Recently, allegations have been made in media reports about the possible involvement of some Singapore companies in bribery scandals overseas. The responses from these companies typically include an immediate denial of the allegations, and an assertion that the company has zero tolerance for corruption and a code of conduct prohibiting bribery and corruption. In some cases where third parties are allegedly used, the companies have not denied using the third parties, but have stated that the third parties they use are bound by a code of conduct and an agreement to not pay bribes.
Such responses are not helpful for a number of reasons: First, every company will undoubtedly say it has a zero tolerance for corruption. I have never seen a company say it has some tolerance for corruption.
Second, most companies have a code of conduct that prohibits bribery and corruption, and certainly none will have one that condones it. This does not guarantee that employees or third parties may not have violated the code. Without further investigations, it would be impossible to say for sure that no employee or third party has paid bribes.
Third, where third parties are used, the company will not know if the third party abides by the code of conduct and service agreement, especially if it does not audit these third parties. A recent global survey of bribery and corruption found that many companies did not audit third parties. I have not seen a Singapore company accused of bribery through third parties confirm that it audits the third parties it uses.
Having a code of conduct is only the first step to any effective anti-bribery and compliance programme. Even the existence of a robust compliance function cannot guarantee that bribery will not occur, especially if the company has aggressive sales targets and incentive compensation closely linked to individual sales targets, and operates in industries or countries with high levels of corruption.
We have weak enforcement of our anti-corruption laws overseas, unlike some developed countries, which have strengthened their anti-bribery laws and enforcement in overseas jurisdictions.
Further, there is no concept of corporate liability when employees or third parties pay bribes, and senior management and boards are not held responsible when they oversee a corporate environment that is weak in curbing corruption.
Singapore is also not one of the 41 signatories to the OECD Anti-Bribery Convention aimed at combating bribery of foreign public officials in international business transactions. Therefore, while Singapore has strong enforcement of its anti-corruption laws on home turf, there is less pressure on Singapore companies operating overseas to strengthen their anti-corruption controls, compared to companies from countries such as the US and the UK. Given these factors, when bribery allegations about Singapore companies surface, I tend not to dismiss them outright.
In a recent case, overseas media reports said a leaked confidential memo from an overseas company accused of being a middleman in a massive bribery scandal commented that the Singapore company that was allegedly involved was an "ideal client" because it had lax anti-corruption controls, relative to other multinational clients.
However, it has become evident that even if our regulators do not take enforcement actions overseas, Singapore companies may be exposed indirectly through investigations by overseas regulators of foreign public officials, foreign companies and third parties. Even if no enforcement actions against Singapore companies result from such investigations because of jurisdictional issues or because the Singapore companies are not the main targets of investigation, their involvement causes reputational harm and potential loss of future business opportunities, which are likely to affect their long-term profitability. If many Singapore companies become accused of engaging in corruption overseas, it will also affect Singapore's standing in the global community - even more so if government-linked companies are implicated.
Singapore companies that do business overseas need to take a good hard look at their compliance programmes, strategies, incentive systems and business practices and adopt a more measured approach when responding to bribery allegations. Rather than issuing a knee-jerk outright denial, chanting "zero tolerance for corruption" and "code of conduct" whenever such allegations surface, they should take allegations seriously and commit to reviewing their compliance programmes and undertaking their own investigations. Outright denial of bribery without any specific action may give the impression that the company has a head-in-the-sand attitude towards actual bribery risks out in the field. If the allegations subsequently turn out to be true, the company's initial response would be seen to be shallow and, over time, the company will lose its credibility.
This article was first published on May 4, 2016.
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