tools for state-owned enterprises to counter corruption · 2019. 10. 2. · tools for soes to...

Tools for State-owned Enterprises to counter corruption

Peter Wilkinson

11th EU Experience sharing programme workshop Berlin, 7 May 2019

Berlin, 7 May 2019Tools for SOEs to counter corruption

In this presentation• The use of tools: codes are only a starting point,

the power of methodology, setting standards, assurance, assessing progress, accountability

• Tools must be dynamic: managing change, opportunities and complexity in the anti-corruption arena

• Case study: The impacts of an anti-bribery tool

• A tool for SOEs: The 10 Anti-corruption Principles for State Owned Enterprises

• Discussion topics

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The roles of tools• Use of tools: methodologies for best positioning for

results• Setting standards: identifying and promulgating best

practice• Improvement and striving for excellence

– Assessing performance – internal and external– Due diligence – Benchmarking and workshops– Guidance and training– Frameworks for research

• Accountability– Transparency– Public reporting– Independent review and assurance– Stakeholder assessment and action

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The use of codes• Values

– Provide credibility to enterprises– Protect enterprises– Define and advance standards– Raise the profile of an issue– Shape the agenda

• But there are drawbacks:– Too many codes – a huge range of topics and

issues being addressed– Cost of implementing codes – Codes lose credibility if standards are not upheld

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Tools must be dynamic to address change


Tools must be dynamic• Tightening legal framework: laws, extra-territoriality,

prosecutions, international cooperation• Political change and complexity• Privatisation of SOEs• Corporate ethics and responsibility• Sustainable development goals• Transparency: public reporting, beneficial ownership, conflicts

of interest, organisational transparency, open government• Growing threats: organised crime, terrorism, new technology• Complex supply chains: large numbers, varying corruption

risks, multiple supplier tiers, e-hubs• Social media: both a threat and anti-corruption tool• New technology solutions: AI, big data, block chain, cloud,

data protection and security• Public expectations more demanding, activism

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Case study: the impacts of a tool

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• The Business Principles for Countering Bribery

• Published 2003 and third edition published 2013

• Influenced most anti-bribery codes and tools as well as corporate behaviour

• Platform for a range of tools

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Case study: the impacts of a tool


The Business Principles have influenced:

• UK Bribery Act guidance• FCPA• OECD good practice guidance• Global Compact Reporting Guidance on the

10th Principle against Corruption• The Global Reporting Standard• WEF Partnering against Corruption Principles• Companies• Investors: Indices (FTSE4Good, Dow Jones

SAM) and advisers to investment funds9


Methodology of the Business PrinciplesThe business integrity cycle

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Provide a control environment of integrity and good governance

1. Commit to a no corruption policy and an anti-corruption programme

2. Assess: scope, identify and prioritise the risks

3. Design: mitigate the risks through design and roll out of policies and procedures

4. Implement: apply the policies and procedures

5. Monitor: assess implementation and improve

6. Report publicly and to leadership


The Business Principles: a platform for tools

• Codes and standards• Quickcheck self-assessment 20 questions• Self-assessment tool• Third party management• Benchmarking: tool, group and index• Training: on-line modules• Anti-bribery guidance portal*• Topic and sector related anti-corruption guidance and

tools• TI surveys of transparency in corporate reporting of

anti-corruption practices• Anti-bribery assurance framework

*Global Anti-Bribery Guidance Portal, Transparency International UKwww.antibriberyguidance.org/

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https://www.antibriberyguidance.org/latest-from-ti


Development of the 10 Anti-corruption Principles for State-owned Enterprises

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• Why TI initiated the SOE Principles

• How the SOE Principles were developed

• The parameters for the SOE Principles


Why TI initiated the SOE Principles• TI strategic priority: To raise anti-corruption standards in

the public and private sectors • SOEs are important economically and socially but

vulnerable to corruption• Control significant assets, services and goods• Closeness to politicians• Often have weak management systems and anti-

corruption measures– Significant recent scandals

• Complements OECD’s work for state-owners of SOEs• Strong business case for countering corruption • Codes can be a nexus for change

