F 20110120 053322 eccp anti corruption dr von rosen

Corporate Governance and Compliance – Lessons from Europe Prof. Dr. Rßdiger von Rosen, Managing Director, Deutsches Aktieninstitut European Chamber of Commerce of the Philippines Makati City, Philippines, 26 August 2010

Contents

I. II. III. IV.

Reasons for Anti-Corruption Measures in Compliance-Systems Implementation of Anti-Corruption Measures in Compliance-Systems Enforcement Conclusion

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I. Reasons for Anti-Corruption Measures

• Expansive global fight against corruption includes legal framework for

deterrent sanctions. For companies these sanctions can often be existencethreatening.

• Legal background: – US Foreign Corrupt Practices Act, FCPA (1977) – US Sentencing Guidelines (1991) – OECD-Convention for Combatting Bribery of Foreign-Public-Officials (1997) – EU Guidelines for setting fines (2003) – UN Convention against Corruption (2005) – Exclusion from public procurement / registers of corruption, Germany (2005/2006) – UK Bribery Act (2010) – Dodd-Frank-Act, USA (2010)

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I. Reasons for Anti-Corruption Measures 10 largest ever cartel-fines in the EU:

[1]

Year

Company

Subject

Amount in Euro

2008

Saint Gobain

Carglas

896.000.000

2009

E.ON

Gas

553.000.000

2009

GDF Suez

Gas

553.000.000

2007

ThyssenKrupp

Elevators

479.669.850

2001

Hoffmann-La Roche

Vitamins

462.000.000

2007

Siemens

Isolated switch- and controlgears

396.562.500

2008

Pilkington

Carglas

370.000.000

2010

Ideal Standard

Bathroom taps

326.091.196

2008

Sasol

Paraffin wax

318.200.000

2010

ArcelorMittal

Prestressing steel

317.280.000

Source: European Commission, Cartel-Statistics, Status as per 30 June 2010

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I. Reasons for Anti-Corruption Measures

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I. Reasons for Anti-Corruption Measures

US Foreign Corrupt Practices Act (FCPA): • Strict sanctions on US-companies for bribery of foreign officials and related offenses (eg. build-up of funds for the purpose of committing bribes) • Extraterritorial approach: non-resident companies with US-ties are affected likewise: a phonecall, an e-mail, etc. from US soil can be sufficient for the application of the FCPA Dodd-Frank Act: • Employees reporting misbehaviour of company to authorities will receive a benefit of up to 30% of fine imposed on company

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I. Reasons for Anti-Corruption-Measures UK-Bribery Act 2010:

• Status: will enter into force presumably in April 2011 • Contains sanctions for bribery in the private sector, conduct may be •

bribery-prone which previously triggered, if any, only civil-law sanctions – eg. for excessive corporate hospitality Extraterritorial approach: „doing business in the UK“

• Only defense available for company: „adequate measures in place“ • Amendment of compliance-systems of companies operating in the UK is essential

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II. Implementation of Anti-Corruption Measures in Compliance-Systems Questions to be asked: • Which conduct shall be prevented/achieved?

• In which fields of business does/could this conduct (potentially) occur?

• How can the company effectively prevent undesireable/illegal conduct?

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II. Implementation of Anti-Corruption Measures in Compliance-Systems Identifying potential hazards: • Purchase and sales department • Other departments authorized to award contracts, e.g. product development, project management, facility management • Customer- and supplier-related staff and units dealing with governmental authorities • Corporate hospitality • Public procurement

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II. Implementation of Anti-Corruption Measures in Compliance-Systems • Overall-responsibility of management for anti-corruption• • • •

programme („tone from the top“) Delegation of tasks to adequate qualified persons/institutions (chief compliance officer / compliance department, general counsel, internal auditors, data protection-personnel) Establishment of a network of persons responsible for compliance in the company Consultation of board and work council Establishment of a ‚code of conduct and business ethics‘ with detailed directives regarding identified hazards. Code should command thorough documentation of business-processes

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II. Implementation of Anti-Corruption Measures in Compliance-Systems Internal communication of compliance-system: • Basics: database with anti-corruption-directives of company • Brochures, flyers, company-magazines and other internal publications (e.g. newsletter), information packages for company-meetings • Anti-corruption-practices made subject to employee-contracts; breaches of respective provisions may result in dismissal with immediate effect • Discussions with employees on frequent basis • Annual compliance-report

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II. Implementation of Anti-Corruption Measures in Compliance-Systems External communication: • Internet-homepage • Brochures • Compliance-report as part of financial reporting • Public relation, eg. articles in newspapers, law reviews and further legal publications • Discussion with external groups, eg. speeches on seminars, conferences, etc.

External communication may bind company tight to its own programme and may serve as a positive example for other companies.

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II. Implementation of Anti-Corruption Measures in Compliance-Systems Example of integrity-clause included in contracts with suppliers of goods/services: Compliance Policy: Company acknowledges and agrees that it is the written and established policy of XXX and affiliates (“XXX”) to comply fully with all applicable laws and regulations of the United States and all jurisdictions in which it does business. Company warrants and represents that it will not take any action that would constitute a violation, or implicate XXX in a violation, of any law of any jurisdiction in which it performs business, or of the United States of America, including without limitation, the Foreign Corrupt Practices Act of 1977, as amended (“FCPA”) and where applicable, legislation enacted by member States and signatories implementing the OECD Convention Combating Bribery of Foreign Officials...

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II. Implementation of Anti-Corruption Measures in Compliance-Systems Training • E-learning / online-training • Seminars / presentations on frequent basis • Part of company‘s education, e.g. courses for new employees, etc.

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II. Implementation of Anti-Corruption Measures in Compliance-Systems

Compliance and ethics-programme will succeed only, if weaknesses of relevant business procedures will be thouroughly identified and eliminated to the largest possible degree.

The commitment of the management to anti-corruption is essential in order to set a positive example for all employees.

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III. Enforcement • Company‘s sanction-policy („zero tolerance“) • Rules providing how to deal with both suspected and discovered • • • • •

compliance-breaches („emergency plan“) Publication of compliance infringements and sanctions throughout the company Compliance-audits on regular basis Whistleblowing-hotlines Ombudsman Internal investigations in case of infringements of the compliance-system

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IV. Conclusion • Implementation of anti-corruption-measures in compliance• • •

•

systems is necessary due to drastic sanctions resulting from global fight against corruption Adequate compliance-system may in some legislations be the only possibility of escaping liability For reasons of public relations: no real alternative to cooperation with prosecution authorities Communication of compliance-system with respective anticorruption measures and thorough enforcement by management is essential in order to strengthen the employees‘ awareness of the importance of an anti-corruption programme Expectation: anti-corruption-compliance must be part of company‘s business model

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