Bribery & corruption reporting
RESEARCH FINDS ASX50 UNDER PAR IN BRIBERY & CORRUPTION REPORTING
Australia's top companies are failing to follow global guidelines on bribery and corruption reporting and fall short of world's best practice, according to research by the Association of Chartered Certified Accountants (ACCA) and Net Balance Foundation Ltd.
The Bribery & Corruption Report, conducted by ACCA in collaboration with Net Balance Foundation Ltd, assesses the extent to which Australia's 50 largest publicly-listed corporations have implemented and reported on anti-corruption measures.
Companies were assessed against five criteria groups; policy, organisation, program implementation, performance, and materiality & responsiveness. Each organisation was given a score out of 100 against each criteria group and an overall score. The two international standards against which organisations were assessed were the AccountAbility AA1000 framework and the G3 Guidelines of the Global Reporting Initiative (GRI).
"Historically, Australia hasn't been considered a country that has a problem with corruption. It was ranked in the top ten nations in the Global Corruption Perception Index1 from 2003 to 2007, however Australia's rank slipped to 11 in 2007, following the Australian Wheat Board 'Oil for Food' scandal," says ACCA Global CEO, Allen Blewitt, who is in Sydney this week to launch the report.
"Recent allegations of corruption within RailCorp, Wollongong Council and NSW Fire Brigades, highlight a need for greater focus on bribery and corruption measures in Australia," says Blewitt.
The Report scored the overall performance of the ASX50, in terms of their transparency and disclosure of anti-bribery and corruption prevention initiatives. Stockland was the top scorer with 80%, followed by BHP Billiton with 73%, Rio Tinto 66%, NAB 64% and Westpac rounding out the top five with a score of 60%.
ASX50 companies score an average of 74% in the 'policy' criteria, acknowledging that anti-corruption policies or at least codes of conduct were in place. In contrast, publicly communicating how the organisation is structured to manage bribery and corruption scored an average of only 43%.
"This report looks at an organisation's ability to disclose information on counter-corruption programs and performance. It would appear that top Australian companies are creating anti-corruption policies and codes of conduct, but most are not transparent in how those policies are governed, implemented and reviewed," says Blewitt.
Blewitt says policies to combat bribery and corruption must be openly communicated and adopted by all stakeholders including staff, suppliers, shareholders and customers, to ensure programs are effective.
"Companies that report on anti-corruption programs show they take responsibility for their, and their employees, behaviour and understand the negative effect a bribery or corruption scandal would have on their organisation," he says.
The Report also found ASX50 companies score an average of only 27% when it comes to following international guidelines for bribery and corruption disclosure, such as the relevant elements of the AA1000 framework or the GRI G3 Guidelines.
"Australian organisations need to improve reporting transparency to meet international standards and show that they are safeguarding their companies, their reputation and the economy against corrupt behaviour," Blewitt explains.
The top ten performing companies of the ASX50 had an overall average score of 62% and were Stockland, BHP Billiton, Rio Tinto, NAB, Westpac, Commonwealth Bank, Insurance Australia Group, Brambles, Transurban Group, Foster's Group, GPT Group, Macquarie Group and Mirvac Group. Four companies scored 48% to tie for tenth place.
The ACCA report also included an analysis of the top 21 ASX-listed companies operating in sectors categorised as 'high risk' as defined by the UK's FTSE4Good anti-bribery criteria. These sectors include oil and gas producers, chemicals, industrial metals, mining, pharmaceuticals, telecommunications.
BHP Billiton was the highest scoring organisation in this 'High Risk 21', closely followed by Rio Tinto. The average overall scores were comparable to the rest of the ASX50, however Blewitt says high risk organisations should be doing more than other publicly-listed companies.
"Companies operating in high risk sectors should be adopting a more rigorous approach to bribery and corruption disclosure. In particular, multinational mining corporations operate in countries that rank poorly in the Global Corruption Perception Index and are therefore more susceptible to bribery and corrupt behaviour," explains Blewitt.
"Only 12 of the 'High Risk 21' adhere to or employ internationally recognised standards against bribery and corruption and across the ASX50 the average score is just 27%. This review shows there is much to be done to improve the transparency in reporting of countering bribery and corruption," he says.
The Report found that a small number of ASX50 companies reported comprehensively on the issue of countering bribery and corruption; however the majority of disclosures lacked detailed information. The overall picture is that there is a need for improvement. Recommendations to improve reporting of countering bribery and corruption in Australia include more and better disclosures of the following:
- The full suite of anti-corruption program documents.
- The internal and external communication strategy for the anti-corruption program.
- The governance structure in place to oversee anti-corruption program.
- The risk management and assessment processes of the anti-corruption program.
- Targets (with explanations) to drive improvement in the anti-corruption program.
- A detailed account of any non compliance or violations of the Code of Conduct.
- Political donations and charitable contributions.
- The effectiveness of the anti-corruption programme should be included in the (sustainability) report assurance process.
The Report recommends companies can strengthen their anti-corruption program in the following ways:
- Develop a Code of Conduct or Ethics Policy that strictly prohibits bribes to be made by, or received by, company personnel and prohibits, or at least regulates, facilitation payments.
- Implement a 'gift policy' which defines what a gift is and requires anything over a certain amount to be reported.
- Ensure implementation of the code, along with a robust system to encourage and monitor compliance. This includes awareness raising, performance monitoring, reviews and proposed actions plans in the event of any non-compliance.
- Implement transparent practices for employing senior executives, remuneration, governance and risk management
- Take part in industry wide initiatives, such as the Extractive Industries Transparency Initiative (EITI), which requires signatories to transparently disclose payments made to foreign officials in an attempt to eliminate the instances of bribery
- The Code of Conduct should not only be applicable to direct, permanent employees of the organisation but also any contractors, agents, suppliers and subsidiaries/business partners with appropriate methods of communication used.
