• Register
Return to: Home > Comments > Why keeping clean is good for corporate returns

Why keeping clean is good for corporate returns

George Serafeim writing for the Harvard Business School found, in his paper Firm Competitiveness and Detection of Bribery, that 'bribery's most significant impact is its negative effect on employee morale'.

Whilst some senior executives may be worrying about reputation and regulatory fines (which are ever more punitive) who is calculating loss of productivity, talent and engagement as well as the impact on partners and customers? Would top talent make a beeline for a company known, or suspected, of bad business practice? Who wants that headache?

The United Nations Global Compact, UNGC, is a global platform for business and non-business entities to proactively network and engage in areas of human rights, labor, environment and anti-corruption. I attended the UNGC UK Network's meeting in November on Principle Ten: Anti-corruption. Not surprisingly the UK Bribery Act was the focus of the discussion.

It is two years since the Act came into force. The first case to be brought by the Serious Fraud Office, SFO, this year, is a charge against four individuals in connection with an alleged £23M bio-fuel investment fraud. The company is in administration so the testing of the corporate offence related to "adequate procedures" in order to prevent bribery, is yet to be played out.

Speaking at the event, Lord Browne, Chair of the All Party-Parliamentary Group on Anti-Corruption, reminded the room to look to the US, where it took some years for the Foreign Corrupt Practices Act cases to reach high numbers. Taking a look at their web pages today, they certainly have no lack of investigations to pursue, and reviewing some of the eye-watering settlements, Siemens still topping the list at $800M, anyone doubting the impact the UK Bribery Act may have, should quickly reconsider.

As Lord Browne pointed out such considerations should not just be in relation to the company, its reputation or the morale of the staff. Bribery and corruption down the line cost lives. This cost disproportionately falls on the poorest of communities. Do you think these communities want corruption? The often stated "it is their culture" and that is "how business is done" omits to consider the abusive power at play. The "while in Rome" stance, as Browne stated, is not only out of step with civil society but also with many business leaders. These voices are getting louder.

In my travels in 2013, across different continents, I have yet to meet anyone in business ready to openly defend the benefits of corruption. Instead I have heard how it disturbs the playing field and leads to failings and wider risks in the system. At a Zambian conference in August I saw first hand over 500 accountants call on their Finance Minister for more transparency and stronger governance and law, which he in turn recognised as important for economic development.

The garment factory collapse in Dhaka, costing over 1,000 lives, illustrates how "buying" a building permit can have far more serious consequences than a fine. Increasingly issues of bribery and corruption are linked to environment and human rights, other key principles of the UNGC. A representative of the UK's Ministry of Justice commented at the meeting on the growing influence of international law and how this will intensify in the corporate arena.

Ultimately, as Transparency International's Peter van Veen emphasised, bribery is not a sustainable business practice. If you can only survive through backhanders your business model is out of date. He cited recent reports by BNP Paribas and Hermes Investment which found that bribery and corrupt business practices have a negative effect on shareholder value.

Once the first prosecutions are made under the Bribery Act, particularly those related to the corporate "failure to prevent", the connection between bribery and business practices and culture will become clear. These in turn impact performance.

As Serafeim in his research concluded, 'The lesson for managers is that bribery is more costly than you might think. If you think of the cost as just fines and regulatory actions, you're missing a big piece of the puzzle.'

Top Content

    2018 Digital Accountancy forum and awards: Digital transformation

    The Accountant presents highlights from The Digital Accountancy Forum & Awards 2018 panel discussions

    read more

    2018 Digital Accountancy Forum and Awards: Tech deep dive

    The second panel session of the day saw experts discuss how new technologies should not just be seen as a threat, and could be used to improve accounting.

    read more

    Digital Accountancy Forum and Awards: The power of data

    The third panel discussion of the day saw panellists discuss some of the worries their clients have had, how to overcome them, and how data and technology are providing real business opportunities.

    read more

    Digital Accountancy Forum and Awards: The next generation

    With young people more mobile, and technology changing the industry rapidly, the final panel session of the Digital Accountancy Forum looked at how firms would need to adapt to the new reality

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.