Cancerous Corruption

UN Global Compact Network, India is the top rank NGO spreading the above findings. Hereunder is the article printed in their publication released in Mumbai on 6th February, 2015 (Where BCAS was a business partners and incidentally, Nitin Shingala was one of the panelists on session on discussion) titled:

BUSINESS CASE FOR ANTI-CORRUP TION

Section 1ForewordDinesh K. SarrafPresident, Governing Council,UN Global Compact Network India,Chairman & Managing Director,Oil and Natural Gas Corporation Ltd. (ONGC)

The idea of anti-corruption entered into international development discourse in the 1990s, defining corruption as a major global problem, being “sand for the wheels of commerce” and affecting development negatively. On one level, it can refer to the risk of taxpayers’ money in Government’s projects being fraudulently spent or stolen. On another level, it can refer to corruption within a country’s financial structure and institutions including that in the private sector, with the negative impact that this has on economic growth of the country.

Corruption retards the pace of development and impedes developmental activities. It not only suppresses the economic growth by driving up costs, but also undermines the sustainable management of the environment and natural resources and results in criminal activity, malfunctioning state institutions and weak governance.

With the evolution of economies, mandate of the businesses have moved from being profit-making entities to socially responsible organisations. Over the past few years, clean business has emerged as one of the primary objectives of the organisations. One of the most efficacious recommendations for business practice to tackle corruption has been found within the ambit of Collective Action. The idea is simple – get companies working together with their competitors and other stakeholders to create decisions that are driven by economic considerations and not by corrupt transactions.

Global Compact Network India (GCNI), in furthering the UNGC’s 10th principle on Anti-Corruption, implemented the Collective Action Project (CAP) from 2011-2014. This project, in a phased manner, took up pressing corruption issues in the Indian context, in the spheres of public procurement, bribery and fraud, supply chain transparency and sustainability, transparency in sports and sports related hospitality, and facilitated businessacademia dialogue in the country.

Over the past few years, clean business has emerged as one of the primary objectives of the organisations. One of the most efficacious recommendations for business practice to tackle corruption has been found within the ambit of Collective Action.

In its first series of Pan-India consultation conducted during 2011-2012 titled ‘Ethical Business for Profitability’, CAP partnered with academicians, civil society, chambers of commerce, and international business councils to share their best practices which were being followed in various sectors. This consultation resulted in CAP India’s first publication “Raising the Bar through Collective Action: Anti-corruption Efforts in Action in India”.

CAP conducted its second series of pan-India consultation in the second half of 2012 titled Turning Down the Demand: Cutting off the Supply – Collective Efforts to reduce Corruption in India. The main aim of the consultations was to examine innovative ways in which corruption could be tackled and explore ground realities that are not factored in while constructing Anticorruption policies. The consultations provided recommendations that became part of the second CAP India publication – a study that showcased trends of private sector fraud and bribery in the last fifteen years in India. This third and final publication of CAP Project presents the Business Case for Anticorruption in India. Many companies and business entities have shared their practical experiences in this publication as to how they have been investing in getting their processes and procedures in order, so that businesses could be graftfree; and to ensure transparency in their supply chain and procurement mechanism, irrespective of the size of the business. I am sure this publication will be a very useful reference for many new as well as existing business entities.

UN GLOBAL COMPAC T 10TH PRINCIPLE:

Olajobi Makinwa Head, Transparency and Anticorruption Initiatives, United Nation Global Compact

The journey so far and the way ahead

The world is now a global village. While the world is shrinking, traditional roles and responsibilities of business and governments are shifting and merging. The interconnectedness of roles and responsibilities are much more pronounced than ever before. Private investment, thriving entrepreneurship and vocational training are more needed today. In a globalised world, the private sector is expected to do much more in areas that used to be the exclusive domain of the public sector. away from the public relations realm to a strategic one handled at the highest levels of the company. Longterm financial success is now seen to go hand-in-hand with environmental stewardship, social engagement and effective governance for sustainable development. Bribery and corruption is no longer accepted as a way to conduct business. The current demand for transparency, integrity and accountability is consistent all over the world. Businesses and governments, more than ever before, are daily asked to conduct business with integrity, openness, accountability and transparency. It is a just call. The costs of doing business otherwise are known and such costs are no longer accepted; it is a task that has to be embraced and a task that has to be done. There is definitely a business case for anti-corruption and all businesses, big or small, global or local, have to come together to set a new path for all to take. The stage is set and is irreversible. It is a global movement of creating a sustainable and inclusive global economy. We therefore need to join hands to work towards reducing, if not eliminating bribery and corruption in conducting business. There is no other way.

Long-term financial success is now seen to go hand-inhand with environmental stewardship, social engagement and effective governance for sustainable development. Bribery and corruption is no longer accepted as a way to conduct business. The current demand for transparency, integrity and accountability is consistent all over the world.

