Mastering the art of self-disclosure
Imagine being the general counsel of a multinational company and you learn that an overzealous employee has violated the U.S. Foreign Corrupt Practices Act, the UK Bribery Act, or any number of other anti-bribery laws. What do you do? If a violation is surfaced by government regulators, the ensuing investigation will most likely be challenging, but the process rather straightforward. If, however, the alleged violation is discovered within the company, the question of whether or not to self-report can become a highly complicated matter.
Questions involving only one jurisdiction are inherently complicated affairs, but suppose the alleged violation involves multi-jurisdictions? Knowing just what to do can challenge even the most thoughtful of legal minds.
During the 2014 cycle of the G20/B20 hosted by Australia, the B20 Anti-Corruption Working Group urged the G20 governments to take steps to harmonize their anti-corruption laws. In addition, the Working Group further recommended that governments implement leniency policies, which together with a harmonized legal framework would provide the predictability necessary to encourage companies to self-report when violations were internally discovered and deemed to be legitimate. The Working Group concluded that such an approach would incentivize companies to develop far more rigorous compliance programmes and policies. In turn, this would cause employees to be more committed to their company’s anti-corruption agendas, thereby minimizing the potential for instances of illicit behavior.
In effect, business would get it what it most desires - a predictable legal framework and leniency when self-reporting violations of anti-corruption laws. Government, meanwhile, will have helped inspire a more rigorous corporate compliance culture and contributed significantly to an overall reduction in corruption, particularly in the multitude of interactions that routinely occur between the private and public sectors.
As optimal and as sensible as this approach may sound, governments have yet to embrace the strategic importance of these concepts. Advocacy on their behalf by business continues, but as of this moment, real traction has yet to take hold. The challenge then is what to do in the interim? The case can easily be made that self-reporting a known violation is simply the right thing to do. Employees usually know when problems occur, particularly when they are grounded in breaches of ethical behavior. If the “tone at the top” (and the middle) demands the highest standards of ethical conduct, employees will expect management to investigate and take action. Specifically what to do, however, must be thoughtfully considered.
During the 2015 cycle of the B20, a Work Grouping of high-level legal and policy experts sought to develop a set of guidelines and best practices for how companies should approach self-reporting. The Work Group’s full report can be found in the B20’s 2015 policy paper, as well as on the Partnering Against Corruption Initiative page. The guidelines are thorough and detailed and should be reviewed and discussed at the most senior levels of any business.
Fundamentally, the guidelines first encourage all companies to develop a specific corporate policy on self-reporting. The policy should be developed by executive management and fully supported and endorsed by the board. The guidelines also provide perspective on a range of important questions management should ask itself when considering whether or not it is appropriate or necessary to self-disclose a possible violation. Perspective is offered on such questions as: do I have a duty to report demands for bribes to national authorities? Do I have a duty to disclose actual or potential violations of anti-corruption laws? What are the potential benefits and risks my firm can expect from self-disclosure of a violation of anti-corruption laws? Will the information I disclose become public? Exactly when should we self-disclose? What risks must be managed in the self-disclosure process? And, what if my case does cross several jurisdictions, how do I deal with this?
The guidelines also offer practical recommendations on actions a company can take in the self-disclosure process. For example, while leniency remains a new and as yet under-developed government practice, there are examples of some governments exploring such practices, as well as examples of some companies negotiating so called, “leniency agreements.” When employed, these agreements can have the positive and beneficial effects of rapidly advancing investigations, significantly reducing penalties and fines, exempting the company involved from publication of a conviction, and finally, exempting it from being barred (usually for up to five years) from participating in future government contracts. There is, of course, a precedent for the application of leniency, as it has been utilized by governments for quite some time in addressing anti-trust issues.
It is clear that self-disclosure comes with a unique set of challenges. Indeed, it can be a real nightmare, particularly when multiple jurisdictions are involved. But with a self-disclosure policy in place, and a rigorous compliance programme in effect, it is possible to find a favourable way through such dilemmas. And maybe, if the global corporate community can come together in a collective action effort, and advocate for change, government just might come to appreciate the true value a harmonization of laws and a policy of leniency can actually provide. Let’s hope so.
The Forum report, Partnering Against Corruption Initiative - Infrastructure & Urban Development, is available here .
SOURCE: World Economic Forum