Where the Wild things are – bribery at the edge of business

The Financial Times (http://www.ft.com/cms/s/0/e12e0efc-0d71-11e2-bfcb-00144feabdc0.html#axzz28VeYteen) reports that one third of Board members would happily bribe to win business despite the introduction and publicity over the Bribery Act that was enacted in 2010 and brought into law last year. FTI Consulting, which did the survey, believes that the Serious Fraud Office is showing no desire to investigate and prosecute low level crime and is only after the big boys (www.fticonsulting.com/…/the-realities-of-the-uk-bribery-act.pdf).

 

This is no surprise to those of us involved in agitating to bring the Act into being – 34 years after the FCPA in the US and years after we signed up to the OECD convention. Jack Straw advised that around 1.1 extra prosecutions a year would ensue from the Act – so, no real surprise.

 

The Grown-ups get it

 

The report from FTI shows that businesses are being divided into those (usually large and quoted) that comply and other who are becoming the “risk takers” – willing to go for business in whatever way and hope they don’t get caught.

 

Like tax evasion and using deep and difficult schemes to evade tax, these organizations are willing to act outside the law and depend on the SFO’s inability to implement the law.

 

The grown-ups get it, the kids don’t – but, we have insufficient numbers of grown-ups in the SFO (many of whom left to go to private industry when the Bribery Act came into effect).

 

Just like Maurice Sendak’s children’s book, our small and medium companies wander into places and get transfixed by the wilder side of business. It wasn’t that long ago that the costs of bribery overseas were tax deductible in the UK and big companies (especially in defence and aerospace, construction and energy routinely bribed to get business and keep business.

 

Now, most large UK-based businesses act like their American and European cousins and have mainly (not completely) forsaken large-scale bribery. The SFO has said it will prosecute those who threaten the stability and reputation of the UK.

 

ITV’s Exposure on Wednesday, 10th March at 10.35 (UK) – “No Bribes Please, We’re British” – takes a look at the UK one year on. I spent some time helping with this documentary made by Ed Harriman and was interviewed for it – http://www.radiotimes.com/episode/sgzfv/exposure–no-bribes-please-were-british and it looks back at how we did business before the Act – and how many still do such business now.

 

 

This leaves the kids – SME’s / SMB’s.

 

Should we worry about the children?

 

Winning business overseas (especially in the BRICs – where methods of business may be different) in any recession is tough. Competition from those who don’t worry about giving bribes (and that is much more of a norm in the rapidly growing nations of Asia, Russia and South America) is enormous and business leaders want a level playing field.

 

The OECD Anti-Bribery Convention was signed by 39 nations – all the OECD countries plus Argentina, Brazil, Bulgaria, South Africa and Russia (China has not signed) and aims to tackle the “supply-side” of bribery. This is where the money comes from – the wealthy nations that enable bribes to take place. It was on this basis that the UK eventually enacted the Bribery Act.

 

The question asked is now that the Act is in force and most very large businesses comply, does it matter that the smaller ones don’t? Shouldn’t we only concern ourselves with large-scale bribery and corruption?

 

While we don’t want to go back to the 18th Century when you could get sent to Australia for stealing a loaf of bread, the impact of bribery is substantial. From small-scale “facilitation payments” upwards, bribery impoverishes and kills. This sounds overly fraught maybe – but, funds diverted to projects that a country does not need means less is spent where it does – on doctors, hospitals, safety measures and the like. As bad, poor construction of buildings and bridges in China (as an example) causes death each year – the contractors are normally found to have won the work through bribery.

