Collective Action Conference 2014: Going Further Together to Counter Corruption
The ICCA held an international conference on Collective Action: Going Further Together to Counter Corruption on 26-27 June 2014 in Basel, Switzerland.
The event featured successful examples of Collective Action, lessons learned, practical advice and academic contributions, as well as peer discussions on a variety of issues. Over 100 representatives from business, government, academia and civil society all joined for this key event.
The conference was divided into several parts, covering:
- Building a joint vision of Collective Action
- Translating theory into action
- Collective Action in a wider context
- The future of Collective Action
Scroll down to find the key messages and presentations from the conference.
As Collective Action continues to gain attention from companies, NGOs and policymakers as a tool to counter bribery and extortion, one question that consistently arises from those deciding whether to engage in it remains: What is the business case for participating in Collective Action initiatives? The conference brought this issue to the fore again.
Many of the corruption risks that companies face in a particular market are often common among competitors but also across industry sectors. By taking steps beyond solely improving their own internal compliance programs, Collective Action provides opportunities for leveraging the power of the group to effect real change, and to engage with the public and private sectors to kick-start new initiatives to tackle systemic corruption and related issues.
‘Going it alone’ has often been a hurdle for firms to overcome when persuading boards and business managers as to why they should take a proactive approach to tackling bribery: Engaging in Collective Action affords companies the benefits of a group approach, decreasing concerns of being out of synch with other players in the market.
Everyone concedes that reducing corruption provides more stable, transparent, and in the end, more profitable business environments for companies and other stakeholders in which to operate; this in itself should galvanise companies to think creatively about how to enhance their anti-corruption approaches. But if internal drivers are lacking, responding to external pressures is going to continue to be an imperative for companies large and small.
The growing demands of customers, and civil society, the frustrations of disillusioned citizens are all cogent reasons to engage in Collective Action because it can deliver concrete evidence of a firm’s commitment to acting with integrity and play a part in improving the overall development prospects of a country.
Finally, the regulatory environment continues to evolve to ensure that companies and individuals paying bribes will be prosecuted, and companies will be fined, damaging to reputations and to their share price. Engaging in Collective Action demonstrates to law enforcement and regulatory authorities a company’s serious commitment to improving not only their internal anti-corruption programs but also making a difference in the wider business environment. This is cited as well among the adequate procedures for compliance with the UK Bribery Act.
Arguing for business involvement in Collective Action through highlighting the tightening regulatory arena, responsibilities of good corporate citizenship within broader economic and social settings, and Collective Action’s contribution to establishing a more level playing field and cleaner business environment presents strong incentives for company participation.
One area for future consideration is the greater need for researchers and proponents of Collective Action to better ‘speak the language of business.’ Through the development of metrics to improve the collection and analysis of measurable data, the benefits accruing to companies involved in Collective Action can be more tangible and convincing for other stakeholders to also take part.
Corruption happens mostly at the interface between business and public authorities. Consequently, effective anti-corruption measures need to engage both parties. The same is true when it comes to Collective Action, and indeed the need to involve or engage with Governments and the public sector as part of the Collective Action approach to bribery emerged as a key theme throughout the conference.
Manners of engagement with government
However, it has become clear that the manner in which to approach government has to be highly contextualised. Factors that may influence the way companies choose to engage include the level of trust of companies in the integrity of the public sector and the degree of political will of the government; the capacity of the concerned public institutions to implement sustainable anti-corruption reforms; and the convening power of the members of the Collective Action, etc.
Illustrative of this are the different approaches chosen in Colombia and Ukraine in relation to the establishment of mechanisms to handle corruption complaints by individual companies. While the High Level Reporting Mechanism in Colombia is attached to the Office of the President of Colombia and thus an integral part of the Government and the country’s public administration, the Business Ombudsman Institution is steering towards a more independent structure.
Another difference emerging from different contributions at the conference related to the timing of engagement with government. While in some cases such engagement should occur from the very start, in other cases it has proven to be more sustainable if businesses first work among themselves to establish trust and a strong alliance, before then engaging government.
A question that also needs to be addressed on a case-by-case basis is whether companies should approach one or several specific agencies or try to engage with government as a whole and in a more encompassing manner. Ultimately the decision in this regard is to be taken in light of the particular objective(s) of a given Collective Action and, again, the level of trust that companies have in the concerned agency or government as a whole.
Potential challenges and remedies
Involving government in a Collective Action is faced with a number of potential challenges. These include, notably, the risk of being perceived as yet another industry lobby group, a risk that is especially there if the Collective Action is industry specific. Taking a cross-industry approach to the particular engagement with government may help overcome such suspicion.
Another frustrating experience discussed during the conference may be that while top-level officials are highly supportive of actions proposed by a group of companies, the implementation of said actions is blocked by mid-level officials, either due to lack of interest or their direct involvement in the concerned corruption problem.
