Alison Taylor

VIDEO: The Terrain of Global Anti-Bribery Compliance Challenges

In the second part of their interview, Alison Taylor, Director of advisory services at BSR, a non-profit consultancy and company network focused on sustainability and CSR, and James Cohen, an expert on anti-corruption, international development, and security sector reform, share their reflections on a co-authored blog piece titled “An Organizational Response to Global Compliance Challenges.”

In this video, they address:

  • Why organizational culture is such an area of focus in the anti-bribery compliance discourse.
  • How culture and leadership influence behaviors.
  •  The challenges and obstacles to Anti-Corruption literacy.
  • The role of technology in  keeping up with information flows, and how it is relevant to anti-corruption by connecting people across cultures and increasing awareness of corruption and the impact of illicit financial channels.
  • How the Panama papers have educated societies about shell companies and beneficial ownership,  by focusing upon how corrupt money travels globally, and how it impacts populations along its path.
  • How are companies managing supply chain risk.
  • How can training be used as a tool to move anti-corruption compliance away from a box-ticking exercise and towards a  values-based training mission.
  • What might it mean to look beyond a standard legal view of corruption into its wider impact, and how that might influence audit and compliance initiatives.
  • Why anti-bribery due diligence needs to be more than a pin point process.
  • What is a clear eye view of corruption risk?  The importance of understanding the influence, impact, agenda and relationships of third parties among various stakeholders.
  • What are the hubs and spokes of corruption?
  • Is FCPA due-diligence in crisis?

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VIDEO: Hyper-Transparency and Corporate Anti-Corruption

In part one of a two part interview, Alison Taylor, Director of advisory services at BSR, a non-profit consultancy and company network focused on sustainability and CSR, and James Cohen, an expert on anti-corruption, international development, and security sector reform, share their personal views of how recent data leaks have impacted our awareness of global corruption issues, and how that might shape the future of compliance programs.

Issues addressed in this seventeen minute interview include:

  • How 2016 has been a pivotal year for transparency.
  • The impact of large scale data leaks on how we treat and manage information.
  • How risk profiles can’t be ignored in an anti-corruption program, as beyond due-diligence to prevent bribery.
  • The global connectivity of corruption as impacting social awareness.
  • The wider impact of corruption on corporate investment.
  • The significance of public ‘optics’ as to where business is conducted, and  the role engaged intermediaries.

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An Organizational Response to Global Compliance Challenges

An Organizational Response to Global Compliance Challenges

The following is part II of a guest post by Alison Taylor and James Cohen. Part I can be found here. 

A consensus has emerged as to what an effective anti-corruption compliance program looks like – its components and success factors. At the same time, it has become clear that compliance programs don’t exist in a vacuum; the effectiveness of any process is driven by its surrounding culture. Regulators and compliance teams are drawing inspiration from leading academic thinking on behavioral risk to frame their approaches and are finally moving ethics to center stage. This means moving on from “rogue employee” theories of how corruption occurs while considering the role played by strategy, leadership, incentives, and goals in inadvertently socializing corrupt practices. While compliance officers can tackle some of these issues via tools to measure culture and employee engagement, they also need to work with other teams to drive values and ethics throughout a business. Training on accountability and anti-corruption measures need to be tied to the achievement not just of sales but corporate values, too. Frontline sales and operations personnel need to know how to mitigate corruption risks, as well as to know why mitigation is crucial to a sustainable and ethical business model.

The ethical challenges facing companies today go far beyond the traditional control remit of compliance teams. Companies need to consider organizational context, as well as emerging corporate responsibility issues such as human rights, climate change, and inclusive economic growth. It all speaks to a future in which those charged with compliance and ethics functions do not simply police the enforcement of existing rules but are independent, empowered, and ready to meet the most pressing challenges now facing enterprises. Companies that do this will be rewarded with more engaged, purposeful teams, enhancing their ability to retain and motivate younger employees. Compliance officers will increasingly become agents of change, taking ownership of company values and culture.

Supply Chain Oversight Gets Serious

The effectiveness of due diligence and supply chain oversight, much of which relies on contractual provisions and audit models, is increasingly being questioned as labor rights violations continue to be revealed. So far, public concern and business action has focused on such specific issues as conflict minerals, apparel manufacturing in Asia, and forced labor in the Middle East. This reflects a response to specific rights violations among workers in these supply chains. Comparable incidents are certain to occur in the future, and these will lead to focused, issue-specific consumer scrutiny, pressure for industry collective action, and targeted regulations.

The current approach of self-regulation in supply chains is likely to become untenable in the face of increasing transparency and awareness. Governments may seek a greater role in the regulation of corporate supply chains and the expectations placed on companies. The California Transparency in Supply Chains Act and the U.K.’s Modern Slavery Act represent early moves toward the same standard. Given the immense practical complexity that this presents for businesses, we might expect to see the emergence of an “adequate procedures” framework analogous to the emerging global consensus on anti-corruption compliance. A structured approach to identifying, managing, and mitigating supply chain risk will not protect companies entirely. Some leading companies are already taking a more proactive approach to transparency in this area by disclosing identified problems and driving cooperative approaches to help tackle them.

