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Prevention of Corruption: Corporate Governance
 
Topic Outline

International attention has increasingly focused on the key role that the private sector must play in preventing and combating corruption. Measures such as codes of conduct, whistleblower protection and a clear tone from the top can all play an important role in minimising the possibility of corrupt acts taking place within a private sector body.

National criminal legislation is also now focusing its attention on corruption in the private sector, with the UK Bribery Act providing the most recent example of domestic laws which attribute criminal responsibility to legal entities for acts of corruption.

Moreover, the private sector itself has sought to play an increasingly active role in the global fight against corruption, manifested in the addition of the 10th Principle to the UN Global Compact which provides that "Businesses should work against corruption in all its forms, including extortion and bribery".

The topics and resources below provide some insight into what national governments and private sector bodies themselves can do to reduce the risk of corruption in the private sector.

 

 Resources 

 
a) National and International Legal Framework for Corporate Bodies
  • National laws and regulatory rules
  • UNCAC and the Private Sector
  • Other treaties and international regulations
  • Public functions delegated to private actors. Board, management and entity obligations under national and international instruments.

 

 Resources 

 
b) Self-regulation and voluntary compliance mechanisms
As many organisations, institutions and companies are now expected to internally audit their organisations and monitor staff and money flows, it is important for students to consider the internal voluntary and mandatory mechanisms currently in place in order to prevent corruption and money-laundering. The principles and mechanisms that will be considered with include:

 

 
i. Codes of Conduct and Business Ethics
  • OECD Good Practice Guidance
  • FATF Recommendations
  • International Chamber of Commerce
  • Industry codes of conduct
  • Construction Industry (COST) – the particular standards kept within the construction industry will be considered
  • Extractive industries (EITI) – the particular standards kept within the extractive industry will be considered

 

 Resources 

Academic Articles:

Industry Sector Integrity Efforts and Anti-Corruption, Research Material provided by the IBA Legal projects
Kleinhempel, M., Business, Ethics and Compliance Programs. A Practical Introduction (technical note), IAE, Business School, Universidad Austral, January 2011
Kleinhempel, M., Compliance Officers – Theory vs Reality (technical note), IAE, Business School, Universidad Austral, October 2011
Kleinhempel, M., Compliance Training (technical note), IAE, Business School, Universidad Austral, June 2012

International Organisation:

ADB-OECD Anti-Corruption Initiative for Asia and the Pacific, Codes of Conduct in the Private Sector, in Managing Conflict of Interests – Frameworks, Tools, and Instruments for Preventing, Detecting, and Managing Conflict of Interest, 2008, Ch. 5, pp. 161-180
Independent Commission against Corruption (ICAC), Managing Integrity and Striving for Excellence - Corruption Prevention Package for Construction Industry, available online upon request
BSCI - Business Social Compliance Initiative, Code of Conducts, 2009
EITI – Extractive Industry Transparency Initiative, EITI Rules 2011 Edition
EITI - Extractive Industry Transparency Initiative, EITI Fact Sheet, September 2012

 
ii. Business Ethics Policy Statements
  • Standards
  • Ethics
  • Controls
  • Whistleblowers
 
iii. Whistleblower Protection
  • Internal Reporting Mechanisms
  • Internal Educational Initiatives

 

 Resources 

Academic Articles:

Banistar, D., Whistleblowing: International Standards and Developments, in I. Sandoval (ed.), Corruption and Transparency: Debating the Frontiers between State, Market and Society, CORRUPTION AND TRANSPARENCY: DEBATING THE FRONTIERS BETWEEN STATE, MARKET AND SOCIETY, World Bank-Institute for Social Research, UNAM, Washington, D.C., February 2011
Carr, I., The UK Bribery Act 2010, Business Integrity and Whistleblowers, in Lewis D. and Vandekerckhove W. (eds.) Whistleblowing and Democratic Value, Intenrnational Whistleblowing Reseach Network, 2011, pp. 102-114
Kleinhempel, M., Whistle-Blowing (technical note), IAE, Business School, Universidad Austral, March 2011
Stachowicz-Stanusch, A., Whistleblowing in Poland – To Blow or Not to Blow the Whistle, That is the Question, [w:] A. Stachowicz-Stanusch, W. Amman (red./autorstwo), Business Integrity in practice – Insights from International Case Studies, Business Expert Press, New York, USA, 2012, s. 43-57.
U4 Anti Corruption Centre, Good Practices in Whistleblowing Protection Legislation (WPL), U4 Expert Answer

International Organisation:

