By Russ Banham
Corporate Board Member
Board members have a fiduciary responsibility to be loyal to the corporation and its shareholders in utmost good faith and with scrupulous honesty. These duties insist that members supervise the same measures of integrity throughout the organization.
“Serious issues like paying a bribe or engaging in any form of corruption merely to grow the business overseas is a risk no company can consider or take,” says Therese Tucker, founder, CEO and board member of global public company BlackLine, a provider of finance and accounting automated software solutions. “Given this risk and the board’s responsibility to protect shareholders, board members must take an active role ensuring ethical behaviors by all people at all times, particularly in countries with spotty records when it comes to corruption and bribery.”
In taking a more active role, board members must continually evaluate these risks and insist on receiving independent reviews of the ongoing effectiveness of the organization’s anti-corruption and anti-bribery programs. Most importantly, the board must not be quiet on the subject. “The board must set the tone that anti-corruption is a priority, should be properly resourced, and supervised by an independent Chief Compliance Officer with a direct reporting line to the board,” says Pamela Passman, president and CEO of the Center for Responsible Enterprise and Trade (CREATe), a non-governmental organization promoting anti-corruption best practices.
Tough questions must be asked by board members of senior executive managers, such as:
• In the particular geography, what are the most prevalent bribery and corruption schemes?
• Is there use of consultants or other third parties in the particular geography, are they critically necessary, and have they been thoroughly vetted?
• Which interactions with which government officials in the particular geography raise the biggest bribery and corruption risks?
• What are the experiences of other companies in our industry with regard to geographic expansion in the region?
• Do the company’s quarterly forecasts encourage unrealistic goals like too-rapid growth that may incentivize salespeople to pay bribes? Should the company project earnings across a longer timeframe to reduce the pressures that may generate bribery?
• Are employees and third-party representatives provided with training and tools to address bribery and corruption when these tactics rear?
• Are the members of every operational team cognizant of the provisions of the FCPA and the implications in failing to comply with these rules?
• Is there a “zero tolerance” policy with respect to bribery and corruption; if not, why is this the case?
• Are systems and audits in place to detect evidence of bribery? What are the procedures when such criminal activities are discovered, and at which point does this information reach the board?
• Does the Chief Compliance Officer have the independence, standing and resources to be an effective monitor of these activities?
Board members taking on more involved and active oversight of bribery and corruption risks are effectively the “conscience” of an organization, says David Montero, author of the book “Kickback,” a history of corporate corruption. “The board must set the tone that employees will not be penalized for doing the right thing; rather, they will be rewarded for avoiding bribes and other forms of corruption, as this augments the overall health of the company,” he adds.
BlackLine’s Tucker shares this perspective. “I believe that to drive home to every employee that stringent adherence to ethical practices in every single undertaking is a priority of the highest order, the CEO and the board must set the tone at the top,” says Tucker. “Honestly, there are few things more important.”
Russ Banham (email@example.com) is a contributing writer to Corporate Board Member.