Toward Systems Thinking

Corruption has long been approached with the implicit attitude that it is a victimless crime that simply greases the wheels of bureaucracy. This view is quickly evolving now that it has become impossible to ignore the links between corruption, poverty, conflict, and human rights violations. Because of corruption, kleptocratic regimes that abuse human rights and perpetuate conflict as a means to retain power can funnel their money offshore and sustain illicit revenue. As the links between corruption and conflict grow more prevalent, companies may come under increasing pressure from governments and civil society to pull out of projects that sustain corrupt regimes.

Corruption-risk assessments need to move on from approaches designed to detect the risk that operational bribes will be paid by employees and third parties. Companies will need to consider the wider systemic context in which they operate, which means understanding impact as well as risk. Human rights impact assessments will become standard practice. The mapping of business and political networks will help companies determine how their business partners might be helping to sustain corrupt national systems, thereby enabling them to eliminate such relationships.

Compliance and ethics departments will need to incorporate into their strategies the connections among corruption, human rights violations, and the conflicts they drive. They must underline not just the legal ramifications of corruption but its larger impact. As more governments, multilateral organizations (such as the UN), and civil society groups embrace the need for cross-sector responses to combat corruption, companies should expect to be drawn into participating in expansive anti-corruption networks.

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Global Trends and Business Ethics

Global Trends and Business Ethics

The following is part one of a two-part guest post by Alison Taylor and James Cohen.

2016 is only half-complete, but it’s already been a pivotal year in ethics and compliance. The Panama Papers and Unaoil data leaks have ushered in a transformed transparency environment. Due diligence approaches have come under particular pressure as it came clear that standard tools and approaches are not fit for purpose. Leading thinkers in compliance have called for Compliance 2.0, a boost to the power and authority held by compliance functions, to match its rising accountability. Corporate responsibility and ethics teams are working more closely together in recognition that issues of strategy, incentives, and culture require organizational change, as well as thinking and approaches that cut across internal teams. Governments, the media, and civil society organizations have become increasingly aware of the systemic drivers of corruption.

With so much going on, this is a good moment to pause and consider the future of business ethics. What will keep the compliance and ethics officers of the future up at night? We will present six ideas over two articles. Part One, here, deals with emerging global trends, and Part Two will focus on organizational responses.

Hyper-transparency and its Consequences

Today, Facebook has over 1 billion users, approximately two-thirds of the world’s population have mobile phones, and one-third have access to the internet. By 2020, 80 billion devices will be connected to the web. Amid all this, the media industry has fragmented, public debate has become less top-down and more diffuse, and both companies and governments have had to accept that their ability to control reputation has become greatly reduced.

This new environment raises complex, morally fraught questions around privacy, surveillance, transparency, and freedom of expression. Companies will learn to behave as if everything they say and do may become public, but they will expect the same of employees. Employee surveillance and monitoring will become standard practice as companies seek to detect behavioral risk before a violation can occur. Big data solutions to measuring third-party risk, emerging threats, and employee compliance are mushrooming. The vast expansion of interconnectedness will transform how companies manage and engage with their external and internal stakeholders. Information can no longer be reliably distributed over time; nor can its content be easily controlled. This will require rethinking approaches to reputation, stakeholder engagement, and values.

Governments, too, are increasingly under pressure to commit to such global transparency initiatives as the open government movement and the Extractive Industries Transparency Initiative (EITI). One high-profile transparency initiative, particularly in the wake of the Panama Papers, is the creation of national corporate ownership registries. While these tools have shortcomings, companies should expect the trend toward transparency and accountability initiatives to intensify with each global corruption scandal. They should also expect more OECD countries to bolster their commitments to the Convention on Combating Bribery of Foreign Public Officials. It will be important for companies to give honest feedback regarding growing government and civil society initiatives, as well as to recognize that standards are changing. Neither self-assessment nor box-ticking will endure.

Individual and Collective Empowerment and Rising Expectations

Today’s headlines are focused on inequality and political populism, with executive pay and compensation serving as a particular pressure point for companies. But there is another underlying story: the growth of the middle class. By one estimate, the global middle class will increase from 1.8 billion people in 2009 to 5 billion in 2030, a growth trajectory that is concentrated in the Global South. This shift represents a momentous point in the story of human development; for the first time in recorded history, a majority of the world’s population will NOT be impoverished. Also, it is estimated that by 2030, 90 percent of the world’s population will know how to read. Improved living standards and education levels will create an unprecedented level of individual empowerment, along with rising expectations from business and government. We are already seeing this play out in soaring popular anger about corruption in countries as varied as Brazil, India, China, Russia, Turkey, Malaysia, and Indonesia. Corruption provides a powerful explanation for the misuse of public funds and the failures of government to meet the public’s aspirations for more just and prosperous societies. This is becoming an issue in the Western world, too, particularly given the lack of benefits from globalization.

Individual empowerment is also bolstered by collective action. There is no longer such a thing as a remote region in the world. Through social media, citizens in the most distant locations can galvanize around issues or work together on hackathons of open government data. Such endeavors, in turn, create evidence for action against those regarded as responsible for breaches of ethical and accountable corporate practice. Citizens in highly corrupt countries once generally lacked the tools to confront corrupt governments and corporations, but this is changing. As “anti-corruption literacy” grows among the public, companies should expect more of their business dealings to be part of the open data that the public reviews. This applies to any global business: Citizens around the world are tuning into how international illicit financial flows work.

