Today’s globalized markets have fostered reliance on third-party partners throughout the supply chain. The benefits that these parties provide to multinational companies – access to local knowledge, lower-cost production, etc. – are also accompanied by increased corruption risks.
Ensuring that these partners are adhering to strong anti-corruption policies and practices can be a difficult task, and most companies do not go beyond the basics in ensuring that they do so. Most companies do some level of due diligence, although it may be fairly rudimentary. Some require contract provisions, like the right to terminate the contract in case of corruption (audit rights are far less common), and some require certification of compliance with the company’s policies. Yet statistics suggest that these methods are insufficient. According to the head of the SEC enforcement division, 60 percent of FCPA cases in the last two years have involved bribes paid by third parties, and at times the percentage has been as high as 90 percent.
Specific, regular anti-corruption training is crucial to building a culture of compliance within a supply chain – particularly in high-risk situations – but for most companies, the focus is on training employees, with limited attention on third parties. A company’s anti-corruption program can only be effective if all those involved are aware of its policies and understand how to follow them. Add to that the expectations of government officials who enforce anti-bribery laws and the reasons for training third-parties becomes compelling.
In the evaluation of U.S. Foreign Corrupt Practices Act, the U.S. Department of Justice (DOJ) and Securities Exchange Commission (SEC) will “evaluate whether [a company] has taken steps to ensure that relevant policies and procedures have been communicated throughout the organization, including through periodic training and certification for all directors, officers, relevant employees, and where appropriate, agents and business partners.” The UK Bribery Act Guidance also encourages companies to train “associated persons”, particularly those perceived to be high risk.
Some companies are out in front on this issue. A new Microsoft program requires its business partners to provide anti-corruption training to all employees who resell, distribute, or market Microsoft products or services. Via its website, Microsoft has made training available to those business partners who have not developed their own. Similarly, Cisco, IBM, Google and Fluor all provide ethics and compliance training for their partners.
Should more companies choose to follow these examples in the future, they will no doubt reap the benefits in reduced risks and costs, sustained economic growth, and competitive advantage.