Why Compliance Management contributes to a better world
Since today Transparency International’s (TI) annual Corruption Perception Index (CPI) was launched, I thought I should share with you some background information on why I have chosen to work in the area of Compliance Management and why I am convinced that a company that has an effective Compliance Management System in place contributes to a better world. And of course, gains a competitive advantage from it at the same time, on which I have elaborated in an earlier post.
In case you are neither familiar with Transparency International, this is what they do:
“We hold the powerful and corrupt to account by exposing the systems and networks that enable corruption. We advocate for policies and build coalitions to change the status quo. Our vision of a corruption-free world is not an end in itself. It is the fight for social and economic justice, human rights, peace and security.” The CPI ranks of countries around the world, based on how corrupt their public sectors are perceived to be. Check it out, it is really quite illuminating especially to read about corruption in countries like Germany.
Corruption, now, is defined as the abuse of entrusted power for private gain. Also, a third party (such as the public) is typically harmed through this corrupt activity. That is a broad definition, limiting corruption not only to bribery, which is what people oftentimes understand if they hear corruption, but including any kind of fraud, embezzlement or extortion. “Private gain” goes also beyond financial advantages, in fact, it can be any kind of material or immaterial advantage, granted to oneself or a related person. It could also be a job offer, for example. There may or may not be public officials involved. Some examples are
public servants demanding or taking money or favors in exchange for services,
politicians misusing public money or granting public jobs or contracts to their sponsors, friends and families,
corporations bribing officials to get lucrative deals.
But what is so bad about it? Well, corruption erodes trust, weakens democracy, hampers economic development and further exacerbates inequality, poverty, social division and the environmental crisis. As said above, there is always a third party, may it be an individual or society, that gets harmed. It might also be your own company - imagine your HR responsible gives the C-level job to a good friend and not the best qualified applicant. Your business success and thus your financial situation is likely to be affected by this.
Exposing corruption and holding the corrupt to account can only happen if we understand the way corruption works and the systems that enable it. To do that, transparency is urgently needed. Transparency is all about knowing who, why, what, how and how much. It means shedding light on formal and informal rules, plans, processes and actions. Seeking and receiving information is a human right that can act as a safeguard against corruption and will increase trust in decision makers (such as the CEO or CFO as well as politicians, for example). However, transparency is not only about making information available, but ensuring it can be easily accessed, understood and used by citizens. This is what Transparency International works on, at its core.
Obviously, increasing transparency does not mean that laws and regulations that serve to protect personal data and confidential information about trade and business secrets do not need to be observed. It is about holding actors accountable for what they do in case they do not comply with them (and other regulations, privately gaining from non-compliance). In addition, I would also like to emphasize that non-corrupt, ethically correct behavior goes beyond pure compliance with laws. There are so many grey areas where, let’s say, there is some room for interpretation when assessing the legality of an action, where people should be guided by what is ethically correct and justifiable and not what is “legal”. A good example is the cum ex tax scandal in Germany, where people found loopholes in the law that made it to a certain extent legal how they dealt with taxes, but their tax evasion scheme was obviously totally against the actual intention of the law and highly immoral. The “third party” harmed in that case was society, meaning YOU, by the way, because the tax money was stolen from the state and could thus not be invested in things like environmental protection and climate change, infrastructure, education and health care.
Now, Compliance Management, or Ethics & Compliance Management as I like to call it to take this rule-based approach out of the story and focus more on the cultural aspect of it, intends to prevent corruption and economic crime on company level. I really cannot say often enough that this cultural part of Compliance Management must not be neglected because you can have as many rules and processes as you like at your company, if people really do want to cheat for private gain they will find a way to do so. Laying a cultural foundation based on trust, honesty, fairness (also when it comes to remuneration), respect and last but definitely not least transparency is in my opinion key to successful Compliance Management. If you are successful with it, you will not only gain a huge competitive advantage with it, but you will also contribute to a better world through educating your employees to make ethically correct decisions, not only at work but also before and after. It would be (or will be or is) your direct contribution to fighting corruption.
In sum, through the competitive advantage you benefit yourself economically from fighting corruption while at the same time you are contributing to the greater good through educating your employees and business partners on ethically correct, non-corrupt behavior. How appealing is being able to say that about your company?! If you want professional, effective and efficient support with steering your company towards this state, get in touch with me.
Oh, and here some food for thought and a hint on a future blog post: Compliance Management should be an essential part of any company pretending to engage in CSR (Corporate Social Responsibility) / ESG (Environmental Social Governmental) activities, otherwise their endeavors cannot be considered credible.