We can expect demands for the fulfillment of individual human rights to continue. This will lead to an increase in public expectations from government and business, more powerful advocacy for social, economic, and environmental justice, and the creation of a more vibrant and extensive civil society. The role of the business sector will change as expectations around its responsibilities shift. The standard, outdated concept that the purpose of a corporation is to “drive shareholder value” may be replaced by broader concepts of stakeholder trust and “shared value.”

The Demographic Shift and the Automation of Work

The world is getting older, as illustrated by two statistics. In 2012, the size of China’s workforce reached its peak, and today over 60 per cent of the world’s population lives in countries in which the fertility rate is below the replacement rate. This aging process poses sweeping social and economic implications, including a decline in the number of workers available to business and an increase in local communities’ need for (and demand for) services associated with an older population.

Countering this overall decline in the workforce will be the expected sharp reduction in the need for workers, owing to the automation of jobs. Companies across various industries are embracing technology to improve operational efficiency, conserve natural resources, reach new markets, and support innovation. These forces, though they can be powerful drivers of economic opportunity and improved well-being, carry a host of risks, most notably the elimination of large numbers of jobs. Many experts cite labor’s declining share of GDP in many advanced economies, structural unemployment, and rising economic inequality in many countries as indicators that a transformation in the labor market is already underway, with technology as a key contributor. Many jobs will be eliminated and others will be created. The effects of this transformation will vary enormously across countries and demographic groups, with risks of widespread societal and political disruption in a number of areas.

The complex interaction between these two trends makes predicting the consequences for society particularly difficult. Still, it is likely that in an era of reduced employment opportunities (and reduced job creation by business) the pressure for equitable sharing of value will be intense. This will place a premium on the abilities of business to support local communities via investments, local contracting, and tax revenues – and to explain the value of its support. Communities of the future may require far more extensive provision of services and facilities to support aging populations. The role of business in supporting more inclusive economies will be reexamined.

Alison Taylor is the Director of Advisory Services for BSR (Business for Social Responsibility). Her bio can be found here. Also, here is a link to my video interview with Alison on “How Organizations Impact Corruption.” 

James Cohen as an expert on anti-corruption, international development, and security sector reform. He is based in Washington DC, and can be followed on Twitter at @JamesCohen82.

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Organizational Cultures of Corruption

Organizational Cultures of Corruption

The following guest post is by Alison Taylor. 

My new issue brief, published by the Columbia Law School Center for the Advancement of Public Integrity, is based on extensive academic research, a review of primary data from FCPA investigations, and interviews with 23 expert integrity practitioners. The research aims to answer one simple question – what do corrupt organizations have in common? It seemed to me that any attempt to build more sustainable and ethical organizational cultures relies on understanding the answer to this question. I used approaches based on organizational psychology and behavioral ethics, combined with my own experience in corruption risk management.

My work provided a highly consistent, and revealing, set of answers. A full discussion is within the paper itself, but broadly speaking, the following organizational characteristics are likely to be indicators of an ethical problem:

Strategy: Growth is the primary goal, and all others are irrelevant; competition is high, and it is agreed that the ends justify the means. There is little regard for the ‘social licence to operate’.

Leadership: Leadership is complacent; diffuses accountability, opaque and arrogant. Information is hoarded –communication is restricted and top down. There is complacency, and a lack of engagement with business conditions on the front line – just enough to maintain plausible deniability.

Structure: High local devolution and autonomy combines with limited oversight. The group or team isolates itself, by design or circumstance. This isolation creates a sense of mystique.

Authority: Decision-making is strongly hierarchical and directive, with little consultation, and a strong sense of urgency and necessity. Leadership is high status and cannot be questioned.

Incentives: Incentives emphasize high pressure and high rewards. Discretionary bonuses and targets are unrealistic, set without regard to market conditions or risk.

Values and Beliefs: The workplace will hold a pervasive culture of fear, necessity, insecurity, powerlessness, and intense rivalry. The language is of war, games and sport. Corrupt processes are described with jokes and euphemisms, reflecting the need to create distance and reduce shame.

Norms and Behaviors: There is pervasive secrecy, defensiveness, and a lack of pride in the organization.

This research was conducted over a year ago, but recent events seem to definitively support its primary conclusions. It is still early days in the Unaoil investigation, but the massive leak of internal emails provide a treasure trove of information on organizational behavior and ethics. There is apparent evidence that Unaoil’s clients were driven by a sense of urgency, necessity and a desire to eliminate the competition – Leighton Offshore reportedly selected Unaoil because “ they have a plan to win and are hungry and can do the job”. Leadership in Unaoil seems to have been highly top down and directive, with all communications and decisions flowing through Cyrus Ahsani. Even more obvious is the use of code words, jokes and euphemisms to describe the corruption, with bribery referred to as ‘days available’, ‘holiday arrangements’ and ‘train times’.

While such data leaks have numerous dramatic implications for the future of transparency, not least is the opportunity they provide to ethics specialists to understand the intricacies of organizational cultures of corruption. It is a very exciting time to be working in this area, and I am now developing my research further, in tandem with tools to measure and improve organizational ethics.

Alison Taylor is the Director of Advisory Services for BSR (Business for Social Responsibility). Her bio can be found here. Also, here is a link to my video interview with Alison on “How Organizations Impact Corruption.”