The United Nations Global Compact (Global Compact) was launched in the year 2000 amidst the emerging debate on globalisation. Business was and continues to be recognised as a key stakeholder and driver in the international sustainable development framework. The Global Compact, a multi-stakeholder initiative is the world’s largest voluntary corporate sustainability initiative with more than 8,000 business participants from developed, emerging and developing countries. It has 80 local networks. With its ten universal principles related to human rights, labor, environment and anti-corruption and other platforms, the Global Compact calls on business to make environmental, social and governance issues as important as financial bottom lines. The adoption of the UN Convention against Corruption (UNCAC) in 2003 led to the addition of the 10th Principle against Corruption to stem the tide against corruption.

The year 2014 was a watershed as it marked ten years of business working collectively with the Global Compact, to work against corruption in all its forms including extortion and bribery.

Since its inception, the Global Compact’s  role  has  been that of a facilitator and a convener. It convenes international actors – government, business, investors, civil society and  academia  –  at  a  common  platform  to devise and discuss ways to further the corporate sustainability agenda and take concrete action. It is a platform for continuous improvement. Activities of the 10th Principle against Corruption manifest this convening role as well as action platform of the Global Compact in  a  most  comprehensive  manner.  The  10th  Principle globally advances its objectives through a working group comprising of anti-corruption champions from business, civil society, academia and international organisations, including the UN office on Drugs and Crime (UNODC), transparency international, the World economic Forum’s Partnering against Corruption initiative, and Global Compact local networks. With the crucial interplay between global and local, the 10th Principle working group provides continuous guidance to the Global Compact’s anti-corruption   related   activities.   The   working   group meets regularly to identify priority work and discuss topics of relevance as well as issues that will help companies to embrace and embed anticorruption in their operations.

Over the years, various task forces comprising of members of the working group have developed a number of important generic tools and resources to guide companies in the fight corruption. Companies adopt the tools and resources taking into account their own specificities. the   Global   Compact   tools   and   resources   include Global  Compact-  transparency  international  reporting Guidance on the 10th principle against corruption, a Guide for anti-Corruption risk assessment and Fighting Corruption in Sports Sponsorship and hospitality. others are un Global Compact/UNODC e-learning tool on the unCaC and the upcoming guidance on Whistle-Blower policies and Collective action in Practice, to name a few.

Corruption is one of the biggest impediments to any economic  or  social  development.  the  evil  impacts  of corruption are widely known. Private to private corruption is indeed a challenge. Small and medium enterprises bear the brunt of corruption with no leverage to fight back. The private sector can be a victim and can be a perpetrator of corruption. It is therefore of utmost importance for every effort to eliminate corruption to be done collectively. A company’s lone action, while important, may not be sufficient to fully deal with the challenges of bribery and corruption  especially  where  it  persists.  That  is  why  an african adage that says “if you want to go fast, go alone. If you want to go far,  go together” is apt. One can do a  lot by oneself but one can do the impossible with a great team. It is with this realisation and to multiply the effects of individual corporate action against corruption, companies are joining hands with like-minded companies and organisations to improve the way they conduct business and promote transparency. This type of partnership among multiple interested parties with common challenges and common objectives to turn the tide against a common foe, in this case bribery and corruption, is referred to as Collective action.

“If you want to go fast, go alone. if you want to go far,   go together” Collective action can create a more stable business climate by enhancing access to markets and allowing companies to save revenue and profits that would otherwise be lost to bribery. Collective action-led solutions arrived at by multiple stakeholders have more credibility, ownership, acceptance and their implementation is more sustainable. But collective action is indeed not easy. It requires many things, the most important is trust among companies, which is difficult to secure. This is the dilemma. Global Compact Collective action projects in 5 countries are bold initiatives that have taken the bull by its horn by laying the foundation for solid collective efforts to address corruption challenges in the 5 countries.

The 5 countries collective action projects were launched in   january   2011   to   engage   critical   stakeholders   in concerted efforts to eliminate corporate corruption. the 5 collective action projects were launched in Brazil, Egypt, india, nigeria and South africa with support from the Siemens Integrity Initiative. The 5 projects have been working with local businesses, governments, civil society and academia in these countries to create an enabling environment for dialogue, discussion and action against corruption. By facilitating ongoing dialogue between the private and public sector, the projects set the stage and offered an opportunity for a wide range of stakeholders to explore how collective action can create incentives for ethical business performance, and to discuss areas for further improvement. the Global Compact has proved to be the best incubator for these collective action initiatives.

Global Compact has leveraged these projects worldwide by disseminating information, raising awareness, calling for partnerships and collaborations through all possible mediums. These 5 collective action projects conclude in january 2015. however, the spark of action that has been ignited has the potential to shine brightly and incessantly with the commitment from business – whether local or global – and all key players in the international arena.

Brazil Egypt India NigeriaSouth africa

Collective action provides a framework for a coalition    of like-minded stakeholders (industry peers, committed government officials & policy makers, civil society academics, and business associations) to act together for a common cause.

Business    case    For    anti- corruption in India

Ms. Shabnam SiddiquiProject Director,UN Global Compact network india

According to World Bank estimates 0.5% of india’s Gross domestic Product (GdP) is lost due to corruption every year. in 2014 india ranked 134 on ease for Business index and 179 in terms of ease of Starting a Business amongst 189 nations in the world, the ranking being based on parameters such as dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

Correspondingly efforts on anti-corruption have taken a front seat since the past couple of years. The beginning of 1990s saw several international organisations introducing anti-corruption  instruments  to  make  the  functioning  of businesses clean. With globalisation and business opportunities spread across  the  globe,  companies have to follow norms of several countries. Some of the strong global anticorruption convention and legislation, mentioned below, have led businesses to introduce anti- graft initiatives in their working across the world. however india still lags behind.

