The anti-corruption enforcement boom took off first in the United States, then globally. In mere decades, a remarkable international consensus emerged. The zeal for enforcement continues today and comes with copious advice from regulators on how to design a good anti-corruption program. A decent one can even serve as both operational and legal defense in the event a bad-apple employee is caught paying a bribe.
Your company almost certainly has a zero-tolerance anti-corruption policy. It’s likely that your international business partners are familiar with the US Foreign Corrupt Practices Act and similar internationally binding laws, and know they must sign agreements promising not to pay bribes if they wish to secure your business. Corporate anti-corruption programs have thus reached the kind of advanced state that climate change activists dream of. Yet corporate bribery scandals continue, and corruption as a societal challenge remains unresolved.
While compliance efforts against bribery are essential, they are insufficient to tackle the wider challenges of corruption. You need to consider whether your company’s goals and targets incentivize employees to operate unethically. Are internal reward systems addressed in your compliance framework? As for bribery, zero tolerance won’t help much in countries where corruption is so endemic that your staff cannot function without facing extortion or physical threats.
Ruling out payments and favors won’t reliably address nepotism, regulatory capture, and rising pressure over lobbying and campaign finance. Moreover, doing business in a kleptocracy doesn’t necessarily mean bribing the power brokers who control lucrative relationships; working with them is a condition of entering the market. In such a market, winning a contract guarantees nothing: shifting political winds can topple kleptocrats and lead to retaliation, even expropriation. So, if you ban bribes but don’t consider wider questions of power and political risk, it can all end very badly.
Tackling corruption risk effectively in a given country requires more than legal controls. It starts with gaining a practical understanding of how corruption affects your sector. Then you must build business and political relationships to make your company resilient in the face of ever-unpredictable dynamics. You’ll need to cultivate an organizational culture with incentives and rules that do not conflict, and your employees must be empowered and trusted to raise questions and use their judgment.
Author and Clinical Associate Professor, NYU Stern School of Business, and Executive Director, Ethical Systems
Following four years of discussions and a few weeks of intense negotiations, the European Council approved, on Friday, 15 March, 2024, a new EU directive of corporate due diligence with respect to both human rights and the environment, known under the acronym of CSDDD (Corporate Sustainability Due Diligence Directive).
Once adopted by the European Parliament (likely in April) the Directive will introduce new obligations for thousands of EU companies based on the following phased implementation:
3 years after adoption for companies with more than 5,000 employees and € 1.5 billion in annual turnover,
4 years for companies with more than 3,000 employees and € 900 million in turnover,
5 years for companies with more than 1,000 employees and € 450 million in turnover.
Non-EU Companies with turnover of at least € 450 million generated in EU countries will also be covered by the Directive.
Due diligence requirements will apply to activities of a company’s upstream business partners related to the production of goods or the provision of services by the company, as well as to activities of a company’s downstream business partners related to the distribution, transportation, and storage of the product, but only where those activities are carried out for the company or on behalf of the company.
While the thresholds have been revised to cover fewer companies than originally proposed, the Directive’s impact will still be very important for companies also covered by the Corporate Sustainability Reporting Directive (CSRD) and beyond.
Beyond the technicalities, the Directive is sending a political message: “When in Europe, do as the Europeans do”.
Note: The due diligence process set out in this Directive covers the six steps defined by the Organisation for Economic Co-operation and Development’s (OECD) Due Diligence Guidance for Responsible Business Conduct: (1) integrating due diligence into policies and management systems, (2) identifying and assessing adverse human rights and environmental impacts, (3) preventing, ceasing or minimizing actual and potential adverse human rights and environmental impacts, (4) monitoring and assessing the effectiveness of measures, (5) communicating, (6) providing remediation.
International Lawyer, Former Director for Legal Affairs, OECD
The global compliance community has a great appetite for substantive content and for a place where new cases, insights and best practices can be shared and discussed. As new professionals join this growing community, they also need a place where fundamentals are addressed alongside more arcane ideas.
Today we launch BriberyMatters.com.
We will post short pieces a few times per week addressing compliance tips, enforcement trends, and policy and legal updates. We’ll also include opinion pieces from experts in the field, colorful stories about corruption and thoughtful pieces addressing the impact of financial crime on business, people and communities.
This is an ambitious project and it came together very quickly, so please bear with us as we work out the early kinks. Please also reach out if you have a question that you’d like us to ask an expert. (You can do this anonymously if you so choose.) And, of course, we want to hear from you about your own compliance successes and challenges, whether down in the weeds or ‘big picture.’
We look forward to this conversation and hope that you’ll find it valuable and thought-provoking.
President and Founder, TRACE