Foreign Officials: How does the organization conduct business in other countries? Does it offer grease and facilitation payments to obtain licences, premises and approvals for setting up operations? Do the subsidiary companies follow a strict code of conduct on dealing with foreign officials?

 Implementation of Policies

 Covering the above-mentioned aspects, an organization should prepare an Anti-Bribery Policy. India presently has a Prevention of Corruption Act, which prohibits government officials from receiving bribes. US and UK have Foreign Corrupt Practices Acts (FCPA), which prohibit making payments to foreign officials to obtain business advantage. Hence, if the Indian organization is a subsidiary of a multinational, the policy should cover FCPA requirements.

 Secondly, the organization must implement the policy by establishing procedures, internal control checks and reporting mechanisms. Employee training must be done to educate them about policy and procedures for adherence and report questionable conduct of colleagues. Lastly, establish investigative procedures to investigate violations and take appropriate action.

 Closing thoughts

 In nutshell, address the supply and demand side of corruption to eradicate it from the roots. India’s longer growth and prosperity is dependent on it. Hence, we need commitment at all levels to root out this evil. While Lokpal bill provides a firm foundation for this effort, we need to build the whole structure to fight corruption. Indians have taken the first few steps by supporting Anna Hazare’s efforts to get a Lokpal Bill with teeth. The road ahead is long and tough. Let us join hands and give long-term commitment to this battle.

Last but not the least, congratulations to all Anna Hazare supporters for forcing the government to discuss Hazare’s version of Lokpal bill in the parliamentAs Gandhi ji said – Be the change you wish to see in the world.

References:

  1. Photograph : Courtesy Nandita Sharma
  2. Bribery & Corruption Take Centre Stage: An Overview of Key Laws & Practical Steps to Manage Risk by ELT
  3. Transparency International
  4. 2010 scams: India takes Rs 2,00,000 cr hit
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One comment on “Implement Anti-Bribery Policies to Stop Supply Side of Corruption

  1. Very important post. Thanks.

    We have to realize Annajis crusade is primarily focused on transactional corruption. What you are referring to is institutional corruption. This is in my opinion much easier to get rid of – how? Introduce smart regulations rather than more regulations. More regulations are simply an infrastructure for rent-seeking bureaucrats and politicians.

    So what is “smart” regulation? Smart regulation starts with 100% transparency. It involves systems thinking. Read here for more http://www.simafore.com/blog/bid/58768/the-perils-of-complete-absence-of-systems-thinking-in-city-planning

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