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Presenter

Presentation Notes


Multi-stakeholder development• TI SOE Working Group: OECD, EBRD, UNGC India,

PEMEX (Mexico), Norsk Hydro, Petronas, Statoil, TI Secretariat, TI chapters from Mexico and Mozambique

• TI consultation: Steering Committee of the Business Principles for Countering Bribery, TI chapters

• Local working groups of SOEs in three countries

• Public consultation: between May and July 2017

• Coherence: Drafted by the consultant who developed the Business Principles for Countering Bribery and other TI tools

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The parameters for the SOE Principles

• Aim: An anti-corruption code for SOEs that has the potential to become a widely acknowledged and used international standard

• For use by: Boards of directors and managers of SOEs and as a reference for any other kind of state-controlled entity, state-owners, regulators, lawmakers, prosecuting agencies and professionals, civil society.

• Best practice voluntary code • Multi-stakeholder development• Based on the Business Principles for Countering Bribery• Aligned to the OECD’s SOE Guidelines on Corporate

Governance of SOEs15


Emerging states’ practice on responsibility• “The State as a shareholder promotes the adoption and

compliance by companies of policies aimed at preventing and punishing fraud. It is our desire as a shareholder that SOEs become an example of integrity in the use of their resources. For such purposes, it is not only important to comply with national regulations and directives on anti-corruption but also to develop processes and policies aimed at guaranteeing the transparent and integral management of resources.”Guidelines on the Good Governance of State-Owned enterprises of Argentina, February 2018

• “For the state in its capacity as owner, it is particularly important that state-owned enterprises work towards high standards of business ethics and active prevention of corruption and responsible conduct in relation to taxes”. The state’s ownership policy and guidelines for state-owned enterprises, Government Offices of Sweden, 2017

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Emerging SOE practice on responsibilitySovereign Wealth Fund

“Working against corruption is an important part of the board's responsibility. We expect boards to ensure that the company sets a clear policy on anti-corruption and that relevant measures are integrated into business strategy, risk management and reporting. We expect all companies we are invested in to have effective anti-corruption measures in place."

Yngve Slyngstad, CEO of Norges Bank Investment Management, Global Pension Fund General, Norway: Expectations on Anti-corruption Standards in Its Investee Companies, 13 February 2018

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Key discussions in the working group

• Scope of SOEs• For all forms and sizes of SOE?• Bribery or corruption?• Good or best practice• The responsibility of SOEs• The key topics and their prominence to be

given in the SOE Principles

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SOE definition

“An enterprise in which the state has ownership, control or significant investment.” The SOE Principles cover privatised enterprises governed by corporate laws and state agencies set up by statute or decree such as state-owned oil companies, national health services, railways, museums; privatised companies – listed or private – which the state owns or controls; sovereign wealth funds and state pension funds, significant investments

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Presenter

Presentation Notes

OECD: “Any corporate entity recognised by national law as an enterprise, and in which the state exercises ownership. Also, statutory corporations, with their legal personality established through specific legislation, if their purpose and activities, or parts of their activities, are of a largely economic nature.”


The structure of the 10 Anti-corruption Principles for State-owned Enterprises

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• The 10 SOE Principles

• Forms of corruption

• Detailed policies and procedures for vulnerable functions and transactions


The structure

• 10 SOE Principles• 93 clauses• Commentary: Most clauses have commentary

defining the topic, stating its importance and clarifying the clause. The commentary does not give implementation guidance.

• Extensive glossary• Supporting publications:

• SOE working paper• An assessment tool

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The 10 SOE Principles1. Operate to the highest standard of ethics and integrity2. Ensure best practice governance and oversight of the

anti-corruption programme3. Be accountable to stakeholders through transparency

and public reporting4. Ensure human resources policies and procedures

support the anti-corruption programme5. Design the anti-corruption programme based on thorough

risk assessment6. Implement detailed policies and procedures to counter

key corruption risks 7. Manage third parties to align with the SOE’s anti-

corruption programme8. Use communication and training to embed the anti-

corruption programme9. Provide secure and accessible advice and whistleblowing

channels10. Monitor, assess and continuously improve

implementation of the anti-corruption programme 22


Key topicsA quick look at six Principles covering key topics of:• Higher responsibility• Governance• Transparency• Risk assessment• Detailed policies and procedures• Monitoring and assessment