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Offshore Leaks and the New Transparency

Offshore Leaks and the New Transparency

The Following Guest Post is by Alison Taylor

Last week’s joint investigation by Huffington Post and Fairfax Media into oil intermediary Unaoil, which offered up revelations that seem to implicate a number of big oil and gas companies in grand corruption, quickly provoked a dramatic raid by authorities in Monaco. Within days, the Unaoil case was dwarfed by history’s biggest data leak, 40 years’ worth of beneficial ownership data from Mossack Fonseca, a law firm specializing in the structuring and management of offshore corporate structures in Panama and across the globe. While hardly new, the Mossack Fonseca story offers a trove of evidence of involvement by at least a dozen current and former political national leaders. The twin leaks, which accompany a popular focus on inequality and an unprecedented public mistrust of business and government, give a massive adrenalin shot to transparency. The revelations should inspire a fresh approach to ethics and anti-corruption, causing companies to change how they operate.

The transformation of the transparency environment traces back to 2010, when (thanks to WikiLeaks) Tunisians were suddenly able to read the contents of a diplomatic cable describing in detail the web of assets held by the country’s ruling family — wealth often secured via extortion and expropriation. Anger led to the overthrow of Tunisia’s regime, setting off the so-called Arab Spring and a general worldwide rage against self-interested, inefficient regimes. In Russia, activist journalists began flagging and highlighting corrupt relationships. China’s government launched a broad crackdown that, while unquestionably convenient to the authorities in its targeting, was partially intended to placate public rage. And in Brazil, the Petrobras revelations revealed a cancer of corruption riddling the private sector and national political class. Everywhere, unease and outrage has been fueled by disillusionment among mainly middle-class protestors who are economically ambitious, technologically savvy, and bent on asserting the right to be free of corrupt governance.

Meanwhile, in New York, London, and Hong Kong, ordinary residents were being priced out of their homes. As they began asking questions, it became clear that the movement of offshore money was driving much of the inflation in “local” property prices. Governments started mulling crackdowns on anonymous investors and companies. In 2011, for instance, Prime Minister David Cameron promised to end “tax secrecy” in the U.K. But little action was taken. The problem? Offshore companies are not only legal; they are standard business conduits for most of the world’s biggest companies. The breadth and depth of vested interests in the offshore economy means that national regulators and political leaders necessarily lack both the will and the agency to tackle the problem effectively. This is a problem that requires global collaboration to solve, and the effort is complicated by the fact offshore ownership is only a problem sometimes. While transparency campaigners were comforted to witness increased pressure on tax havens, they saw little movement. Companies conducted business as usual, and the public in the West shrugged.

But the arrival of Edward Snowden turns out to have driven a new form of transparency activism. Civil society organizations such as Global Witness, Sherpa, and the International Consortium of Investigative Journalists had long been conducting painstaking research into the financial networks of kleptocrats and criminals. But the launch in 2014 by Transparency International of its Unmask the Corrupt campaign was a definitive sign that times had changed.

Technologically sophisticated whistleblowing has boosted the work of this network of NGOs and investigators. However advanced any company’s cyber-security program, it is difficult for administrators to control the actions of disgruntled ex-employees who may perceive little to lose amid a growing market for leaks of information about corruption. Unlike the financial crisis — where banker misuse of obscure derivative instruments did not lend itself to an exciting storyline— Unaoil and the Panama Papers proffer juicy tales of wealth, greed, and hypocrisy. In the context of economic inequality and political populism, this is an incendiary mix.

In 2016, it appears that the secrecy that has historically protected beneficial ownership structures or illegitimate payments can no longer be guaranteed. Both Unaoil and Mossack Fonseca are intermediaries – the former accused of paying bribes to secure contracts and the latter said to have guaranteed that ill-gotten assets could be reliably secured from public scrutiny. There are in fact relatively few such intermediary operations, and they serve as critical connection points. A finite number of agents, fixers, brokers and incorporation agents serve a high proportion of the world’s wealthiest, most influential people. Penetrating a single channel can trigger quite a domino effect.

The threat of reputational risk is evolving and growing rapidly. Companies and individuals must begin operating on the principle that anything and everything they do might become public knowledge at any moment. With hyper-transparency now a contextual reality, ticking a compliance box on some form and pledging to “do the right thing” won’t count for much. Avoiding exposure to bribery and corruption charges has become a matter of hard-core self-interest.

Alison Taylor is the  Director of Advisory Services for  BSR (Business for Social Responsibility). Her bio can be found here. Also, here is a link to my video interview with Alison on “How Organizations Impact Corruption.”

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Front-Line Interview Episode 1: Alison Taylor, How Organizations Impact Corruption

In the launch of a new video series, Front-Line Interviews, I engage with Alison Taylor, Director of Energy and Extractives at BSR (Business for Social Responsibility). I first became aware of Alison’s work via a Forbes article she authored “Compliance and Risk: Clearing the Org Chart Hurdle” (link here). After an introduction, Alison and I co-authored an article on Ethical Boardroom, “Reconciling Sales Strategy with FCPA Compliance.” (link here). In this interview, Alison shares the findings of her research with respect to her Masters Thesis from Columbia University on “The Organizational Culture Dimension of Corruption.” In her work, Alison identifies the impact of growth forecasts, selective leadership focus, the existence of corrupt sub-cultures within an organization, the role of incentives, and the sense of urgency within business units, as all representing areas which can leave an anti-bribery compliance program as vulnerable to ‘real-world’ behaviors.

