Denise Kingsmill: Dealing a straight hand

With the new Bribery Act, Britain has at last aligned itself with its western partners in tackling corruption.

by Denise Kingsmill
Last Updated: 31 Aug 2010

One of the last pieces of legislation to be passed by the Government before the election was the Bribery Act, the first updating of the UK's anti-corruption laws since 1916. The need to replace the UK's antiquated legislation was illustrated by the fact that, until 2009, there hadn't been a single case of a British company being convicted of bribery offences. The landmark prosecution and conviction of British bridge-builder Mabey & Johnson for corrupt activity in Jamaica and Ghana broke the UK's duck in September that year.

Although Britain was a signatory to the OECD Anti-Bribery Convention in 1997, it has brought only this one case since then, compared to the US, which has brought 103 cases, Germany more than 40 and France 19. This poor record did not enhance its reputation as a country prepared to fight international corruption; neither did the well-publicised allegations against BAE Systems in connection with the Al Yamamah arms agreement with Saudi Arabia, or the controversial decision of the SFO in 2006 to discontinue its investigations into these allegations on the grounds of national security - a move supported by Tony Blair as prime minister. As a consequence, the UK has come under pressure from the OECD and others to take a tougher US-style approach. The Bribery Act is part of the response to this.

In some companies, bribery is not so much an ethical issue as a cost, albeit hidden, of doing business in certain parts of the world. Kickbacks, facilitation payments to well-connected middlemen and bribes made to government officials are seen as just a necessary part of getting the contract or the deal.

The fact is that bribery can be good business. Last month, German carmaker Daimler pleaded guilty in the US to bribing officials in Russia, China and 20 other countries over many decades in order to fuel sales, and thereby illicitly enhancing its profitability by millions of dollars. In 1999, after an internal auditor raised concerns about certain accounts used as a conduit for the bribes, the board approved an integrity code with anti-bribery provisions. But Daimler failed to enforce it, and illegal payments continued until 2008. Although the company was fined $185m, this must represents just a small proportion of the gains made as a result of the corrupt payments.

Earlier in my career, I was asked by a large multinational to consider how to compensate employees whose job it was to 'oil the wheels' of certain valuable business dealings in a developing country if their activities were discovered and the company was obliged to sack them. The firm simply accepted that this was the way things were done in that part of the world, and although it recognised that it would have to distance itself from the bribery if it came to light, it wished to do the right thing by its employees, who were just doing what the company required of them. This brief stretched my legal ingenuity as well as my ethical standards to the point were I declined to act and lost a good client.

The scale and scope of bribery in business is staggering. Transparency International, the organisation that campaigns against global corruption, estimates that in developing and transition countries alone, bribes of between $20bn and $40bn are received by politicians and government officials annually. Such payments are not just unfair to more ethically minded competitors, it says, but can result in contracts going to reckless companies who disregard the law, with consequences ranging from water shortages in Spain and illegal logging in Indonesia to unsafe medicines in Nigeria and dangerously unstable buildings in Turkey.

When it comes to bribery, Transparency International urges a focus not only on the developing countries with the greatest economic and governance challenges but also on the companies from the industrialised world that offer bribes. In its 2008 Bribe Payers Survey, the organisation interviewed 2,700 business executives in 22 of the world's most economically influential countries and ranked them according to the propensity of their firms to bribe abroad. Companies in Belgium and Canada were seen as least likely to engage in bribery when operating overseas, whereas companies from Russia and China were thought to be the most likely to be involved. All 22 countries were thought to engage to an extent in bribery and so needed to take stronger measures to enforce anti-corruption legislation. The UK ranked fairly high at seventh, but in the light of its weak enforcement record, the need to improve anti-corruption measures and to increase its vigilance in this area has been recognised.

There now seems to be a new appetite for pursuing companies engaged in unethical behaviour, as the recent flurry of high-profile SFO activity in connection with bribery allegations against multinationals illustrates. Rio Tinto faces a possible SFO inquiry following the convictions of four of its executives in China for taking bribes, while three UK board members of French engineering group Alstom were arrested on suspicion of bribery and corruption after raids by the SFO in March. The long-running investigation into BAE Systems has recently resulted in a settlement with the SFO and the Department of Justice in the US, and a $400m fine.

It is early days yet, but one feature of the new Bribery Act that may encourage the new-found assiduousness of the SFO investigators is that they will no longer have to seek the consent of the Attorney General to pursue a prosecution, so removing any possible political influence.

- Baroness Kingsmill CBE has been a non-executive director of various private and public boards. She is a non-executive director of British Airways and Korn/Ferry International

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