Is your anti-corruption system a reality or an illusion?

Today, it is quite obvious for most investors and stakeholders on the financial market that corruption is devastating for companies’ long-term value growth, and will cause sever damage in several ways.

This growing awareness has created a demand for better methods to assess companies’ actual capability to prevent corruption.

This new awareness, combined with the new requirements on sustainability reporting for listed companies, has increased investors’ expectations on the companies anti-corruption reporting. Anti-corruption has historically been, and in many cases still is, an area consigned mainly to the Communication or IR departments within the companies. When it comes to corruption, the proof of the pudding lies however in what companies actually do or don't do in their daily operation, not in what they say they do. The companies sustainability reports and CSR statements sometimes tend to present a picture of what the companies believe that the surrounding world expects to see, and not a report of the actual conditions in the companies operation. For the shareholders it is very difficult to penetrate the companies reporting and determine to what extent they deliver a declaration of the actual situation, or a vision of the company’s ambition for the future – or, in worst case, a pretty illusion hiding an ugly truth.

In case a corporation is convicted for bribery, the negative effects are obviously devastating both from financial and reputational point of view. But severe negative effects will strike long before any legal procedure even has begun. The reputational damage is immediate and the workload for the management to defend itself and the company against allegations and negative media attention will divert focus and effort away from their work to manage and develop the business. The cost in terms of lost opportunities is hard to define in dollar value. It is however not hard to imagine the catastrophic consequences when the management and board suddenly are forced into defensive crisis management and most of the progressive business development is put on ice.

A company’s anti-corruption reporting, as well as an investor’s evaluation of those reports, needs to focus on the anti-corruption programs design and execution. Lack of corruption incidents in the business is vital but not a sufficient indicator on a company’s ability to prevent corruption.