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Principle 1: highest standard• Operate to the highest standard of ethics

and integrity– Embed an organisational culture of ethics and

integrity– Commit to advancing integrity in societies– Commit to an anti-corruption policy and

programme – provide tone from the top

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Principle 2: governance• Ensure best practice governance and oversight

of the anti-corruption programme– Implement governance that conforms to accepted global best

practice– Ensure that board directors act in the best interests of the SOE– Apply a rigorous and transparent procedure for the appointment

of directors to the board– Structure the SOE’s board so as to have a balance of skills,

experience, knowledge, diversity and independent directors– Set a clear division of responsibilities between the board and the

chief executive– Carry out vigilant oversight of the anti-corruption programme and

ensure accountability

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Principle 3: accountability

• Be accountable to stakeholders through transparency and public reporting– set and observe best practice in accountability to

stakeholders– report publicly on the anti-corruption programme– apply organisational transparency and country-by-

country reporting– engage with stakeholders – be transparent on the relationship with the ownership

entity

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Principle 5

• Design the anti-corruption programme based on thorough risk assessment – report publicly on the risk assessment approach– identify risk factors: internal and external factors– understand forms of corruption and related risks:

• bribery, trading in influence, nepotism, favouritism, clientelism or patronage, fraud, money laundering, abuse of conflicts of interest

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Principle 6: detailed policies and procedures

• Implement detailed policies and procedures to counter key corruption risks – implement controls to counter risks related to vulnerable

functions and transactions commit to fair trading practices– provide transparency of contracting and procurement

processes– counter the highest corruption risks– no political donations / lobbying should be information

based– establish and maintain internal accounting controls– maintain accurate books and records– subject the anti-corruption programme to regular internal

audits– develop an incident management plan

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Principle 10: monitoring and assessment

• Monitor, assess and continuously improve implementation of the anti-corruption programme – implement systematic, continuous monitoring and

improvement– undergo regular independent review– provide regular leadership reviews and make

improvements as appropriate

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Quickcheck assessment tool

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SOEP Y P I Ref.

1: We operate to the highest standard of ethics and integrity. ☐ ☐ ☐

1

The state-owner provides an enabling environment for the ACP, does not intervene improperly in the SOE, and encourages and supports our anti-corruption efforts.

Intro ☐ ☐ ☐

2 We meet the state-owner regularly to discuss the ACP. Intro ☐ ☐ ☐

3We provide an example for, and encourage integrity and anti-corruption practice in, the societies in which we operate.

1.1 ☐ ☐ ☐

4 We have an embedded organisational culture of ethics and integrity. 1.2 ☐ ☐ ☐

5We have a formal and public commitment to an anti-corruption policy and to implementing an anti-corruption programme

1.3 ☐ ☐ ☐

6The anti-corruption policy explicitly applies to all employees and board directors.

1.3 ☐ ☐ ☐

7Our board of directors has committed formally to the implementation of the ACP.

1.3 ☐ ☐ ☐

8Our board and senior management ensure adequate support and resources for the ACP.

1.3 ☐ ☐ ☐

9Our board and senior management provide tone from the top on the anti-corruption commitment and ACP.

1.4 ☐ ☐ ☐

10We have an effective process to ensure compliance with anti-corruption and related laws.

1.5 ☐ ☐ ☐


• Some discussion topics• What is corruption/integrity?• The uncertainty of what an SOE is• Is the SOE definition in the SOE Principles too broad?• Is the Principle of a high responsibility practical?• How should states monitor and oversee their SOEs?• How to ensure board appointments represent desired

practice• How to ensure third parties live up to anti-corruption

standards• Do small SOEs need to be addressed?• Could the SOE Principles be of help?• What tools and actions are needed?

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tools for state-owned enterprises to counter corruption · 2019. 10. 2. · tools for soes to...

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