Corruption in corporate Britain

The UK has slipped to an all-time low of 17th in a global corruption index. GB assesses the scale of the problem.

The UK has slipped to an all-time low of 17th in a global corruption index. GB assesses the scale of the problem.

The UK has slipped to an all-time low of 17th in a global corruption index. Raj Chada, a partner at Hodge Jones & Allen who recently acted for a BAE Systems executive in the recent investigation into the company by the Serious Fraud Office (SFO), assesses the scale of the problem.

There has been much media speculation recently about a culture of corruption in UK companies. High-profile prosecutions and settlements of SFO cases, as well as the likely introduction of a new Bribery Bill have all made the subject more high-profile, as has the recent downgrading of the UK in the corruption perceptions index published by anti-bribery watchdog Transparency International.

However, we have to be careful about saying that standards in British boardrooms have deteriorated over the last few years. Instead, there is much more subtle game being played where regulation and law enforcement are being taken to a new level to challenge some business practices that have been going on for ages.

The first thing to note about the prosecutions and settlements is that they relate to British companies acting overseas. There are few, if any reports of brown envelopes and bungs being passed around to secure business within the UK.

The issue though has been how British companies have operated overseas. To some extent, there has been a laissez-faire attitude to overseas operations by British executives. This ranges from the proverbial blind eye to an attitude that ‘everyone is at it’ or ‘that’s just how you win business in these places’. When you are working in countries in which oversight and governance is lax, as it is in some emerging markets, decisions are made that sensible and reasonable British executives would not normally take.

‘The Bribery Bill is a game-changer’

In respect of this aspect of corruption, we have been somewhat behind the game, with jurisdictions such as the US taking a much tougher stance. In fact, it is arguable that pre-1999, it was not even a criminal offence for a UK company to bribe someone in a foreign jurisdiction. Without doubt, it is now. Moreover the Bribery Bill, when it becomes law, will be a game changing piece of legislation.

The emphasis will be on proactively preventing bribery. It will be a criminal offence for a company to fail to prevent bribery on its behalf, regardless of where in the world the bribes are offered, irrespective of whether it is an employee or an agent and no matter what the size of your company.

A company’s defence will rest on whether or not it can show that it had “adequate procedures” in place to prevent bribery. The authorities will check not only that appropriate procedures are in place, but that they are being followed in practice. No doubt they will want to see how executives or the Board have assured themselves that the policies are being followed.

The government has promised guidance to assist firms in putting the relevant policies in place, but this is likely to set out broad principles and examples of good practice rather than prescriptive standards. However some sort of checking mechanism and upward reporting would appear to be essential. Companies should start thinking about ensuring that there is one person responsible for implementing an anti-bribery programme. Formal contracts with agents and lobbyists, where there is a specific requirement for them to comply with all legislation and behave ethically, could help reduce exposure for liability.

Corporate culture may not have deteriorated over the past few years, but the challenge will be how it adapts to take into account the new legislative framework.

Nick Britton

Nick Britton

Nick was the Managing Editor for when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...

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