Elephant in the boardroom: Corruption

Read the blog post of below from our partner Evert-Jan Lammers to Risk & Compliance: Elephant in the boardroom: Corruption.

Some organizations address integrity issues in the in-house magazine, in balanced scorecards, in board meetings, in their communication to stakeholders. Other organizations don’t. Good versus bad company or proactive versus reactive company. Let’s zoom-in on the pro-active companies, the mature organizations. Their board meetings are not only about the what-and-when, but also about the why-and-how. Participants in these meetings dare to speak-up, empowered and protected by shared values. These meeting rooms are light and clear.

The meeting rooms of the other organizations are obscured. Participants don’t feel free to speak-up. There is a lack of shared values for certain touchy subjects at least. These organizations need to ripen, and fast because time’s up. Let’s make this concrete and look at corruption. The large corporates have learned (some of them the hard way) to address the issue of corruption and to deal with it. I’m not saying that they have solved the issue of corruption, far from that. But the elephant is definitely in the board room of the smaller multinationals. In a recent study Transparency International Belgium has compared reporting on anti-corruption programmes by large corporates with that by multinational SME’s. Large corporates report twice as good on their anti-corruption programmes as smaller multinationals. So if you are a director of a multinational SME, what can you do? You can expect this question today or tomorrow from a large shareholder or business partner. Your answer must start as follows: ‘Our board room is light and clear’. For that to happen you must first define shared values, while addressing the touchy subjects including corruption. The next step for the Board is to get their act together and set the example. This starts with the drafting of a zero-tolerance statement on corruption and to publish it. The Transparency International study shows that three out of four multinational SMEs do not even have a publicly stated commitment to anti-corruption. Foster a culture of integrity that rejects corruption Implement a conflict of interest policy for board members and managers. Perform regular corruption risk assessments, distinguishing well between risks and risk-mitigating controls. Include this information in the management information system. Start a companywide awareness program. Include anti-corruption KPI’s for general management, procurement and sales functions. Foster a culture of integrity that rejects corruption. And so forth. Include external stakeholders in this process and start reporting on the organization’s progress and performance. Several organizations including Transparency International and also the International Chamber of Commerce have published practical guidance for elementary anti-corruption policies and procedures. You will find it on their websites. Finally, keep measuring the integrity level of your organization by a mix of in-depth interviews and companywide surveys. The first round will probably show that the policies have well been put on paper but don’t work exactly the way they should. Congratulations: you have just started an important change process! This takes time and requires continuous attention. Especially from top management, leading by example, and not obstructed by any elephants.

The author, Evert-Jan Lammers, is Partner at EBBEN Partners, President of the Institute of Fraud Auditors and board member of Transparency International in Belgium.