 

In the 21st Century and in our global economy where we are all much closer to each other economically (as customers and suppliers), we need to ratchet up the standards not diminish them. The UK is a wealthy nation that can do without involvement in helping to destroy developing nations. Bribery is a constant threat at any level as Transparency International constantly shows in their annual Corruption Perception Index. Even in industries like Defence which have been subject to anti-bribery investigations for many years, the picture is unclear as TI have recently shown: http://www.transparency.org.uk/news-room/press-releases/13-press-release/375-defence-companies-fail-anti-corruption-test

 

Now countries like Greece, whose economy has been based on corruption, are paying the price. Countries like Mexico are likewise – http://www.nytimes.com/2012/04/24/world/americas/bribery-tolerated-even-as-it-hurts-mexican-economy.html?_r=0

 

Bribery hurts those countries receiving the bribes. If we let our kids (the SME’s) run amok, then the hurt just grows. We have to keep our neighbours safe.

 

Getting an ASBO

 

In the UK, Anti-social Behaviour Orders (ASBO’s) are now routinely given out by police to kids who run riot in the streets and disturb neighbours. The UK was close to receiving the equivalent from the OECD before the Bribery Act was enacted. The UK had to be pushed to enact it – although all party support was eventually forthcoming.

 

Now, a year on, we see that lack of implementation (always feared by those most supportive of the Act) looks like it is providing those with more risk attuned attitudes to buck the system here and enter into the system overseas. Our neighbours (our trading partners) often don’t help – bribery takes a long time to eradicate and often governments are implicit in it. But, countries like the UK managed to stop slavery, made drug running illegal (although after we grew rich on both) and campaign to stop child-labour improve safety standards worldwide. Bribery seems a softer crime to many yet studies have continuously shown that the impact can be as horrific.

 

The UK is in recession but a get-rich-quick attitude that admires tax evasion (and tax havens) and tolerates bribery is not a modern society – it is a throwback to the 19th Century. We deserve credit for enacting Bribery legislation and we deserve an ASBO for tolerating bribery and for tolerating the use by foreign businesses especially in the energy sector that use London to raise capital on the stock exchange – and who are notorious for their poor business practices in poor health and safety and corruption.

 

The current UK Government has been mute in its delivery on anti-bribery provisions and the FTI survey – which should be a wake-up call – has received scant reaction. Watch Exposure on Wednesday, 10th October at 10.35 (UK) – No Bribery Please, We’re British. One year on from the Bribery Act, we should not be rolling back the legislation by lack of implementation.

 

 

Locked out of Power and Making a Noise

How do we contribute to society and how do we influence the future?

 

There is a dangerous gap opening up between people and institutions that current forms of democratic parties and other organisations set up to channel views to those instruments of power are not able to bridge. The problem is manifold:

Political parties which dominate most democratic societies are filled with professional politicians who have little (or at best moderate) understanding of the real world outside of politics;

Civil service bodies and public sector institutions are (as they have always been) full of careerists who are no longer “tempered” by the social reality that broadly based political parties would provide;

Campaign organisations are also full of careerists who work their way up the system internally and may have little real association with society outside their own silo of interest.

Corporations (especially large, multinationals) have a tremendous power in a world dominated by numbers – growth objectives – and can fund large campaigning groups of their own.

Ever-Changing society

There is no equilibrium in society although it feels like stasis has been reached. Different bodies are continually evolving as the environment changes politically and socially and economically. The problem is that entrenched interest groups (drawn from those sectors above) continuously work to make their positions more secure.

In the past, four, main sources of change were developed to open up society to change:

Political parties

Campaign groups

The media

Communications

But, mainstream sectors have succeeded, in the main, in wrapping the first three groups into that mainstream. There is a dependency on each other and a difficulty in breaking through with new ideas and attempting to force through decisions on even the most important issues.

The global economy has exacerbated this problem – as international needs lead to massive international organisations that succeed always in taking decision-making away from the individual.

Improved communications have through history succeeded in transforming the ability of individuals to learn more and have a greater say. The printing press was followed by the telephone, which was followed by the fax machine and the mobile telephone and the internet. Mass communication is now available that provides the ability for all of us to understand more of what is being done in our name. Social systems such as Twitter enable communication in an instant; mobile telephony and digital technology allows information in microseconds. This has had repercussions in events like the Arab Spring but the rigidity of social norms fights back most often.

