Two weeks ago, I was honored to speak at this year’s TRACE Mexico City Workshop. Alexandra Wrage, the Founder and President of TRACE, kicked off the conference by offering some words of wisdom. Alexandra is a recognized authority on FCPA compliance issues. She has given FCPAméricas permission to share some of her thoughts with our audience.
On the roots of corruption. No culture embraces corruption. Corruption occurs when opportunity is combined with insufficient penalties. In those environments, people will be more likely to pay bribes. To address bribery, companies and governments need to increase the risks of paying bribes, to ensure that bribery brings consequences. The risks of bribery need to be visible and credible. For example, employment contracts must clearly state that bribery by a company official will lead to consequences “up to and including termination.”
On good governance. In battling corruption, the goal is to establish a culture of good governance. If there is bribery in a company, there are probably other problems too. For example, if money is available for bribes, then it is probably available for theft as well. When executives can use hidden accounts to withdraw money to pay bribes, they can also embezzle money from those accounts for their own purposes. Once there is a certain level of illegality that is tolerated in an organization, bad things happen. On the other hand, when a company’s leadership understands that it is spending money it should not because of poor governance, compliance becomes much more attractive.
On third parties. Third parties present the highest areas of bribery risk. But if you have a system in place that is appropriate for your industry and risk profile and if you apply your practices consistently over time, your approach will stand up should something go wrong. Programs are never foolproof. You can’t avoid someone defrauding you. But if you conduct appropriate due diligence and know your third parties, you should be protected.
On rogue employees. The government understands that, when you pick an employee, you are not hiring them to take care of your children. You are hiring them to advance your interests in legal and appropriate ways. The government also knows you might make mistakes. What they want is for you to take a reasonable and consistent approach.
Now, with the Morgan Stanley declination, the government has clearly acknowledged that the concept of the rogue employee exists. You can send an employee 35 separate messages of what is and is not permitted, and they can still go out and pay a bribe.
But while the government acknowledges that rogue behavior is possible, it also puts us on notice that there can be no ambiguity in a program. Companies must therefore send a consistent message. Imagine how powerful it would be if your CEO sent out an e-mail once or twice a year saying, “Our company will not tolerate bribery under any circumstances. We will walk away from business rather than risk an inappropriate payment. Here is our policy.” Imagine if the message is in several languages and has the CEO’s signature at the bottom. There is no ambiguity. The message is directly from the top. It is not expensive or difficult. If you can show the government that top management has given a consistent message over time, you demonstrate a real commitment to compliance.
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