Ethics In An Unethical World

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In countries where bribery is standard business practice, keeping globally dispersed employees on the straight and narrow isn’t easy. But it isn’t impossible either.

That’s the practice at BlackLine, a public company experiencing rapid global expansion. “There are countries where corruption is standard business practice that we will not do any business in—period,” says Therese Tucker, founder, CEO and board member of the provider of finance and accounting automation software solutions that has sprouted offices in the UK, Australia, France, Germany, Singapore and Japan in the past six years. “Even if the country represents a significant market, it’s just not worth it to us.”

This approach should be de rigueur in all companies, Montero says. “Corrupt behaviors are a short-term solution with a long-term downside—bribes may drive up sales today, but, over the long run, they increase costs, adding to inefficiency and undermining morale,” he explains. Board members should take care not to inadvertently encourage such risky behaviors. “At times, board members will push management too hard to execute deals quickly in specific jurisdictions for competitive reasons—without a discussion of the bribery and corruption risks,” Pollard says. Directors also need to become more knowledgeable about the risk environment in the geographies eyed for market expansion. In assessing the country risk, the compliance experts agree that Transparency International’s index is a great start. “It’s the best way to determine which markets you can effectively compete in and be the ethical player you want to be,” says Montero.

Due diligence into the third parties the business relies on to service, sell and distribute its products abroad also is recommended. According to the 2018 Anti-Bribery and Corruption Report by corporate investigations firm Kroll, nearly half (45 percent) of companies surveyed rely on third-party partners to enter foreign markets and conduct business abroad. If the third party engages in bribes to obtain or retain business, the company itself could be in violation of FCPA and other anti-bribery regulations.

Given that 58 percent of the survey respondents uncovered legal, ethical or compliance issues in their due diligence to select a third party, the compliance risks are not for the fainthearted. “Third-party risks are the most significant corruption challenge for a company expanding overseas,” says Passman. “The further you move away from relying on your own employees abroad, the higher the bribery risk.”

To strengthen third party compliance practices, Passman advises boards to follow the framework within the ISO 37001 Anti-Bribery Management Systems Standard, published in 2016 by the International Organization for Standardization. The standard provides for independent verifications and audits of third-party partners. If these evaluations indicate prior problems with a third party, the standard requires that these issues are made public to alert other companies.

Board members also can help beef up the provisions of the company’s anti-bribery code of conduct to make sure they are transparent, strict and punitive. Contracts with third parties in violation of the code should be terminated, and employees should be made liable for disciplinary actions, including loss of employment. The violators also should be reported to relevant regulatory and criminal authorities. “The code of conduct should be absolutely clear that local business practices are never a justification for paying a bribe,” says Wagner from Country Risk Solutions.

To ensure BlackLine’s employees understand and appreciate the company’s strict compliance with FCPA and other anti-bribery regimes, Tucker has an external legal consultant draw up a 60-pages long detailed employment contract that includes a boldfaced Code of Conduct. “We have a zero-tolerance policy when it comes to bribery and any form of dishonesty,” she says. “When trust is lost, it cannot be regained.”

Read more: Ethics and Compliance Initiative CEO On The Dispiriting Trend of Retaliation

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