Control Risks Group launched its 3rd survey and report into corruption and its impact on business globally with a joint event in conjunction with the International Chamber of Commerce. The survey was carried out amongst 250 business leaders in the UK, US, Netherlands, Germany, Singapore and Hong Kong.
The results show that corruption is still a major problem for businesses, with 40% of companies believing that they have lost business in the last 5 years because a competitor paid a bribe. The international political climate is working against corruption, and this has led to the introduction of new laws against transactional bribery, however, only 56% of UK companies, 38% of German and 30% of Dutch are familiar with the 1997 OECD anti-bribery convention. The new laws have not resulted in any convictions to date, and the anti-corruption codes that companies have put in place (90% of UK and US companies) are not being followed up with training.
Some sectors, such as the oil and gas industry, have made progress, with 64% of these companies reviewing their business practices in the light of new legislation. However, industries such as telecoms, which are struggling to compete to enter new markets quickly, seem less concerned with the issue. Only 23.7% of the telecoms companies surveyed had been deterred from an otherwise attractive investment opportunity on account of a countrys reputation for corruption, and only 18% have reviewed their business practices on account of the new legislation.
In terms of countries, the UK companies are the most sensitive to corruption risks. Almost half of all British companies surveyed (48%) had chosen not to enter into an investment on account of corruption, compared to 42% (US), 40% (Germany), 38% (Netherlands) and 26% (Hong Kong and Singapore). Whilst 52% of German companies agreed that corruption is widespread in business, 60% perceived the risk to be of no real significance.
With respect to the size of companies, larger companies are more likely to be deterred from attractive business opportunities on account of a countrys reputation than smaller companies. When asked where corruption was most likely to take place within a company, 47% of respondents pointed to senior management, compared with only 28% in Control Risks 1999 survey. The increase may reflect a change in perceptions following the revelations in the Enron and subsequent scandals.
Although there is tighter legislation and much greater public awareness of the problem of corruption, companies are in danger of concentrating on short-term, quick solutions to the problem, rather than long-ranging solutions. Unsurprisingly perhaps, the majority of businesses perceived an economic downturn as the greatest threat to business, with reputation and corruption coming 3rd and 6th respectively.
As one Dutch businessman tellingly said:
"You can have all the rules and legislation that you want. What it comes down to is the economy. If people have money to spend, they will play within the rules. If there is a depression, corruption will increase. The tougher the fight, the dirtier the fighting.
21.2% of respondents are of the opinion that corruption will increase over the next 5 years
46.4% believe the level of the problem will remain the same as it is now
Hong Kong companies are the most pessimistic about the future 44% thought the problem of corruption would get worse over the next 5 years
John Bray, Director Control Risks Group, says of the future:
No one seriously expects to eliminate corruption completely. There will always be loopholes and there will always be individuals with the imagination, determination and greed to exploit them. However, companies can do more to combat the problem:
Firstly, they can put their own houses in order. There is a growing body of best practice on anti-corruption measures and on the most
effective means of implementing them. In this area, companies have much to learn from the successes and failures of their peers.
Secondly, companies need to develop the political and diplomatic skills to find ways of operating with integrity even in environments where corruption is commonplace. This means taking the initiative to find local allies, and identifying areas where they can work most effectively.
Thirdly, companies will need to find ways of working with other social actors, both in civil society and in government, to push forward the anti-corruption agenda. Corruption is a collective problem that demands a collective solution: business must play its part.