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fpclub [Date : 2017-06-29 00:00:00 ]   
Subject Better Future Media - [Global CSR Trend] Bribe Is the Biggest Enemy of Business.

[Global CSR Trend] Bribery is the biggest enemy of business ... Korean companies, involved in corruption scandals, what would be the first step to restore confidence?

    Interview with Peter van Veen, Director of Business Integrity Programme, Transparency International UK

 


"Corruption is the company's biggest risk. That's why companies around the world are actively responding to anti-corruption issues. At the core is 'transparent disclosure'."

Peter van Veen, Director of Business Integrity Programme, Transparency International UK, chose transparency as a key word for sustainable management of companies. Transparency International (TI), established in 1993, is a non-governmental organization (NGO) dealing with anti-corruption issues and is well known for announcing the corruption index of countries each year. TI is active in more than 100 countries including the South Korean Chapter.




South Korea's national integrity score is 53 out of 100. The 52nd rank out of 176 countries, down 15 places from 37th (56 score) last year. It is the lowest ranking, since the commencement of the Transparency International’s Corruption Perceptions Index (CPI) survey in 1995. The transparency index of South Korean companies is also the lowest. Transparency International UK has calculated the Defense Companies Anti-Corruption Index by evaluating transparency and ethics policies in 163 defense companies in 47 countries. As a result, six Korean companies have received poor scores. In terms of Band A (most favorable disclosure) to Band F (almost no disclosure), Daewoo Shipbuilding & Marine Engineering received Band C, Samsung Techwin received Band D, Doosan DTS and LIG Nex1 received Band EKorea Aerospace Industries (KAI) and Poongsan received the lowest Band F. Since South Korean President Moon Jae-in decided to focus on strengthening transparent management of large corporations and defeating anti-corruption, remedies of domestic companies rest urgent.

As a special speaker on "Fair Players Club Seminar on Compliance and Ethics Management" co-hosted by the UN Global Compact Network Korea, the British Embassy Seoul and the British Chamber of Commerce in Korea on June 22, 2017, Peter van Veen visited South Korean for the first time. Hetalked about the global CSR trend. Peter van Veen is an expert on corporate strategy, ethical management and anti-corruption, joining Transparency International UK after his experiences in the oil giant company, Royal Dutch Shell and a global consulting group, Accenture.

- How do corruption scandals affect corporate business?

"No matter how good and well-branded a company is, corruption scandals will arise. The problem is that this corruption issue lowers corporate competitiveness and it takes a great deal of time to recover the corporate image that has been lost. The German company, Siemens, caught in a bribery scandal in 2006, was fined $ 800 million in US courts and suffered a lot of damages, including change of CEO. In the past, Siemens was ranked as one of the best companies that young people want to work in. Ranking fell sharply in the same ranking immediately after bribery scandals. In addition, the aftermath of the risk of corruption lasted more than 10 years. In the case of multinational companies doing business around the world like Siemens, it takes a very long time to resolve lawsuits because they are chained together in the courts of each country. In fact, Siemens took 10 years to complete the final lawsuit over the bribery case, and the media covered the issue for over 10 years. The bigger problem is that the new CEO is constantly hit by corruption issues such as bribery in the past. In 2008, four executives of Barclays Bank in the UK were charged with conspiracy to commit fraud in bringing investment from Qatar. During the last 10 years of litigation, CEO has changed four times in total. The current CEO is responsible for the problems caused by the fourth executive in the past. It is very difficult to recover a corporate image that has once been lost."

- Recently, there was a big political corruption scandal in South Korea. Since then, there have been rushing inquiries and reviews in the global market, "Can we deal with South Korean companies?" How does the country's corruption risk affect its business?

"The corruption scandals between politics and corporations reduce the credibility of not only elected politicians by the people but also the business as a whole. According to the survey by the Transparency International, the public confidence in the relationship between government and business is very low. Public thinks that companies give bribes to get preferential treatment from the government. In particular, corruption scandals hurt a company, both internally and externally. The disappointment of the company makes good talents leave, making it difficult to attract young talents. In addition, corruption scandals can be a stumbling block to win contracts when competing with global companies in other countries.

The biggest problem for companies involved in political scandals comes from 'opacity'. Transparency International encourages to disclose when, why, and what lobby had been done with politicians. Interaction between business and politicians is an important factor for establishing a fair and reasonable market economy. It is because politicians need to grasp the corporate environment and needs of corporations correctly when they make policies. The public and business must be able to communicate with politicians in a transparent way under democratic procedures. If this information is not made public transparently, then the public can’t help perceiving that companies are lobbying to gain preferences from politicians. South Korean companies that have maintained their competitiveness in the global market with high quality products need to actively take measures, such as disclosing related information in an effort to cut down the risk of corruption. in order not to suffer from the corruption scandal."

- How can South Korean companies recover their corporate image that has been lost due to bribery? Is there a case of a global company that has actually solved it?