OCED Anti-Bribery  Convention  (officially  Convention on Combating Bribery of Foreign Public Officials in   international   Business   transactions)   adopted   in 1997, prohibits bribery of foreign officials, enhanced collaboration between law enforcement authorities of signatory countries and ban on tax deductibility of bribes to foreign public officials. These elements were borrowed by the other international legal instruments which were introduced after this convention namely united nations Convention against Corruption and UK Bribery act. Though  india  is  yet  to  ratify  the  OECD  anti-Bribery Convention, similar to the features of the convention, india has drafted Prevention of Bribery of Foreign Public Officials and Officials of Public International Organisations Bill, 2011 which is pending in Parliament.

the UK Bribery act on the other hand came into force in 2011 and is applicable to all companies registered in uK, its subsidiaries, as well as all non-uK companies trading in uK stock exchange. the Bribery act criminalises both the payment and receipt of a bribe and in the first of its kind of initiative the dealings with funds received as a result of bribery, could constitute a separate money laundering offense. The uniqueness of the act comes from the fact that it outlaws the facilitation payments that are permitted by several european countries.2  in the indian context,  as yet, no case has been registered under the U K Bribery Act or any action taken to cater to its requirements. However, a large number of big indian conglomerates come under the purview of this new act which has all essential features of united nations Convention against Corruption (UNCAC) which India ratified in May 2011.

Finally, the tough global act, which has reaped the maximum gains vis-à-vis penalties, is the Foreign Corrupt Practices act (FCPA), a US legislation which prohibits United States companies and their employees, officers, directors and agents from paying or promising to pay bribes to foreign officials, political parties, candidates or their conduits to obtain or retain Business. The provisions of FCPA demand a comprehensive Compliance Program, along with a due diligence process for companies. In the last five years, the top ten cases of financial penalties under FCPA have fetched penalties to the tune of USD4.4 billion4. FCPA, in the recent times, had incidence on the business operations in india wherein in march 2011, Wal-Mart, US Retail giant signed a joint venture with Bharti enterprises, an indian conglomerate to set up its stores in india. However, cases of bribery were reported. if charged guilty Wal-mart could have been penalized under the FCPA. Finding issues with the joint venture, Wal-mart in april 2014, decided to enter in the indian market alone5 and suspended its joint venture, loosing around 150 million in the course of three years.

The Bribery act criminalises both the payment and receipt of a bribe and in the first of its kind of initiative the dealings with funds received as a result of bribery, could constitute a separate money laundering offense.

Thus  with  the  increasing  extra  territorial  reach  of  the Foreign Corrupt Practices act of the US and the UK Bribery act, UNCAC compliance and reporting, OECD anti-Bribery Convention, Partnering against Corruption initiative of World economic Forum, and anticorruption Working groups of un Global Compact and Business 20, there is a larger emphasis on corporate governance, transparency, responsibility and accountability.

Even as companies are exposed to multi-jurisdictional laws and regulations, compliance and its monitoring have become an existential issue for most companies. India is trying to address the issue of corruption by making legislative changes, ratifying international conventions and adopting technology in its administrative functioning. However, merely rules and regulations will not address the issue. It is important that the business stakeholders are committed and come together to participate in the fight against corruption.

Business case for anti-corruption

the indian general election of 2014, fought on the plank of good governance and transparency, gave Mr. Narendra modi, the current Prime minister of india, a mandate for ensuring a clean and transparent governance agenda,   a mandate that has triggered a new-found urgency in  the efforts of corporate india to curb corruption in their operations.

Hong Kong-based mini vandePol, who heads the global compliance practice at international law firm Baker & Mckenzie observes that “Over the past five years, Indian companies politely listened when we spoke of tackling bribery and other compliance risks and told us that we don’t understand how things get done with the indian bureaucracy….Since the recent elections won on the premise of being corruption-free, a lot  of  companies  are interested in starting afresh on building robust compliance systems to tap more markets and rope in new foreign investors.”6mini vandePol, has received advisory mandates  from  over  a  dozen  Indian  firms  in  the last six months from sectors such as defence, manufacturing and it.

Within the changing national and global scenario Global Compact network india proposes the Business Case for anticorruption in india. A business case for anticorruption assists in four ways: reduces legal liability, increases business opportunity, enhances company reputation and boosts the morale and trust of company personnel.

With the increasing extra territorial reach of the Foreign Corrupt Practices act of the US and the UK Bribery act, UNCAC Compliance and reporting, OECD anti-Bribery Convention, Partnering against Corruption initiative of World economic Forum, and anticorruption Working groups of un Global Compact and Business 20, there is a larger emphasis on corporate governance, transparency, responsibility and accountability.

Printed with the permission of Shabnam Siddiqui, Project director of UN Global Compact network india.