In some instances, it is the whole government, which is non-responsive to any attempt to jointly engage in anti-corruption efforts, most likely because of a high level of state capture. In these situations it is clearly advisable that Collective Action initiatives delay the involvement of the public sector with a view to creating realities that cannot be ignored anymore by the concerned state actors. For such an approach to work, however, the alliance of business partners must be extremely strong and participating companies ideally must jointly bring together considerable market strength.
Finally, in the face of high levels of state capture, but also more broadly, experience shows that identifying and creating an alliance with a known integrity champion from within government / the public sector and with a sufficiently high profile can often be a key to unlocking relationships with government, or at least with selected agencies. In the same logic, the use of leverages, for example identifying government policy priorities and how the concerned Collective Action can contribute towards the achievement of these objectives, is another way into a constructive collaboration with government / the public sector when the willingness to do so is not immediately apparent by all stakeholders.
Due to their low profile and size, small and medium sized enterprises (SMEs) are easy targets for lower-level government officials seeking to supplement their incomes with facilitation payments and petty corruption. As SMEs continue to face bribery solicitation and extortion in many countries of the world, the same characteristics – low profile and size – puts them in front of particular challenges when it comes to coping with bribery. Finding innovative ways for SMEs to prevent and combat corruption was one of the key issues that came to the fore at the conference.
There are no easy fixes. Solving the problem has generally been viewed by SMEs as the responsibility of governments, not theirs. On the other hand, SMEs have commonly been advised to deal with extortion by individually undertaking certain measures to prevent the giving of bribes, on the model developed by larger companies.
However, SMEs differ from large companies in many ways. SMEs often do not have adequate financial and human resources to develop large-scale compliance programs nor the time to keep informed of legal changes and of evolving international anti-bribery standards. When facing bribe solicitation to obtain a market, SMEs may also not have the bargaining power larger firms enjoy.
Benefits from engaging in Collective Action
Concerted efforts made by SMEs through Collective Action may provide a way to overcome these hurdles and more effectively deal with solicitation and extortion. Collective Action for SMEs serves several purposes.
- First it enables cooperation and the sharing of experience between like-minded SMEs who are tired to pay bribes and affords them the benefits of a group approach.
- Second, Collective Action makes it more likely that governments will consider their anti-corruption stand, thus it gives SMEs a greater bargaining power.
- Third, Collective Action creates a “level playing field” in which no business has an unfair advantage by not engaging in bribe giving.
- Finally, as Collective Action approaches makes it more easy to operate ethically, SMEs can further integrate global value chains: multinational which are bound to strict anti-bribery rules will rely on SMEs that demonstrate high ethical standards, which in turn will increase the concerned SMEs profits and boost their competitiveness.
Setting the groundwork
The conference helped identify the basic elements for effective Collective Action for SMEs.
First, business associations as well as multinationals have an important role in demonstrating the positive business benefits of Collective Action. Arguing for SMEs’ involvement in Collective Action through highlighting the competitive advantage SMEs may gain from implementing ethical business practices and its contribution to creating a level playing field presents strong incentives for SME participation.
Second, it is important to recognise that not all situations may call for Collective Action.
Third, there is no standard model. Collective Action must be tailored to the different categories of SMEs, for example within a certain industry or a geographical area. SMEs can band together to address a particular corruption problem, for instance in relation to a public bidding, or to pursue long-term strategies for countering corruption. Where it relates to a contract, all parties in tendering can for example decide to come together and collectively sign a declaration stating they will not engage in illicit activities. Where it comes to develop a durable strategy, collective action may take the form of a long-term agreement, aimed at promoting integrity standards in an industry, among business peers.
Collective Actions for SMEs must be built on these three pillars:
- education of SMEs on the business case for their involvement in Collective Action;
- tailoring coalitions to industries or geographical areas;
- building alliances that share the same vision and goals and are clear on how these are to be achieved.
While the process may be lengthy and cumbersome, the benefits of Collective Actions for SMEs are potentially tremendous. In this endeavour, and in view of their resource and capacity restrictions, assistance, in the form of a business association or an independent facilitator, could help SMEs engage in Collective Action. Their supply chain partners or multinationals active in the same industry or geographical area could be good partners in this respect.
Defining what constitutes an ‘enforcement mechanism’ depends to a certain extent on the Collective Action itself; there is no single method to keep all stakeholders bound to their commitments. To date, such mechanisms have ranged from self-monitoring and peer pressure, to using external monitors, legal sanctions, fines, disbarment from tendering, or other coercive means to make sure a Collective Action agreement has bite.
The question whether enforcement mechanisms in anti-corruption Collective Action initiatives are a burden on companies was raised at the conference, and without giving a definitive answer on this wide ranging question, various aspects are summarised here.