"The aforementioned Siemens is a good example. Since the corruption scandal, Siemens has appointed a Chief Sustainability Officer (CSO), the chief executive officer of sustainability management, and invested a lot of money to improve its compliance system throughout the business. In addition, with the World Bank, Siemens donates $ 100 million (about 119.3 billion won) to improve compliance and ethical management of companies around the world, customized compliance and ethics management education, research, and self-assessment by country, region, and industry in 24 countries, which is supported and conducted under the name of Siemens Integrity Initiative. South Korea has also created the Fair Player Club initiative with more than 125 public and private companies participating in anti-corruption pledges for fair and transparent business. Siemens is improving its image as a result of bribery follow-up reports and reforming projects to combat corruption. GlaxoSmithKline (GSK), a multinational pharmaceutical company that has been charged with the largest fine of 500 billion won from the Chinese government for illegal rebates, reports to the US Securities and Exchange Commission (SEC) for two years regarding compliance with anti-corruption laws, communication and lobbying processes transparently."

- In recent years, the level of punishment for bribery and corruption has been rising globally. Also, anti-corruption prevention has been a priority, as most EU member states are participating in the United Nations Convention against Corruption or the OECD Anti-Bribery Convention. What are global trends surrounding anti-corruption issues?

"As concerns about anti-corruption are being reflected in investment and trade, especially in major export markets around the world, companies are growing worried. Not only in the US and UK, which have traditionally been strong in anti-corruption, but also in emerging economices such as Russia and China have enacted powerful anti-corruption laws in recent decades. It is now a single bribery case can be related with anti-corruption laws in multiple countries. For example, if a multinational corporation that has a subsidiary in France is involved in a corruption lawsuit, the foreign branch offices of that company will be simultaneously inspected and investigated. Rolls-Royce, an airplane engine manufacturer, has violated anti-corruption conventions in seven countries, including Indonesia, India and Brazil, with a cost of $ 120 million, only for lawyer’s fees. This international dispute is very complex and incurs huge costs. By analyzing the anti-corruption laws of each country and building a company's compliance system based on the highest level of law, companies can manage risk more effectively."

According to the Korea Fair Trade Commission in 2014, the amount of penalties imposed by South Korean companies from foreign authorities is 3.3 trillion won. It was reported that the US imposed a penalty of 1, 713.3 billion won and the European Commission (EC) imposed about 1,544.1 billion won.. As more than 7,000 South Korean corporations have entered the European Union (EU) by 2017, more proactive preparation regarding global anti-corruption laws is needed.

- How should companies manage anti-corruption risks?

"The powerful message of top management is the most important. CEO should declare one’s anti-corruption intention directly and make efforts. Simple promotional texts might not be helpful. Also, employees must understand and internatlize why corruption is important. A corporate culture that supports clean and fair business and ethical management should be formed. If a message of senior management such as CEO is not correct, or if its act is inconsistent, repulsion may occur. Large corporations in US and UK are training anti-corruption to all employees. Online training can be a basic training. Face-to-face training would be more effective for the employees who work in countries with high bribery risks. The employess of the headquarter office and its supplier companies should receive same training. In UK and US, even if an agent, such as a business partner, pays bribes on behalf of a company, the company is held responsible. If you simply ask for compliance-related codes of conduct to be delivered and protected, few SMEs will do well, because they lack expertise, experience, and money. Therefore, global companies are continuously supporting their systems by educating their business partners and strengthening their overall capabilities. They also dispatch employees. Transparency International UK has a system for companies to learn and benchmark about 400 items related to anti-corruption. They are investing more and more every year in order to have a better transparent management system."

- How can companies improve their organizational culture and incentives and reduce corruption risks?

"Rational and appropriate goal setting is important. If you set a goal that is difficult to achieve, someone can take a shortcut or use bribery. Aggressive sales methods are not necessarily bad, but this kind of organizational culture can be a source of corruption. Any employee who does not comply with the law must be omitted from promotion. Appropriate incentives for ethical works of employees should be established. GSK, HSBC, and Barclay Bank in the UK have improved incentives of sales people. In the past, their bonuses were paid if sales goals were reached. Therefore, there were a lot of employees receiving bonuses in a way that illegally washed their clients' funds. Now, if their performance improve due to illegal activities, their bonus is reimbursed. Even the system is created to give employees bonuses in the case of loss to a company in short term but profitable to a client in long term.”

- What kind of preparation is needed for South Korea, which has launched its new government, to join the global trend to emphasize social responsibility?

"I think there is an opportunity as of now. If chairpersons of chaebol companies could declare and lead reforms for fair and sustainable management, these changes can spread rapidly. If large corporations continue to provide and support ethical management guidelines for their suppliers, SMEs can grow with sustainable management. We expect South Korean companies to gain not only reputation in technological innovation, but also ethical management and sustainability management."

 

  http://futurechosun.com/archives/24562

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