Alison’s work brings the ‘WAH’ (What Actually Happens) in an organization to the compliance community as to better understand the real-world corruption risks which can exist and remain unaddressed in a corporation. It is a call to look at compliance at the level of business strategy first, and then to see how those strategies cascade in an organization through incentives, forecasts, and quotas. What follows is a ‘clear eyed’ reality check to see if those strategies are a partner to anti-bribery compliance or a ‘bolt-on’ set of rules and procedures that might be viewed as a ‘work around’ at the front-lines. It is a real honor to bring Alison’s work to life through this interview, and while it is 30 minutes, it brings incredible value and insight to elevate compliance beyond policies, rules and procedures.

I am really excited about bringing this video series to the compliance community. While blogging is certainly an impactful way to communicate,  the opportunity to share perspectives with thought leaders via a professional studio in NYC is really an incredible chance to bring different viewpoints to the field.  I hope that the content of this first interview overcomes my sense of nervousness at this new role. I was going to lose the i-pad but someone likened it to the clipboard that Willam Buckley used on Firing-Line; however, in this interview with Alison, there was so much great content in her Thesis that I didn’t want to chance anything to memory!

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A Summer of Compliance

A Summer of Compliance

When I was working in the field of international sales, August was typically a month of ‘down time’ as a combination of end user, third party and corporate holidays marked a lull in summer sales activity. Well, I have not experienced such a drop-off in the world of anti-bribery compliance, where it seems to be that ‘compliance never sleeps.’ But as I look at the remainder of 2015,  I have been thinking of some social media advice given to me early on by Deirdre Breakenridge, author, “Putting the Public Back in Public Relations: How Social Media Is Reinventing the Aging Business of PR,” (link here) and that advice was “be a giver.”

The challenge has been to somehow distill and share the deep and wide level of content that pertains to anti-bribery compliance, especially where I look to areas of focus outside the mainstream news feeds of enforcement actions, investigations, and trends. Rather, what has interested me are issues pertaining to behaviors, decision making, individual enforcement, as well as to the continued environment of corruption which exists in the field. Thus, I am greatly indebted to those who have elevated such topics and continue to do so in their writing and speaking. I don’t mention them by name as for certain, I will regrettably, and via an error of omission, forget someone who has provided significant thought leadership. However, with that preamble, I still must thank Philippe Montigny, Scott Killingsworth, Alison Taylor,  and Dr. Roger Miles, who not only shared great thought leadership and content, but who also provided me with significant encouragement so early in my writing efforts.

As to how to best capture such leadership, research, and content, I have turned to a really engaging service called Trap.It, which through a sophisticated content analysis platform, is helping to bring this information to ‘my front door,’ in a way is really well organized and resonating. As their website says, “Surface original, high-quality content you won’t find elsewhere” and that’s exactly what they do. The Trap.it service has really supported my efforts to find relevant, engaging and hard to find content on the ever-expanding web, and their intuitive platform has been a major part of helping me to discover content that I never knew existed.

As to how I then share that content, I have recently, through an association with Rightside, secured the domain www.fcpa.news, as part of their product launch of the custom domain .NEWS. (FYI, the design is not yet completed, so the link simply redirects to www.richardbistrong.com) Why .NEWS? As Marc Gawith, 
Business Development Manager, Rightside,  shared, “the new .NEWS domain was launched for the old media and the new. From major outlets publishing in-depth investigations to grassroots initiatives spreading the word through social media, the business of reporting will gravitate to .NEWS to find out what’s happening, right now in the moment.” In addition, with respect to the use of custom domains, Marc added,  “up until now most companies had to  settle for long, possibly hyphenated, .com domain names, as availability continues to contract.  Now with new domain extensions like  .NEWS, and .ATTORNEY, professionals have a domain extension that is specific to their industry.  These domains are more memorable to the right of the dot with more availability to the left of the dot.  Richard, Google just paid $25 million for exclusive rights to  “.app” so this is a trend which continues to rise.”

Thus, through a combination of Trap.It and www.fcpa.news, I hope to spend more time elevating the work of new thought leaders and researchers, who might fall out of the traditional ‘compliance zone’ in order to advance how such work has relevance to the field of anti-bribery compliance.

For example, I recently read Dorie Clark’s book, Stand Out (link here) after having read her work Reinventing You while I was in Prison. Thanks to the team at JD Supra, I had a chance to share Dorie’s work with the JD Supra legal and compliance community in a piece called “Online Reputation Management: How Your “Bad and Ugly” Translates Into “Good” for Others.” (link here). Another work I intend to share in the near future is The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa’s Wealth by Tom Burgis (link here), which is a compelling book that brings the front-line of corruption in the oil and gas field to the general public. It is a work, when combined with Sarah Chayes Thieves of State, which should be required reading for those in the field who might think of bribery and corruption as a victimless crime.

Back to being a ‘giver,’ and a few more compliance shout outs.

My deep appreciation to the team at The Network, who have taken my intersection with Robert Appleton in 2007 when he was Chief of the UN Procurement Task Force (PTF), and elevated that investigation as the centerpiece for an anti-bribery panel in NY, where another one is now scheduled for Boston on September 17th (registration link here). They have been a pleasure to work with, starting from our Behind the Bribe White paper (link here), which led to a webinar and now the live multi-city panels. Another moment of gratitude goes to Dick Cassin and his team at the FCPA Blog. I have been following the FCPA Blog for quite some time and the opportunity to be a part of the Blog’s community has really a major ‘best of’ in 2015.

