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
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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
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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”
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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”.
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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.
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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 )
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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.
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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
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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)
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• 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)
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• 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.
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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.
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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.
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