Transcript Document
Promoting ethical business by private companies Praveen Dixit DG ACB Maharashtra Why anti corruption initiatives • Bribery not only raises moral concerns • Counter to long term interest of business as it increases 1. costs and risks, 2. Undermines efficiency, 3. Lowers country credit rankings (India is 84th in corruption index of Transparency International & 4. Deters investors 2 Rise of civil society & mass movements • Following enactment of Right to Information several Civil Society activists and NGOs have come to play crucial role. • Filing Public Interest Litigations or • Resorting to mass movements as evident from action against Bhopal Gas Tragedy or Green Peace Movement against nuclear power plants 3 Legislative changes in the pipeline • Recommendation by Law Commission to amend Prevention of Corruption Act • Amendment will hold “a commercial organization liable for failure to prevent persons associated with it from bribing a public servant to obtain business” 4 Impact of these amendments • “ Every person in charge of and responsible to it shall be deemed guilty , unless s/he can prove that that the offence was committed without their knowledge or that they had exercised all due diligence” • “Directors of a company shall only be held guilty in a situation, where they have digressed from the set procedures and guidelines as prescribed by the government”. 5 Necessity of these changes • Need to be consistent with relevant international standards on accounting and disclosure, as developed by the International Accounting Standards Board • To adhere to standards of the International Organization of Securities Commissions(IOSCO) • India has signed IOSCO’s “Multilateral Memorandum of Understanding Concerning Consultation and cooperation and the Exchange of Information” to provide mutual assistance in fulfilling statutory functions of financial supervision. 6 International Practices • Countries have enacted regulations governing corporate accounting, internal controls& straightforward requirements of disclosure of relevant information. • Most countries have mechanisms established to involve regular examination of companies’ books and external audits. • Some countries use penal sanctions to deter fraudulent financial reporting( Hong Kong, China, Japan, Korea, Singapore ) 7 Efforts by companies • Recognizing the responsibility for preventing corruption in business resides primarily with company management, they have developed programs to complement the compulsory standards prescribed by the country’s authorities. 8 Measures by Companies • Evolving Codes of conduct, • Regular ethics training • Establishment of specialized compliance and ethics departments headed by senior directors • In Singapore, companies have to disclose and explain in their annual reports where they have deviated from the code. • These Codes /Pacts which have been developed by Transparency International, expect voluntary commitment 9 Recommendations by PBEC • Pacific Basin Economic Council having membership from 20 Asian and pacific Economies has recommended 1. No business enterprise should offer or promise any advantage to a public official or his/her relatives to induce any actions for the express intention of business advantage 2. Ensure financial transactions are properly and accurately recorded in account books available for inspection by board of directors and auditors. ( Continued) 10 • 3. They should assure that there are no “off the books” or secret accounts , and that any documents properly and accurately record the transactions to which they relate. • 4. They should establish independent auditing systems in order to bring to light any transactions that contravene the principles of the Charter of Transaction Standards established by PBEC. • ( Continued) 11 • 5.Codes established by the companies should have code of conduct to encourage employees or agents who find themselves subjected to or pressured by , improper inducements to report such illicit conduct immediately to senior corporate management. 12 Recommendations by ICC • International Chamber of Commerce promotes “ Rules of Conduct to combat Extortion and Bribery in International Business”. These include • Self regulation by international business • Implement these rules voluntarily • These address the use of agents and subcontracts, a common means to channel illicit payments. 13 Conclusion • International Organizations such as World bank lead in Asian roundtable on Corporate governance involving both policy makers and business leaders from the region. • ADB provides technical assistance to improve corporate governance in its developing member countries. 14