Manager Survey The Business of Dealing with Bribery

A survey of 500 top managers worldwide reveals many companies still have a hard time fighting corruption. Small and medium-sized companies in Germany often don’t have the resources to set up big compliance departments.
Bribery is still a problem facing many firms.

Anti-corruption activists call the bribery scandal at engineering giant Siemens a decade ago a “big turning point.” It forced the Munich-based multinational to turn its compliance structures upside down.

According to Transparency International, the company today is one of world’s model companies. In a ranking of the 105 largest companies, Siemens placed among the Top 20.

But few companies show such commitment to fighting corruption, according to a new international study made exclusively available to Handelsblatt.

Germany is lagging behind in corporate criminal law, when compared internationally. Reiner Hüper, Transparency International

The shocking findings: Almost half of company leaders admitted their own measures against bribery and corruption have not fixed the problem. This is all the more serious since all of the respondents stated there had already been cases of corruption in their organizations.

The international corporate law firm Eversheds polled 500 business leaders from 12 countries for the study.

In Germany, all the surveyed managers reported that bribery and corruption occur in their business environment. According to their own statements, only about a quarter actually understood the details of their own company’s anti-corruption policies. And only 15 percent considered themselves sufficiently trained in dealing with bribery and corruption.

Heiko Willems, head of the legal department at the Federation of German Industries, or BDI, knows that the fight against bribery is complex and costly.

 

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Among the most common measures against bribery are rules for suppliers, anonymous hotlines for whistle-blowers and the “four-eyes principle” — where at least two company officials must be represented in contract negotiations.

But Mr. Willems said small and medium-sized companies often don’t have the resources to set up big compliance departments.

The 30 leading German companies on the DAX blue-chip index are in a better position, he said, and now have well-functioning compliance departments.

Still it’s noticeable that, in many cases, large corporations don’t make changes until after scandals. Besides Siemens, this was also the case at carmaker Daimler, for example. After settling a U.S. investigation into bribery allegations last decade, Daimler even assigned Renata Jungo Brüngger as a member of the management board for Integrity and Legal Affairs.

Joos Hellert, a lawyer with Eversheds in Munich, noted that companies are mostly aware of how such cases can damage profits and reputation. But he said managers generally are not yet “able to consistently recognize and prevent cases of corruption with appropriate compliance programs.”

The fact that bribery and corruption are still rampant can also be attributed to lax penalties and global transparency regulations.

That was made clear last week at an anti-corruption summit in London attended by some 40 governments. After the meeting, five more governments besides Great Britain, including the Netherlands and France, pledged to set up public registries for information about company ownership structures – meaning all those persons who profit from income of the business.

This is meant to prevent the ownership of properties from being obscured. In the European Union such registries will be compulsory beginning 2017. Admittedly, however, member states can decide whether the information will be made available to the wider public.

Reiner Hüper, head of the criminal prosecution working group at Berlin-based Transparency International, calls for tougher laws and penalties. He cited Germany as “lagging behind in corporate criminal law, when compared internationally.”

But there is some movement in the fight against corruption. Germany’s minister of justice and consumer protection, Heiko Maas, said he would propose stiffer penalties for companies and banks. Until now, the rigid upper limit for fines was €10 million, or about $11.2 million. Mr. Maas, of the center-left Social Democrats, said fines should be based on sales volume or profits.

The German government is also cracking down on the healthcare industry. Under a recently passed law, corrupt doctors and representatives of the pharmaceutical industry now face up to three years imprisonment, or even five years in especially serious bribery cases.

A planned law on criminal asset forfeiture also points in the same direction. The law is designed to make it easier to seize money earned through corruption. In addition, assets of uncertain origin could be seized independent of proof of a crime.

Companies seem to be cooperating in enforcing current laws in Germany. According to the study, 70 percent of German companies have decided to report detected cases of unethical business practices themselves to prosecuting authorities.

“It will be part of the lawmakers’ strategy to create more incentives to voluntarily turn oneself in,” said Mr. Hellert, the lawyer at Eversheds, which conducted the corruption survey.

But, he admitted, it is becoming increasingly difficult for multinational companies to keep track of all the regulations.

 

Heike Anger is a political reporter based in Berlin, Anja Stehle is a Berlin-based correspondent. To contact them: [email protected], [email protected]