Business Approaches to Combating Corrupt Practices

Executive Summary The international business community’s anti-corruption efforts are essential parts of broader systems for fighting corrupt business practices. These also include formal law enforcement, where an appropriate regulatory framework is already in place, and regulatory and other public sector reform, where it is not. This paper looks at anti-corruption material published on the websites of companies in UNCTAD’s list of top 100 non-financial multinational enterprises. It seeks to understand these companies’ views of corrupt business practices as well as their anti-corruption management and reporting practices. The paper answers the following questions:

• How many of the top 100 non-financial multinational enterprises make public statements on corruption on their websites? Forty three of the top 100 non-financial multinational enterprises present anti-corruption material on their websites. This is low relative to earlier studies of the top 100 companies’ propensity to make public statements on environmental issues (which exceeded 90 percent). This low propensity might reflect several factors -- lack of awareness of the issue, an unwillingness to discuss it publicly or the perception by many of the companies in the sample that corruption is not a major concern for them.

• Do companies from different sectors show different propensities to include material on corruption on their website? Companies’ practices vary greatly, depending on their sector of operation – most extractive industry companies (8 out of the 12 oil and mining companies in the sample) publish lengthy anti-corruption statements. In contrast, only one motor vehicle company (out of 13 in the sample) publishes any material whatsoever.

• What kinds of anti-corruption commitments do these statements contain? Is a shared view emerging on the kinds of business practices that are acceptable and on the management tools that are effective? Among the 43 multinational enterprises that discuss corruption on their websites, there is some evidence of progress toward a shared view in relation to “parties to bribery”: 33 companies mention private-to-private corruption, 26 mention bribery of public officials, and 25 mention both. Thus, 75 per cent of the companies discussing “parties to bribery” mention both sorts, whereas an earlier study, based on 1998 data, found that only one third of the companies mentioned both. However, the international business community continues to show wide divergences in their approaches to most other major issues – political activity, gifts and entertainment, facilitation payments. This could be taken to indicate a need for international dialogue and consensus building on the kinds of behaviours that are acceptable or unacceptable.

How do companies manage the fight against corruption? The managerial content of those statements that discuss corruption shows heavy reliance on a well-defined set of management tools. Seventy seven per cent (of the companies that discuss corruption) mention whistleblowing facilities, 72 per cent accurate record keeping and 63 per cent contain threats of disciplinary actions. Other techniques include hierarchical controls, creation of a compliance office, and establishing a role for the Board of Directors. In a sense, then, this study suggests that a de facto management standard may be emerging.

• Do companies report on their performance in this area? Reporting on company performance against their anti-corruption commitments is not common. Few of the 100 companies in the study report publicly on their performance in implementing these commitments. Seven provided a formal report and 6 had material such as press releases on corruption-related misconduct