Society’s complex underpinning will see some new emergence develop from this – but, what is it likely to be and how can the individual become involved rather than be part of a sector that more clearly matches that of Orwell or Huxley’s nightmares?

The drift to Centralised control

Maybe it’s a natural occurrence – that as organisations develop, they coalesce and form groups and associations that begin to meld into international committees that appear completely remote from most of us.

This is certainly true of political parties, true of sports associations (like FIFA or the International Olympic Committee), true of international organisations (like the UN, WTO), major NGO’s and charities, political groupings such as the EU, international corporates (such as the banks). Most people don’t know most of these organisations and many (like FATF – the Financial Action Task Force) have for years seemingly gloried in their anonymity.

With the rise of the internet, we were meant to discover more but that same rise has meant that less spending goes into traditional media organisations like campaigning newspapers. This has meant a reduction in in-depth investigations and analysis and much-reduced investment by newspapers and other media outlets in providing the type of information we need as individuals in society to keep the massive organisations on their toes.

In a major sense, the rise of the internet has had consequences that were not envisaged and has led to a major centralization of power structures – more immune from investigation than before.

We must not be misled by the closure of the News of the World in the UK after the hacking enquiry – the NotW was a scandal rag that was part of the new world of celebrity. Its loss is not great.

The loss of whole departments where the main task was to investigate and analyse how society works (and where it does not) and the rise of the internet as a news medium (and comment in 140 characters) shows that, so far, what has emerged is leading to centralization not the reverse.

Does Centralised control matter?

Democratic society is supposed to provide individuals with the ability to influence the way our society is run. So, centralized control does affect us all. While the drive to consumerism may suggest that we would not mind if we were ruled like in China (more goods supplied to keep the population quite), I suspect that this tendency does not appeal to all of us. Centralised control does not stop at Tiananmen Square – it has no controls. “”Unlimited power is apt to corrupt the minds of those who possess it” (William Pitt the Elder) is borne out through history and the idea that we can allow others complete freedom to guide us through life is obnoxious to most of us I suspect.

What are the options for decentralising?

The centralization of sectors of society needs to be continuously prodded. That can be done both internally (i.e. within those instruments of power) but mainly externally (from other organisations and / or individuals).

Working within is tough – the structures bind staff to their culture and it is very difficult to break out. A feature of British politics has been how the Liberal Party (a party for the individual within a coherent society and always opposed to centralization and totalitarianism) has become (especially since it became the Liberal Democrats) so bound up with the EU project – a centralizing force that is now seen to be breaking up.

External pressure may now be the only way to elicit change and to change the environment so that something less centralized can emerge.

The Centre for Civil Society in Australia is a good example of an organization that has been set up to prod society. www.civilsociety.org.au

The Centre for Investigative Journalism in London is another. http://www.tcij.org/

NGO’s like Global Witness are important contributors. www.globalwitness.org

All such organisations are set up to prod (some quite heavily) the existing structures – they are all dependent on external funding.

We need some creative destructionism – in the same way that Apple created new products that tore at our desire for more than pure functionality (although Apple is now part of that central structure); in the same way that Google tore into the online world and is now a core of that central structure – within the non-economic sphere, the way we live outside of numbers and products.

There are some options that remain that can assist in developing society so that we learn the lessons of the 20th Century – where communism and fascism drove the world to and then away from totalitarianism. Those lessons are now in danger of being unlearned – where the danger of unbridled centralism of society is occurring without (thankfully) war, but just the same potential results. We could wake up and find the world run from the centre. Maybe it is already and the drift to unequal wealth distribution a symptom.

That suggests more of an effort is needed to point a finger at our structures and the best way to do this is through our participation – and through some independent organisations, especially in investigative journalism, which can expose, fight for freedom of speech, help to analyse the impact of centralised decisions on society and expose fraud and corruption: many groups, many individuals wanting to open up the closed doors.

Does a tree that falls in a forest make a noise?