Helping SMEs on how to resist corruption in business

Which areas are at high risk of corruption?

Actually not everyone realize that their performance is acts of embezzlement or bribery. They simply thought that is only a common practice, a habit and business culture. However, corruption arises if you get benefit from those behaviors included:

Gifts and receptions:

Gift giving is acceptable in most countries but it could be abused to pave the way for bribery.

An expensive gift or lavish entertainment can be seen as a form of bribery under local law though this act of corruption seem more discreet than cash. This also aims to gain business advantage improperly and may lead to more serious bribery. Nevertheless, it is not blamed to bribery if reasonable gifts and open reception are provided to strengthen good relationship and to celebrate special occasions.

However, if gift and entertainment influence economic decisions and in your favor, the situation demonstrates that you are performing an unfair competition behavior.

A clear “Gift Policy” should be developed in the Code of Conduct of enterprises. This policy helps you identify which gifts are appropriate, which are inappropriate and problematic.

When you are suggested to receive gifts or offer gifts from employees, you should ask the following questions:

  • Does giving or receiving gifts are contrary to the provisions of law or regulations of the partner or not?
  • Does the gift affect the objectivity of the recipient in decision making or not?
  • Does the gift set a precedent in your business that it is appropriate and not creating any problem?
  • Can the gift be seen as a bribe before the eyes of outsiders in business or not?

Charitable donations, event sponsorship

Bribes can be covered up in many forms such as charitable donations. If charity and sponsorship influence too many decisions, this will be considered a form of “disguised bribery”. This action contributes to build a brand name for your business, but you should make sure this is not linked to your business contracts to avoid being blamed for bribery.

Illicit benefits

“Facilitation payment” are normally illegal. This is a small tip to facilitate a routine service that a person is legally entitled to received. Those are some examples procedures for visa application, home ownership certification… It could be bribes that businesses give to customs, immigration and other officials to “not have to queue” or to “quicken” services and permits… Those acts in any kinds are not legal. Notably the out of pocket fee for faster service differs from “facilitation fee” that it is always advertised with a fixed amount, available for everyone, paid transparently with receipts.

In case that the competent authority clearly regulates this fee in order to provide a faster and more convenient service, the out-of-pocket fee will not be attributed to a bribe. But if this expense does not comply with regulations, is not noticed publicly, then it becomes a bribe.

Conflict of interest

A conflict of interest occurs when interests or personal relationships are placed over the interests of a business. Conflicts of interest can distort judgments and lead to dishonest and non-transparent actions. This sometimes leads to situations in which individuals behave contrary to their good perceptions, thus giving and receiving benefits that affect the business. Even in the absence of abusive practices, conflicts of interest can still be considered corruption as it causes damage like actual abuse does.

In other words, a conflict of interest arises when an officer or employee of the company takes action or makes profits that put them in a dilemma when performing their assigned work. For example:

  • A business procurement officer transferred a supply contract to his/her family member despite of higher cost or inferior quality.
  • Your employee works part-time for another firm or receive allowances from a supplier, customer or competitor, and this influences the decisions relevant to the interests of your business.
  • Manager in your R&D sell proprietary information and intellectual to other’s enterprise for personal profit.
  • Your financial director is a Board Member of your competitor.
  • Your sale manager keeps close relationship with leader in local or ministerial PMUs (Procurement Management Division).

To avoid risks of a conflict of interest, you should clearly stipulate in the Code of Conduct the following:

  • Situations and prohibited behaviors (description of situations and violations).
  • Obligation to report and prevent conflicts of interest (obligation to report, refuse to perform duties).
  • Process of receiving and processing information on conflicts of interest (declaration form, form of reporting and receiving reports).
  • Measures to be taken in conflict of interest situation (such as refusing to perform, temporarily changing the position or handling violation).