Published: 28/02/2015

As a result of host countries introducing stricter regulation and penalties on corporate corruption, incidents and allegations of corrupt practices in corporate behaviour have increased as more companies have been caught out under stricter rules. Corruption or bribery incidents have generally been accompanied with international criticism, sharp declines in company share price and considerable litigation expenses – costs that are ultimately borne by shareholders. Importantly, companies embroiled in such events are often characterised by poor corporate governance processes, the failure of internal processes to protect the integrity of stakeholder relationships and an inability to successfully implement and monitor company codes of conduct.

The United Nations notes that ‘Corruption is a complex social, political and economic phenomenon that affects all countries. Corruption undermines democratic institutions, slows economic development and contributes to governmental instability. Corruption attacks the foundation of democratic institutions by distorting electoral processes, perverting the rule of law and creating bureaucratic quagmires whose only reason for existing is the soliciting of bribes. Economic development is stunted because foreign direct investment is discouraged and small businesses within the country often find it impossible to overcome the “start-up costs” required because of corruption.’

Research provider CAER (the Centre for Australian Ethical Research) was commissioned by ACSI (the Australian Council of Superannuation Investors) to examine the current state of anti-corruption and bribery practices in Australia, with a focus on the ASX 200. The ASX 200 contains 164 companies with subsidiaries operating internationally (“ASX 200 Internationals”). Of those 164, 77%, representing 126 companies, are involved in either an at-risk sector, an at-risk country or both, indicating significant risks for Australian corporations.

The inclusion of bribery and corruption prevention in a company’s Code of Conduct represents the first step along the road to adequate anti-corruption practices. Transparency International Australia (TIA), part of a global coalition in over 80 countries, recommends that directors and management demonstrate visible and active commitment to the implementation of an anti-bribery program.

EIS endeavours to monitor and identify good corporate governance practices by means of our own research, research conducted by CAER and the exchange of information with other members of the Ethical Advisers Co-Op. At times clients have even provided valuable information and insights. In an increasingly globalised business environment and subsequent increased chance of exposure to bribery and corruption, EIS believes that companies must demonstrate a strong commitment to good governance with clear policies banning bribery and corruption.

Pursue your values, build your wealth and help make the world a better place.