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Tuesday
Sep022014

Collective Action: A new approach to combat corruption (Part Four)

Last week, I introduced the different types of Collective Action. This week, we’ll take a closer look at the most common form of Collective Action for fighting corruption: declarations and joint activities.

There’s no shortage of declarations and joint initiatives from groups of companies about their commitment to fight corruption. Some are at a global level such as the UN Global Compact (UNGC) with its 10th principle, signed by thousands of companies, that “businesses should work against corruption in all its forms, including extortion and bribery”, or the World Economic Forum’s Partnering Against Corruption Initiative (PACI). Others may be on a sectoral level like the Maritime Anti-corruption Network, or in a particular country, like the Indonesia Business Links Business Ethics Initiative. The annual recommendations of the B20 group of companies to the G20 leaders are also a declaration.

Cynics will of course point to the fact that declarations are only as good as the paper they are printed on. Adherence will depend entirely on the extent and quality of the companies' commitment to the declaration, and the drivers underlying that commitment – peer or public pressure. Ultimately enforcement is voluntary.

With some justification, it can be asked how meaningful anti-corruption declarations really are. How many companies which have been indicted for corrupt activities have voluntarily withdrawn from an anti-corruption declaration? And on how many occasions has a guilty company been barred from an anti-corruption initiative by its peers? In fact how often has a new signatory been refused entry based on a thorough review of their past record?

And what about the many companies that have not signed a declaration in a particular sector or country? These are divided into two categories: those who are compliant with the law but sceptical about declarations and those who simply have no intention of complying with the law.

The first argue: “why should we sign these additional commitments, when we are already committed to abiding to extremely effective legislation such as the FCPA? And why become a hostage to fortune by taking a holier-than-thou stance, when something can so easily go wrong in high-risk markets?”

The second category – the companies which are not compliant - undermine the whole concept of Collective Action by their corrupt activities. By not signing the declarations, at least they are being “honest”!

But the reality is that in most cases, there are no negative consequences for not publicly supporting an anti-corruption initiative.

As we have seen, it’s easy to pick holes in declarations. But in our experience in international business and especially in high-risk markets, it is the first - and critical - step in creating alliances to counter corruption. Next week, we’ll see why.

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Brook Horowitz is CEO of IBLF Global and a member of the IBLF Global board. A graduate of Cambridge and Harvard Universities, he's a contributor of opinion pieces on raising business standards to the Financial Times, International Herald Tribune, Moscow Times and others.