LE CONFLIT D’INTÉRÊTS EST DANS L’ŒIL DE CELUI QUI REGARDE8 août 2019
30 JOURS – 30 COLLABORATEURS : PARTIE 14 octobre 2019
by Marc Y. Tassé, MBA, CPA, CA
FCPA (USA), CICA (USA), CFF (USA), CACM (USA)
Establishing a Corporate Compliance Program is no longer “Nice to Have”, but rather an absolute “Must Have”
Over the last few years we have observed a strong increase of international collaboration in enforcement by various authorities. Not only does this help bring international corruption cases to conclusion more quickly but it also gives a clear message to potential perpetrators: the chances of getting caught are increasing.
With all the public discussion around corruption scandals and the massive impact that sanctions such as debarment, monitorship, and huge monetary penalties, executives that continue to ignore corruption run the risk of not only exposing their organizations failure to implement effective anti-corruption compliance programs, but are also acting with gross negligence and gambling with the future of their company and its employees.
The dramatic reputational and financial impact of non-compliance and unethical management practices as presented in the press and social media in connection with SNC Lavalin, Bombardier, VolksWagon, Valeant, Petrobras and others have contributed to the investment community taking increased interest in long term sustainability of companies within their portfolios and how ethics and compliance are embedded in a company’s corporate culture. Institutional investors are increasingly demanding evidence of effective compliance programs before making significant investments in portfolio corporations.
There clearly is a new recognition that establishing a corporate compliance program is no longer “nice to have”, but rather an absolute “must have” for all corporations. As more and more stakeholders are demanding robust compliance programs, those companies that embrace ethics and compliance will emerge with a competitive advantage.
The C-suite executives need to provide the appropriate tone from the top and ensure that ethical behavior will be considered as part of the performance evaluation process of middle and senior managers. Equally there should be zero tolerance for violations, even if it may affect top executives and other “high achievers”.
A key element of the foundation for a successful compliance program will always have to be a thorough compliance risk assessment, taking into consideration the companies’ geographical footprint, industry sector, government interactions, past identified fraudulent activities and other policy violations, third party relationships and overall business models, to name just a few of the input factors that should be considered for an in-depth compliance risk assessment.
Only if compliance risks are clearly identified will the Chief Compliance Officer or equivalent be able to design effective risk mitigation measures, helping to prevent corrupt activities. Such risk assessment should be repeated regularly, in order to account for changes in the respective market environment as well as other changes to related risk parameters.
Prevention of corrupt activities largely depends on targeted risk mitigation measures and starts with ensuring sufficient awareness across all company stakeholders. The more people know about the factors that contribute to corruption, the harder will it be for corrupt individuals to continue their unethical practices.
How to establish a robust ethics and compliance program
Global Compact Network Canada has published “Designing an Anti-Corruption Compliance Program – A Guide for Canadian Businesses” which suggests that in order to have an effective compliance program some very important questions need to be addressed and documented:
- Does the CEO have the requisite skills and experience to move the organization forward?
- Does the CEO possess the character and moral fibre to model and contribute to the development of a values-centered enterprise and strategy?
- Does the CEO have the chemistry and communication skills necessary to rally others to successfully and consistently deliver on the organization’s value proposition to all stakeholders?
- Does the organization support the ethical culture and anti-corruption compliance program through training and communication, which includes allowing employees to raise ethics and corruption compliance issues without fear of retaliation?
- What is the process for assessing ethics and corruption compliance risks within the organization?
- Have they updated their policies, procedures and internal controls to address emerging risks (e.g., cyber risk, anti-corruption)?
- Does the current ethics and anti-corruption compliance program cover the organization’s global operations, including management, employees, shareholders, customers, subcontractors, business partners and vendors?
- Does the organization have an ethics and compliance officer?
- Does a reporting and monitoring process keep the board of directors informed of key ethics and corruption compliance issues, as well as the actions taken to address them?
- Are ethics and corruption compliance issue a regular item on the board agenda?
Here are some practical suggestions that may be useful to Board members and senior executives:
- Sustained leadership on transparency and integrity is vital.
- Strong anti-corruption measures and repeated staff training is crucial.
- The compliance office must be answering directly to the CEO and report to the Board.
- When allegations occur, move quickly with a forensic audit and investigation (external investigator is preferred) and if criminal issues are uncovered turn them over to the appropriate authorities.
- Ensure that the staff remuneration is not an incentive to sell contracts at all cost.
- Make it clear in documentation that this is a “clean” company that does not bribe – this has been demonstrated to be a deterrent for bribe asking.
- Include in the external audit a review of the compliance on anti-corruption measures.
- Ensure full transparency in contract management.
- Publish who the real beneficial owners of their company and subsidiaries are.
- Beware of transfer pricing and tax evasion since it creates impoverishment in countries where the company is working; especially in the natural resources sector and in poorer countries.
About the author
As an investigative and forensic accountant, and also internationally renowned subject matter expert in the fields of anti-bribery / anti-corruption, anti-money laundering, and anti-fraud, Mr. Tassé examines financial crime from different angles and explores what motivates people to break the law, how wrongdoers cover their tracks, and what can be done to put a stop to the looting.
An award-winning lecturer in the MBA program at the Telfer School of Management and in the Common Law Section at the University of Ottawa’s Faculty of Law, his current research focuses on the actual and potential effects of allegations of corruption and improper financial reporting on publicly traded companies’ market capitalization.
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