Asking if companies, as opposed to any other stakeholders, find these mechanisms burdensome is to approach the question with a narrow perspective. If a Collective Action is to live up to its name, then all the participants should feel obligated to make it work, and sometimes this may be more onerous on one or other of the parties.
Research on the effectiveness of Integrity Pacts developed by Transparency International has examined the matter from the perspective of other parties involved in making an Integrity Pact work, including external monitors and the public sector. What emerges from this research is a more differentiated picture of what is burdensome; failure by an errant stakeholder to follow the commitment is probably the hardest burden for all the other stakeholders to bear when contemplating the consequences of the breach.
Where an enforcement mechanism requires corporate competitors to raise concerns about each other to a third party monitor or government agency, there is a risk that none will take such action for fear of upsetting the market in which they all operate. In such cases the mechanism may fail and as a result the Collective Action initiative may also not succeed.
The best way to address such a scenario is to have a strong basis of trust between the stakeholders, and a good rapport with the external facilitator who may or may not be the monitor. The mechanism will work if there is a forum for dialogue and even confrontation to address possible breaches of an initiative, moderated by a trusted facilitator.
This is why some of the more successful Collective Action initiatives are a sustained commitment that are developed over time and which also allot time for regular meetings in person.
Enforcement through High Level Reporting Mechanisms
The High Level Reporting Mechanism (HLRM) in Colombia presents another form of ‘enforcement mechanism’ in Collective Action, requiring pre-selected bidders for certain designated infrastructure projects to sign up to an integrity pact type commitment.
The HLRM is however, more than an integrity pact arrangement and presents an interesting study of an enforcement mechanism as a tool rather than a legal remedy, to ensure the procurement process continues even in the event of allegations of breaches of the pact. The enforcement element is thus more of an enabling mechanism, offering a win-win for all involved.
The Colombian HLRM example represents a shift away from solely punitive approaches that can end up stymying the procurement procedure and involving the parties in protracted legal proceedings. Instead, the novelty of the HLRM process lies in the ad-hoc committee that has been established to receive complaints that bidders (or potentially others) in the procurement process can raise.
The committee in the Colombian example consists of just four experts: in criminal law, civil engineering, business structures, and public procurement. The bidders can raise technical issues, problems of extortion and of course allegations of bribery by their competitors in the tender process, with the committee’s recommendations transmitted back to the Secretary of Transparency, thereby offering a quick and solution oriented process. If the prosecution authorities do need to be involved, then appropriate referrals will be carried out.
The HLRM reporting procedure is in itself part of the remedy in that it starts a process that aims to keep the procurement procedures running, instead of bringing them to a halt. As such, this feature may help to incentivise companies to participate actively, rather than just depositing a complaint, then waiting for the outcome in enforcement terms and possibly delaying or stopping the tender process altogether.
More generally, the participatory and voluntary characteristics of Collective Action are not only its distinctive features but also its strengths; otherwise signing up to a no-bribes pledge or a similar type of agreement in the context of a government procurement process would be nothing more than just another formal requirement that has to be acknowledged.
Given these two basic characteristics, the notion that companies find enforcement mechanisms burdensome becomes less credible; companies enter such arrangements with their eyes open, and knowing that they can influence the process through their participation.
In future, it is likely that the number of Collective Action initiatives that are based on positive incentives, such as white listing or preferential treatment for companies participating in these types of commitments, should increase. There are many examples where enforcement is based on incentives, and hopefully these will continue to grow in number.
The question as to how burdensome enforcement mechanisms really are to all stakeholders would be a worthy area of more research. This would help to establish the business case for companies considering whether to join a Collective Action initiative and also to bolster wider support for such approaches.
- John Githongo, CEO, Inuka Kenya Ni Si Si: Keynote address
Collective Action around the world: challenges and successes
- Edward C. Gacusana, Makati Business Club: Integrity and Anti-Corruption Initiatives in the Philippines
- Debby Ramsay: Good Corporation
- Tayfun Zaman, TEiD: Collective Action For Fighting Corruption in Customs; Country of Application: Turkey
Collective Action tools
- Gualter Grisòstomo, CEIIA: Practical Guide to the Management of Corruption Risks in Organizations
- Virna Di Palma, TRACE: Portable Due Diligence: TRACE Collective Action Tools
- Gretchen Jonker, PACI: Partnering Against Corruption Initiative: Heat Maps as Collective Action Tools
Collective Action in a wider context
- Claudia Baez Camargo, Basel Institute on Governance: Bottom-up collective action: Citizens against corruption
- Martin Kreutner, IACA: Collective action through education and capacity building
- Dominique Lamoureux, Thalés: Collective action: a performance engine for business
- BSR, Maritime Anti-Corruption Network: Corruption Risk Assessment in the Nigerian Port Sector
- CBCI: Compliance im Mittelstand
- The Corporate Governance Rating System
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