As to the remainder of the year, I am really looking forward to contributing a chapter to the 2016 edition of Trace International’s How to Pay A Bribe, as well as to a number of pieces on The FCPA Report. I am also working with Nicole Rose, CEO, The Centre of Excellence and Create Training, where she has invited me to be a part of a major training initiative, which is soon to be announced. I also want to thank Alain Pirot, an incredibly talented videographer, for producing this video called “From Behind the Bribe” (link here) and again to Dick Cassin, as well as to Maurice Gilbert and the team at Corporate Compliance Insights, for sharing it with their communities.

I am also looking forward to a number of programs, via live presentations, webcasts and whitepapers with ethiXbase (www.ethiXbase.com). Given my own background as a corporate executive who bribed, cooperated with international law enforcement, and who served prison time for my own offenses, there is a natural synergy with ethiXbase, who helps their clients to shield themselves from bribery and corruption in their own third party networks. “It is important for compliance practitioners, in-house counsel and senior management to understand practically how bribery and corruption can occur in real life situations” said Leas Bachatene, Chief Executive Officer, ethiXbase. “Richard, for this reason we are pleased to partner with you to educate compliance professionals about ways in which they can shield their business from bribery and corruption by third parties and sales agents who operate on the front lines.”

Speaking this fall also looks quite robust and I have started an events page (link here). So, while I might have bitten off a ‘little more blogging and speaking than I can chew,’ I am really looking forward to this second half of 2015. While my discipline of posting a new blog piece every Monday morning might slow down as to keep my commitments to the aforementioned organizations, I hope to be back on my weekly schedule by late September. However, once I get Trap.It and www.fcpa.news ‘talking to one another,’ I will be posting the work of other thought leaders more often.

Less than twenty months ago I was on the bottom bunk of a two man cube at the Federal Prison Camp at Lewisburg PA, and thus, this seems like an appropriate time to pause and be a ‘giver’ by thanking all of those who have supported my journey, and continue to do so, since I stepped out of the Camp and into my car on December 17th 2013.

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What does anticorruption have to do with CSR?

What does anticorruption have to do with CSR?

Today’s Q & A is with Alison Taylor.

Hi Alison, thank you for participating in today’s Q & A. While we have had the opportunity to collaborate on a number of guest pieces, including Reconciling Sales Strategy with FCPA Compliance (link here), perhaps you can share some of your background and perspective with our readers.

AT: Thank you Richard. I have a background in corporate investigations and intelligence, including anti-corruption consulting and compliance training. I spent 11 years at Control Risks as a Senior Managing Director, focusing on risk management, market entry, due diligence, stakeholder mapping and corporate intelligence. More recently I became interested in the gap between policies and procedures – how things look on paper compared to how people actually behave. I studied organizational psychology at Columbia, and used the concepts of organizational psychology to look at the challenges in embedding risk and anti-corruption in a company’s culture. I have found that a focus on human behavior, group dynamics and social relationships is hugely valuable in understanding what makes compliance programs more or less effective. The area tends to be neglected, as it is difficult to quantify, measure and build a process around. But understanding what really motivates people and what they really care about is crucial if we want to address the corruption challenge. I have recently moved to the world of sustainability and CSR, as I think company’s ethics and corruption challenges need to be addressed and framed in terms of a wider perspective on mission, strategy, leadership and culture. Some of my work is here  and here . Also, here is my Linkedin profile if someone would like to contact me.

Thank you Alison, so, what does the anti-corruption world have to learn from sustainability and CSR? And for all who might be “afraid to ask,” what does CSR mean, beyond the acronym.

AT: CSR stands for ‘corporate social responsibility’. The term is bandied around a lot, but involves thinking about the way your business does business, going beyond the idea of compliance and not breaking the law, and considering the spirit of the law, ethical norms, and the consequences of your business activities across all stakeholders. The term is often used interchangeably with sustainability, showing that there is a need for further definition in the field. Sustainability is often associated with environmental ‘green’ initiatives, but is in fact about running your business with a long term view, about protecting the needs of future generations, and about bringing social and governance as well as environmental concerns to the forefront of managing a business.

As a field, CSR and sustainability are still very young, and are often criticized for being vague, and ill-defined. However, we only need to open a newspaper to see that sustainability is the single biggest issue for business leaders today. Whether we are thinking about future business models for the traditional oil and gas industry, human rights abuses in the supply chain, managing the environmental impacts of your business, or providing access to energy and health services for people that have historically lacked both, there is no doubt that sustainability is here to stay. It is the single most effective way to reduce reputational risk, but it also makes employees happier and more productive. There is a growing body of research showing that it improves corporate financial performance over the long term. It also suggests a fundamental transformation of a company’s relationships with all its stakeholders, not just its customers, suppliers and distributors. It is a new model of how business fits into society, and there are strong grounds for thinking that it is a fundamental basis for future commercial success.

Thank you, but where does that intersect with anti-corruption efforts?

