Wed, Nov 20, 2013

http://www.scmp.com/comment/insight-opinion/article/1361172/integrity-and-transparency-needed-cure-corruption-business

Johnson and Johnson's massive US$2.2 billion payment to settle allegations in the US, that included alleged sweeteners to doctors, mirrors similar investigations in China of GlaxoSmithKline.

When broadly similar problems arise in different parts of the world, under different legislative frameworks, it is hard not to conclude that corruption remains a serious challenge in the private sector.

Businesses are the financial backbone of our societies, we need them profitable and employing people, but it should not come at the expense of integrity, fairness and transparency. These words need to be made meaningful by direct deeds. The United Nations Office on Drugs and Crime is helping to breathe life into these concepts by promoting the UN Convention against Corruption as the foundation for everyone's anti-corruption efforts.

Anti-corruption investigations are more than just painful medicine: they represent an opportunity for the renewal of credibility and reputations and a genuine change in practices and culture.

Siemens has provided an excellent example of how to confront a corruption scandal head-on. The company and various subsidiaries were found to be engaged in widespread bribery in many countries over a number of years. Bribes totalling US$1.4 billion were made to various government officials. On learning of these troubling practices worldwide, there was no immediate attempt by Siemens to investigate or discipline those engaged in these activities.

However, since those bleak days, the company's turnaround has been impressive. Siemens replaced senior management with individuals with strong governance and compliance backgrounds. Today, the company is a front runner in establishing integrity and invests in anti-corruption programmes, including those run by UNODC.

Investment broker Morgan Stanley is another company that has spun bad news into good. After a managing director was found guilty in 2012 of selling real estate interests to a shell company owned by him and his co-conspirators, the company provided evidence that it had a system of regularly updated policies, and had gone to considerable lengths to limit the risk of corruption.

Between 2002 and 2008, Morgan Stanley had employed 500 dedicated compliance officers. The company also operated compliance telephone hotlines, and instituted risk-based auditing to detect violations. For the first time in the enforcement history of the Foreign Corrupt Practices Act, the US Department of Justice declined to act against a company due to its compliance regime.

The Siemens and Morgan Stanley cases are proof that work against corruption needs to begin simultaneously in the board room, on the manufacturing floor and everywhere in between. Company directors have to appreciate that corruption distorts markets, and creates one of the commercial world's biggest sins: driving up costs for businesses and consumers alike.

At the end of this month, more than 1,200 participants are expected in Panama City, for the world's largest biennial gathering of nations to discuss corruption. The private sector's role in eradicating corruption and bribery will be a major talking point.

No one is trying to deny businesses their hard-earned successes, but success cannot come at the cost of integrity. Companies need to promote anti-corruption efforts at every opportunity. Medicine leaves a bad taste but, where corruption is concerned, it needs to be swallowed.

Yury Fedotov is executive director of the UN Office on Drugs and Crime