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By Daniel King and Brendon Wilson
Having a strong international reputation is critical to the New Zealand Inc. brand and our ability to drive terms of trade. We like, and need, to be perceived by the outside world as honest, trustworthy people living in a country where bribery and corruption are virtually non-existent.
In our last article, we hoped that our ratings wouldn’t slip, but unfortunately the recent Transparency International Corruption Perceptions Index (CPI) now out, indicates that things aren’t as rosy as we think. The CPI, a composite index based on international studies and surveys, scores countries on how corrupt they are seen to be. New Zealand fell in the ranking from number two spot as the second least corrupt public sector in the world in 2014, to the number four spot in the now-calculated 2015 rankings. This may not seem like a drastic fall, but the trend is very worrying: we are sliding while others are improving. In 2013, New Zealand was considered to be the least corrupt, along with Denmark.
Corruption and bribery certainly do exist in New Zealand, made clear in a survey recently conducted by Chartered Accountants in Australia and New Zealand (CAANZ), which looked at corruption faced by Kiwi businesses. The survey, involving 1,000 New Zealand businesses of different sizes across industries countrywide, reported that overall, 6% of respondents reported having had illegal demands or bribes made by customers or suppliers – in some sectors as high as 11%. In addition, only 51% of businesses stated they would definitely report an illegal demand.
Even more worrying from Transparency International’s perspective, is that by “not getting around to it”, companies are living in denial, and don’t have robust systems in place to detect and combat bribery and corruption risks. Only 16% of businesses in the CAANZ survey had a formal anti-bribery/corruption policy in place, with Wellington businesses most likely to at 21.8%, and Auckland least likely at 11.6%. A 2015 survey conducted by Deloitte of New Zealand and Australian companies showed that 40% of respondents with offshore operations did not have a formal compliance programme to manage corruption risks.
This comes at a time when New Zealand has tightened its anti-corruption and bribery legislation to ratify the UN Convention Against Corruption – a legally binding global agreement to address corruption in the private and public spheres. Penalties for bribery offences have increased in New Zealand, courts can impose extremely hefty fines and imprisonment for up to seven years. Companies can be held culpable for the actions of employees or agents acting on their behalf.
How can companies avoid ending up in court and facing fines and/or imprisonment? It’s important to note that under the new legislation, taking “reasonable steps” (such as having a compliance system in place and functioning) to prevent incidents can be a defence in court. So feigning ignorance or “burying your head in the sand” is not a viable option if your company is investigated by New Zealand or overseas authorities.
There is an overwhelming business case to be made for taking measures to reduce your company’s bribery risks. There are also a number of tools available to assist you in this process: The Ministry of Justice has developed guidance material for companies to meet the new legislative requirements, and Transparency International has developed best practice tools with its international business partners.
The essentials of a robust compliance programme include:
We highly recommend establishing these commitments as a central part of a committed Integrity Culture – make it your Point of Difference.
Establishing ethical reporting mechanisms (in our last article) within all areas of your operations, and making these visible in your internal and external reporting, will mean intending trading partners or investors in your business can build reassurance in future trade commitment.
It is sensible then to widen this Integrity Culture and process to include your trading partners and supply chain, so you have a mutual tangible basis for trusted business together, with benchmarks of expectation – so binding your partners more closely to your business future, giving you the same reassurance in their operations that you are showing them in yours. We all believe in “no surprises” – here is a way of building this principle into workable daily practice and making it a reputational advantage.
Establishing any of these measures when a crisis occurs will be far too late.
To improve our country’s reputation in the same way, you should expect these same standards from the agencies and non-business structures you deal with, and those which govern your activities. In some cases they have let us all down.