AT:  The anti-corruption field is also evolving fast, driven primarily by enormous new media and public interest in issues such as money laundering through property, the theft of state assets by kleptocrats, and offshore ownership structures facilitating organized crime and tax evasion. However, corporate responses to anti-corruption have so far remained overwhelmingly narrow and process-driven. There are entire conferences dedicated to the nuances of niche areas like gifts and entertainment policy and whistleblowing lines. There is a sense in which the legal frameworks for anti-corruption, which have driven an entire industry of compliance program design, are meaning that companies miss the wood for the trees.

I think that speaks to one of my favorite “go-to” Alison Taylor quotes that “compliance needs to be more than a bolt on set of rules and procedures.” Correct?

AT: I am not saying that the internal compliance approach is misguided, as in the right hands it can clearly reduce a company’s risk and drive better employee behavior. However, process is no match for organizational culture. Too often, companies are putting in place policies and procedures that forbid the payment of bribes, at the same time as incentivizing sales teams to take immense risks to meet punishing sales targets. Or, they are entering markets with high integrity risk, and not factoring this into their growth forecasts. Or, they are encouraging leaders not to ask penetrating questions about how these forecasts are being met, in case they lose the opportunity to plausibly deny any involvement in wrongdoing. In these circumstances, employees will make trade offs about whether a company’s commercial or ethical goals are more important.

Well said Alison. As I have often asked, when those stretch goals are reached in low integrity regions, is it all “high fives” in the C-Suite and Board Room, or is someone asking “how did we get there.” But, as you have said, if the current compliance models are not working, and we only need to look at the enforcement news streams to see that, what are the alternatives?

AT: All of this means that companies need to take a more holistic approach to anti-corruption, transparency and governance, and to ask tough questions about the implications of their entire business model. I have recently completed research for a thesis in which I interviewed 23 prominent anti-corruption experts. They shared my view that companies with market leading approaches to anti-corruption are also the companies that respect human rights, that favor transparency even if it leads to short term difficulties, and that limit their environmental impact. Because none of these things are fundamentally about compliance processes, reporting or gaming the system to make things look OK, while still doing business in the same way. They require a new approach to doing business, and one that takes account of group behavior, norms, and incentives.

The financial crisis demonstrated clearly that battalions of lawyers and compliance officers could not control pathological risk taking behavior on the trading floor. This is a question of status, culture, and what kind of behavior gets rewarded. This says to me that embedding anti-corruption programs within a wider culture of sustainability and ethics makes sense. Compliance teams need to be empowered to move beyond tick box solutions, but companies also need to consider the needs of their stakeholders, the structure of their supply chain and the social risk dimension more broadly. By considering all these things from a sustainability perspective, it will be easier to fight corruption. If your biggest supplier is paying kickbacks to your procurement team, it is probably not putting in place protections for workers’ human rights, either. If your community engagement strategy is focused on getting benefits to the people that need them, and not just awarding contracts to powerful local businesses, it is less likely that you will have a negative impact on your surrounding environment.

So, how does this circle back to sustainability?

AT: Sustainability issues tend to sit within CSR departments, and anti-corruption is the responsibility of the legal and compliance team. These teams don’t always speak the same language. But there is a high correlation between success in sustainability and in ethics and anti-corruption. Companies that consider anti-corruption not in terms of ticking the box and evading legal scrutiny, but rather in terms of whether their businesses can grow and thrive sustainably in their surrounding environments, will be much more successful, and can even reduce costs in the process. We need to bring these conversations closer together.

The other issue is that people aren’t particularly influenced or inspired by a set of rules telling them what they shouldn’t do. Negative, risk-based cues just aren’t inspiring. But a company that is genuinely focused on sustainability, that considers its social relationships and its reputation, is inspiring. To behave well when no one is watching, because it is the right thing to do – that’s a sustainable, ethical culture. Right now it is still a very innovative and cutting edge approach. But I am very confident that it is key to future commercial success, to employee engagement, and to operating ethically and effectively.

Thank you Alison, and I look forward to more of your contributions. 

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Oil, Gas and Compliance: The ‘Deep Blue Sea’ of Corruption

Oil, Gas and Compliance: The ‘Deep Blue Sea’ of Corruption

In Thieves of State, author Sarah Chayes (part two of my interview with Sarah will appear next week) defines the ‘resource curse,’ as where “valuable raw materials are discovered in a country lacking robust institutional safeguards, and the “rents” these resources produce rupture any contract between rulers and ruled.” She focuses on the Nigerian example, where as the thirteenth largest oil producer in the world “life expectancy, educational achievement, and average income, taken together, is about the same as that of their resource poor neighbors.” Other countries, such as Algeria, are also referenced where oil and gas “were being scooped up for the benefit of a criminal elite.”

Having gained my own front-line experience in the defense sector, I found this treatment of oil and gas extremely interesting, and wanting to learn more, especially in the context of the recent fall in oil prices, I read The Secret World of Oil (Amazon link here) by Senior Investigative Reporter Ken Silverstein. As Mr. Silverstein states in his introduction a “constant in the energy business is corruption,” adding, “two central figures in this world are fixers and traders.”

 Legitimate and Corrupt “Door Openers”

In the world defense, fixers would also be called agents, third parties and intermediaries, who, as Mr. Silverstein describes, “open doors for corporate clients and arrange introductions to the various potentiates they know.” He adds “they help companies navigate the local bureaucracy, or provide the lay of the land with political and economic intelligence, or point to important people or companies that should be courted or hired in order to curry favor.” Mr. Silverstein’s accurate definition could easily be applied to both legitimate and/or corrupt services, and therein lies part of the challenge, as the mixing of both makes the best-intentioned vetting and due-diligence process all that more complicated. Indeed, not all agents serve “as bagmen to dictators,” as one executive shared; rather, as this same individual stated, “there’s a real art to acting as an agent, and the role differs from country to country.”