- Ensure a management system is in place to manage anti-corruption, minimising the risk of occurrence. If an incident does occur, ensure a robust system is in place to process the incident and put the necessary procedures and reviews into place.
Transparency International publishes an annual "Global Corruption Perception Index (GCPI) ", which rates countries on their level of corruption, according to public agency officials.
About the Report
The ACCA and Net Balance Foundation Bribery & Corruption Report assesses the extent to which corporations have implemented, and reported on, anti-corruption measures by analysing publicly available disclosures made by the largest 50 Australian public companies (by market capitalisation) as recognised by the ASX 50, on 30 May 2008.
The research was carried out between 11 June 2008 and 27 June 2008. Corporate information was sourced from published sustainability reports (or equivalent), annual reports, corporate governance information, code(s) of conduct, code of ethics and business principles. In all, 203 individual reports relating to the ASX 50 were analysed. These were typically annual reports, sustainability reports, codes of conduct, risk management (and other) policies and websites. A secondary researcher verified and cross-checked 20 of the 50 analyses to ensure consistency.
The criteria used were based on criteria first developed by Transparency International in 2004, when similar research was conducted by ACCA and TI. Consideration was also given to the G3 Guidelines and FTSE4Good criteria.
The criteria by which each organisation's disclosures were assessed fell into five groups as follows:
- Policy - covered indicators such as disclosure of a no-corruption policy and code of business conduct, together with its communication policy to employees and application to business partners.
- Organisation - criteria covered indicators such as description of the governance structure to manage bribery and corruption, sanctions process in place, board commitment and risk based assessment.
- Program Implementation - criteria covered indicators such as disclosures on the anti corruption program in place underpinning the policies and codes, description of how the program is communicated and implemented throughout the organisation and to the entities within its control and any internal control systems in place to control and minimise risk of corruption.
- Performance - criteria covered disclosures on bribery and corruption incidents during the reporting period, including violations of code, employee dismissals, legal cases, whistle-blowing and contract cancellations.
- Materiality & Responsiveness - criteria covered the bribery and corruption G3 indicators and use of the AA1000 framework in reporting processes.
The ASX Top 50 Companies (as at 30 May 2008) used in the analysis are:
1. AGL Energy Limited
2. Alumina Limited*
3. Amcor Limited*
4. AMP Limited
5. ASX Limited
6. Australia & New Zealand Banking Group Limited
7. AXA Asia Pacific Holdings Limited
8. Babcock & Brown Limited
9. BHP Billiton Limited*
10. Bluescope Steel Limited*
11. Brambles Limited*
12. Commonwealth Bank of Australia
13. Crown Limited
14. CSL Limited*
15. Fairfax Media Limited
16. Fortescue Metals Group Ltd*
17. Foster's Group Limited
18. Goodman Group
19. GPT Group
20. Insurance Australia Group Limited
21. Leighton Holdings Limited*
22. Lend Lease Corporation Limited*
23. Macquarie Airports
24. Macquarie Group Limited
25. Macquarie Infrastructure Group
26. Mirvac Group*
27. National Australia Bank Limited
28. Newcrest Mining Limited*
29. News Corporation Inc (Voting CDI)
30. Orica Limited*
31. Origin Energy Limited*
32. Qantas Airways Limited
33. QBE Insurance Group Limited
34. Rio Tinto Limited*
35. Santos Limited*
36. St George Bank Limited
38. Suncorp-Metway Limited.
39. Tabcorp Holdings Limited
40. Telecom Corporation of New Zealand Limited*
41. Telstra Corporation Limited.*
42. Toll Holdings Limited*
43. Transurban Group
44. Wesfarmers Limited
45. Westfield Group
46. Westpac Banking Corporation
47. Woodside Petroleum Limited*
48. Woolworths Limited
49. WorleyParsons Limited*
50. Zinifex Limited*
* Denotes companies that principally operate in business sectors categorised as high-risk (as defined by the FTSE4Good anti-bribery criteria)
ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.
It supports 122,000 members and 325,000 students throughout their careers, providing services through a network of 80 offices and centres. Its global infrastructure means that exams and support are delivered - and reputation and influence developed - at a local level, directly benefiting stakeholders wherever they are based, or plan to move to, in pursuit of new career opportunities. ACCA's focus is on professional values, ethics, and governance, and it delivers value-added services through 50 global accountancy partnerships, working closely with multinational and small entities to promote global standards and support.
ACCA uses its expertise and experience to work with governments, donor agencies and professional bodies to develop the global accountancy profession and to advance the public interest. Its reputation is grounded in over 100 years of providing world-class accounting and finance qualifications. It champions opportunity, diversity and integrity, and its long traditions are complemented by modern thinking, backed by a diverse, global membership. By promoting its global standards, and supporting its members wherever they work, ACCA aims to meet the current and future needs of international business.
About Net Balance Foundation Limited
Net Balance Foundation Limited is a not-for-profit think-tank specifically set up to work with small-to-medium enterprises, research groups, industry groups, professional associations and other not-for-profit groups in the pursuit of sustainable business.
The Foundation also undertakes research and consultancy projects on a not-for-profit basis, with the caveat that the research would be made publicly available for the public good. Net Balance Foundation believes that the fundamental purpose of business is to grow shareholder value by providing goods and services that reflect market and community needs at affordable prices, and reflecting actual value that incorporates environmental and social costs and benefits. It believes that this approach will contribute to stakeholder value creation in business, thereby reducing reputational risk and preserving the license to operate.
More2 importantly, externalising such costs, it also believes, will only contribute to losing competitive advantage over the longer term. Net Balance Foundation draws its resources from Net Balance Management Group , a sustainability advisory and assurance firm.