Anti-bribery Program – Role of Board of Directors
By Huzeifa Unwala
Turning a blind eye
The Companies Act 2013 mandates listed corporates to set up a Vigilance function to identify misconduct and unethical behaviour of employees. On account of growing compliance fatigue (that includes spending appetite) corporates are unable to set up a robust Vigilance function. Mandate of Internal Auditor is to generally work on the prevention side of Corruption. Further, transparent and open discussions on the subject of bribery and corruption are not encouraged in Corporates resulting in an open vulnerability that keeps surprising the Board of Directors.
Corrupt executives prefer taking short cuts and achieving higher growth run-rates by indulging in rampant corrupt actions such as making improper payments, falsifying books to camouflage original entries, entering into conflicting arrangements, recording of non-existent expenditure, etc. Post a high-profile event Board Committees rush to retain specialist teams that go after corrupt employees / third parties, however, by then damage is done and reputation maligned.
Baseline Procedures to Manage the Bribery Risk
It begins right at the top; CEO has to clearly spell out the zero-tolerance risk appetite statement to all stakeholders (employees being the most important stakeholder). Good governance systems demand establishment of following (minimum) building blocks: –
| Design & Implement Ethics & Compliance Program | Invest & sustain enabling organisation structure/ systems | Continuous Communication & Training |
| Diligence over all Licence, Permits, Registration Procedures | Due diligence for government dealings, third parties, inter-mediaries | Use of Risk Assessments & Data Analytics to isolate high risk transactions |
| Implement Whistle Blower Programs | Monitoring Internal Controls over Gifts, Travel#, etc | All third parties to execute Integrity Pacts/ Suppliers Code of Conduct |
| Legal & Compliance Checking | Periodical MIS Reviews | Appropriate engagement of Subject Matter Experts |
Bringing back Board’s Focus on the Bribery Risk
Given India’s low ranking on the global corruption surveys question arises on the focus of Board of Directors. Vigilance & Ethics programs on paper are useless. Boards have to direct executives to implement sufficient internal controls that would create a climate for changing the culture and enable effective implementation of the Ethics Agenda as the sole winning strategy.
Key measures that the Board & Audit Committees could look at implementing include: –
- Ensuring CEO engagement on anti-corruption initiatives, top management commitment and responsibility
- Boards should oversee appointments of Ethics & Compliance officers, ant-bribery risk assessments and awareness creation programs.
- Develop and implement supplier codes relevant to people, services and products. Making it comprehensive to provide guidance and awareness around reporting concerns, use of company’s systems, various access channels, obligations of suppliers, etc
- Screening & evaluation policies for third party intermediaries, business associates, associated entities and new projects
- Pro-active auditing of internal controls and vulnerable accounts to identify high risk items
- Involve subject matter experts to review the rate contracts, offer learning and development programs to employees
- Pro-active digital forensics on the corporate data sources
- Commit to Partnering Against Corruption Initiatives (PACI)/ WEF
- Initiate proper accounting disclosures for vulnerable accounts and prohibiting off-books of accounts arrangements
- Policy for political donations and engagements, charitable donations
