Business must fight corruption

More than 40% of business executives and anti-corruption specialists believe their competitors pay bribes.

While it is easy to point fingers at government officials, businesses urgently need to take responsibility for their role in perpetuating the scourge of corruption.

PwC's Confronting Corruption report covers a survey of 390 senior executives in 70 countries. Findings were supported by extensive interviews with 36 senior executives and specialists on anti-corruption measures in 14 countries.

Focus on the private sector's role in fighting corruption has sharpened in recent years. The survey indicates that business is more aware than ever of the dangers of corruption but, clearly, more must be done.

Companies need to expand the scope and strictness of their policies to manage corruption risks with well-designed controls that are clearly communicated and enforced.

PwC's recent Global Economic Crime Survey reported that 59% of South African companies fell victim to bribery and corruption, while less than half this percentage (27%) of their global counterparts experienced similar crimes.

The survey sample consisted of 3000 senior representatives of organisations in 54 countries.

Global trends reflected in PwC's corruption report reveal that 55% of companies fear damage to their reputations as the most significant impact of corruption, 11% find legal enforcement a concern and only 10% are concerned about actions by regulators.

While the threat of enforcement and regulatory action appears toothless, a casual internet search sheds light on the price of corruption for those who are caught:

• In April last year, a key figure in the Fidentia case, Steven Goodwin, was sentenced to 50 years in jail on 36 counts involving fraud, corruption and money laundering.

According to the Scorpions (now the Hawks), Goodwin was party to the corruption of Piet Bothma, CEO of the Transport Sector Education and Training Authority (Teta), in that he paid Bothma R4.6-million in bribes to transfer Teta investments into Fidentia's control.

• In New York, Daimler Benz was fined $185-million in March this year after admitting to bribing foreign government officials with money and gifts to win contracts in various countries, including Russia.

• In April, a Munich court found two former executives in Siemens's telecoms unit guilty of breach of trust and abetting bribery for their roles in a corruption scandal that rocked the German engineering group.

The affair - the biggest bribery case in German history - cost the company around à2.5-billion in fines, investigations and back taxes.

• In September, Swiss multinational ABB announced settlements of anti-bribery investigations conducted by the US Department of Justice and the Securities and Exchange Commission. ABB is to pay a total of $58.3-million to resolve charges arising from payments related to projects in Mexico.

While it is evident that companies sometimes pay the price for corruption, it is apparent that these are isolated examples.

Is enough action being taken against companies for procurement corruption? Unfortunately not. However, the Prevention and Combating of Corrupt Activities Act 2004 does seek to address the problem.

The act creates the offence of corrupt activities in relation to procurement and places the onus on a director or manager of a company who has knowledge of any offence of theft, fraud, extortion or forgery involving more than R100000, to report this to the SAPS.

The corruption report highlights the fact that companies are more worried about the reputational damage associated with being found out than they are about the consequences of not coming clean.

As long as this situation persists, people will be discouraged from reporting such offences.

While it remains the exception that individual businesses pay the price for their role in corruption, we still have a long way to go before the fear of legal enforcement and regulatory action prompts businesses to take a meaningful stand against corruption.

As long as the benefits outweigh the costs, crime will continue to pay for perpetrators of corrupt practices.

Goss is a partner at PwC and is head of anti-corruption solutions at PWC