Mr. Silverstein explains how “oil company executives are sent overseas to make deals, and they are measured by performance.” Quoting a Chevron Executive, “You’re supposed to be clean, but you’re also supposed to create business.” Wait! I didn’t discover the zero-sum game of “what does management really want, compliance or sales?” As this Chevron executive adds, “That leads to a tension, and a temptation to use middlemen. Let him do whatever he needs to do; I’m not part of it and I don’t’ want to know.”

Blindness at the Front Lines

In my experience, such “blindness” is a commonly embraced attitude that is easy to rationalize at the front lines, while at the same time presenting great legal peril. In addition, what about the complexities of ownership, where in certain countries third party title might be shared among private and state personnel? What of the peril where front-line personnel are “directed” to use certain third parties to hold local contracts (something I experienced in defense), where those entities are owned, wholly or in part, by public officials or their relatives? What happens when they are told if they don’t use those agents they don’t “get the business? Can local registries be a trusted source of due-diligence to provide transparent documentation when it comes to beneficial and/or minority ownership?

As another executive stated, “the businessman has no choice but to do what those guys want. He’s between the devil and the deep blue sea.” As to how that gets done, Mr. Silverstein references traders who speak of “ever more sophisticated forms of payoffs that may skirt the spirit of anti-bribery laws but are often technically legal.” Sounds like a compliance accident waiting to happen!

Reflecting upon the writings of Silverstein and Chayes, and looking at recent events including what looks to be a multi-jurisdictional investigation of Petrobras, among other oil and gas anti-bribery enforcement actions, it becomes clear that the challenges in this market remain strong from a number of perspectives. Also, while Silverstein and Chayes focus on the corruption element that often pertains to exploration rights and production, what of the downstream providers of infrastructure goods and services?

More Licenses and Permits Often Means More Risk

What are the hazards for those multinationals where permits, transportation, local subcontracting and licenses are all a part of legitimately doing business? In this field, issues of trade, including US State Department (ITAR) Controlled goods, as well as permits and licenses for the use and transportation of hazardous goods, all are important project components that can increase the likelihood of corrupt requests. In addition, there is the potential interaction with sanctioned or debarred entities associated with sub-contracts.

Also, what of the risks associated with local immigration requirements when bringing in outside skilled workers? The issue of outside labor would seem to present tremendous corruption risk, where immigration officials hold up permits and work-visas, effectively threatening a work stoppage. If the local population does not have the skill set required to perform those necessary functions, where does that leave providers when such corrupt requests are demanded? In sum, it would appear that all of these components in certain regions would create an environment where requests for small and large bribes are built-in to the procurement and project landscape.

Conversely, reducing production and investment does not seem to be entirely devoid of corruption risk, even if it appears to be a reasonable economic solution. What happens when companies seek to transport equipment and technology back to more secure environments or to other regions? Will those goods be “held up” at the border with requests for small bribes as part of “extort and export?”

The Impact of Market Conditions

Furthermore, when I look at the recent dramatic reduction in oil prices, which will certainly put added financial pressure on exploration, production and infrastructure multinationals, I would think there would be greater temptation for corrupt behavior from a number of perspectives. First, front line business teams will certainly be under pressure to increase sales and to expedite existing projects, in order to compensate for revenue reductions and projection shortfalls. Will management be tempted to “not ask questions” when forecasts are achieved in low integrity regions in the environment of revenue reduction?

As to the demand side, when I asked Alison Taylor, Director Energy & Extractives at BSR, about this dynamic, she responded, “social chaos and heightened security risk in the high-risk (low integrity) oil producing states will become the new norm due to the drop in prices. While Western consumers will enjoy the economic benefits of lower oil prices, this added value is not necessarily enjoyed on the producer side. And as power structures become more fluid, key political stakeholders as well as low level bureaucrats who may be removed or exposed at any moment, might increase their demands for bribes while they are still in positions of authority.”

In addition, as revenue models and forecasts get recalculated based on market conditions, it is inevitable that expense and spending projections will be revisited. Accordingly, will compliance and training programs that are now even more critical in the context of Alison’s comments, now become fatalities in that financial remodeling? When I asked Alison about that possibility, she replied “given prices plunging and profits vanishing, some companies might be tempted to cut corners on regulatory, social and governance risk management, but now is not the time to reduce spending in these critical areas.” Indeed, an environment where corruption risk is greater in terms of supply and demand, is not the place to reduce compliance support.

How all this will impact the existing state of compliance will be of great interest to me when I attend the Inside Intelligence 2nd Annual Anti-Corruption in Oil and Gas for the Americas on March 23-24 in Houston Texas (link here). While I will participate in two sessions with compliance leaders from the industry, reflecting upon my own experiences where relevant, I also look forward to hearing the views and perspectives from the other presentations. It will be valuable for me to listen to, understand, and engage in the discussions where industry leaders will share their own viewpoints and challenges with respect to corruption risk. In the context of these challenging issues and market conditions, it certainly promises to be a resonating and valuable two days.