ICC, Guidelines on Whistleblowing, 2008
Kramer, K., Protection of Witnesses and Whistle-Blowers: How to Encourage People to Come Forward to Provide Testimony and Important Information, Resources Material Series No. 86, Visiting Experts’ Papers, 149th International Training Course, UNAFEI, Tokyo, March 2012
Effective Measures to Secure Protection and Cooperation of Witnesses and Whistle-Blowers with Special Attention to Organized Crime and Corruption, Resources Material Series No. 86, Reports of the Course, Group 1, 149th International Training Course, UNAFEI, Tokyo, March 2012

 
iv. Corporate Social Responsibility (CSR) (examples)
  • OECD Guidelines for Multinational Enterprises
  • ISO 2600
  • Global CSR standard setting programs (e.g. Global Reporting Initiative [GRI])
  • Industry CSR Programs:
  • Apparel industry – the particular standards kept within the apparel industry will be considered
  • Extractive industry – the particular standards kept within the apparel industry will be considered

 

 Resources 

Academic article, paper, video:

Broomhill, R., Corporate Social Responsibility: Key Issues and Debate, Dunstan Paper No. 1, 2007, Don Dunstan Foundation, University of Adelaide, Australia
Carroll, A.B., Shabana, M.J., The Business Case for Corporate Social Responsibility: A Review of Concepts, Research and Practice, pp. 85-105
Du, S., Bhattacharya, C.B. and Sen, S., Maximizing business Returns to Corporate Social Responsibility (CSR): the Role of CSR Communication, pp. 8-19
Garriga, E., Melé, D., Corporate Social Responsibility Theories: Mapping the Territory, Journal of Business Ethics, Vol. 53, No. 1-2, 2004, pp. 51-71
Hanlon R. Corporate Social Responsibility, Corruption and Human Rights: Multinational Corporations in China and Southeast Asia, Institute of Asian Research, University of British Columbia
Leonard, D. and McAdam, R., Corporate Social Responsibility, Quality Progress October 2003, ASQ – The Global Quality Voice
Lindgreen, A., and Swaen, V., Corporate Social Responsibility, pp. 1-7
Maon, F., Lindgreen, A., Swaen, V., Organizational Stages and Cultural Phases: A Critical review and a Consolidative Model of Corporate Social Responsibility Development, pp. 20-38
McWilliams, A, Siegel, D., Corporate Social responsibility: A Theory of the Firm Perspective, Academy of Management Review, Vol. 26, No. 1, January 2001, pp. 117-127
Noland, J., Phillips, R., Stakeholder Engagement, Discourse Ethics and Strategic Management, pp. 39-49
Rodriguez, P., Siegel. D. S., Hillman, A., Three lenses on the multinational enterprises: politics, corruption, and corporate social responsibility, Journal of International Business Studies, Vol. 37, No. 6, November 2006, pp. 733-746
SAGE Brief Guide to Corporate Social Responsibility, Sage Publications, USA, 2012
Special Issue: Corporate Social Responsibility, International Journal of Management Reviews, Volume 12, No.1, 2010, pp. 1-105
Wood, D.J., Measuring Corporate Social Performance: A Review, pp. 50-84

International Organisations:

IBA, Industry Sector Integrity Efforts and Anti-Corruption
OECD, Guidelines for Multinational Enterprises, and resource document with specific reference to the Chapter on Bribery and Corruption, 2011
ISO – International Organization for Standardization 26000, Discovering ISO 26000
ISO – International Organization for Standardization 26000, ISO 26000:2010 Guidance on Social Responsibility
TI – Transparency International, Corporate Responsibility and Anti-Corruption: The Missing Link?, TI Publications, Working Paper 01/2010

 
c) Incentive systems
This sub-section explains how incentives or rewards can be used to motivate private employees to follow good practices and encourage anti-corruption and anti-bribery systems to flourish within government, private companies and international organisations.
 
d) "Tone At The Top"
This sub-section will highlight how leadership and commitment to ethics can be a deciding factor in the creation and maintenance of an organizational culture in a company. An ethical atmosphere amongst company heads, where ethics and integrity are upheld can encourage employees to do the same via a trickle-down effect.
However, if upper management and senior officials behave in a corrupt and exploitative manner, then employees will feel there is little reason to conduct themselves in an ethical way.

 

 Resources 

Academic Article:

Kleinhempel, M., Best Business Practices and Variable Pay – a Contradiction in Terms? (technical note), IAE, Business School, Universidad Austral, August 2011

 
e) Value Chain Framework
The value chain framework has emerged as an important tool for strategic business planning and can be used to value private and public companies where there are only limited public data available. It can also be used to determine the value added by anticorruption and anti-bribery processes as well as the benefit to the end consumer.
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