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Bribery and corruption: a need for continued board vigilance

January 27, 2021

Last year saw the tenth anniversary of the enactment of the Bribery Act 2010.  Lord David Gold was a member of a House of Lords Select Committee in 2019 which scrutinised the Bribery Act. 

Initially, he says, the business community saw the introduction of the Bribery Act as reducing British competitiveness, fearing that British companies would find it harder to compete in international markets. There was a particular concern that facilitation payments were being outlawed (unlike the American equivalent which provides an exception in certain circumstances), as well as a fear that the new offence – which punished businesses for failing to prevent bribery – would be onerous. 

Lord Gold says that, in practice (and as the Lords Committee found), there is little sign that the Bribery Act has prejudiced UK business.  Indeed, no witness giving evidence to the Lords Committee suggested that there should be any relaxation of the prohibition on facilitation payments.

If anything, it has resulted in companies improving their governance and compliance.  By not using third party agents, companies have found themselves better able to compete internationally as they have developed far better relations with their customers with whom they now deal direct. 

The Bribery Act together with high profile investigations into BAE Systems, Siemens, Rolls-Royce and Airbus have frightened many companies into honesty and, although last year the SFO announced an investigation into Bombardier, there have been few new cases recently.  

Meanwhile, the US Department of Justice continues to be active having agreed a deferred prosecution agreement with Goldman Sachs and a penalty of US 2.9 billion in connection with a scheme to pay over $1 billion in bribes to Malaysian and Abu Dhabi officials to obtain lucrative business.  The DoJ also pursued an investigation into 1Malaysia Development Berhad, alleging that more than US$4.5 billion was diverted from 1MDB by conspirators including officials from Malaysia, Saudi Arabia and the United Arab Emirates for their personal use.

However, despite the success of the Bribery Act, Lord Gold is emphatic that now is not the time to be complacent as the risks remain as high as ever.  He adds that the current environment, so greatly impacted by the Covid-19 pandemic, has resulted in many businesses, some very large ones, fighting for survival.  Some managers under stress or pressure, determined to achieve greater sales and survive, may be tempted to take business risks and revert to unacceptable behaviours.  

Company boards must therefore be particularly vigilant and ensure that management is not putting the company in jeopardy.  This is a time for Boards to seek independent assurance that policies are being followed and values maintained.  Lord Gold concludes that, after all the progress that has been made, it would be disastrous if the wrongful practices of the past emerged again.

 

Lord David Gold is a co-founder of Gold Collins Associates which provides independent objective and strategic advice to senior executives and key stakeholders, notably in anticipating, avoiding and managing crisis.  He monitored BAE Systems for the US Department of Justice and advised Rolls Royce on various ethics and governance issues, helping the company obtain a Deferred Prosecution Agreement with the UK, US and Brazilian authorities in January 2017.  He was formerly Senior Partner at Herbert Smith.

Tags: Lord David Gold
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