After initial engagement: following up and taking it further.
Follow-up actions for investors
Agree time-bound goals with companies on their requests for disclosure/systems implementation.
Continue communication channels
Continue communication with companies to provide feedback on their progress against investor’s expectations.
Follow-up actions for companies
Keep track of engagement queries
Collect and analyse investors’ engagement queries on antibribery and corruption issues and update company-wide systems as necessary.
See the issue as a continuous process
Improvements on the issue of anti-bribery and corruption is a continuous process, and not just a one-off commitment. Assessing risks; defining, updating and implementing policies and practices; monitoring progress; and reporting, all contribute to dealing with the issue in a robust way. More methods are suggested by the UN Global Compact management model.
Communicate outcomes and keep up reporting
Communicate outcomes on a regular basis, by, for example, using the UN Global Compact Communication on progress as well the UN Global Compact Reporting Guidance on the 10th Principle and ICGN guidance.
After initial engagement: the investor perspective
Where companies committed to further disclosure or to review their anti-bribery and corruption processes, diligent follow up on agreed specific time bound goals was key for an engagement with tangible outcomes. In order to do this, investors in the PRI engagement group evaluated companies’ progress against the adapted TI scoring methodology used in the original benchmarking exercise and kept a record of additional qualitative information through meeting summary notes.
While some investors indicated that the outcome of an engagement on a specific anti-bribery and corruption issue could directly impact their investment weightings, this was rare. More often information gathered from engagement was used to make sure that portfolio managers were better informed of the company’s situation. For example, the engagement specialists could feedback to equity teams on companies’ performance and responsiveness so that this could have been taken into account on the overall company analysis.
The value of continued dialogue and collaboration
Several investors found that dialogue uncovered weaknesses in companies’ implementation of their anti-bribery and corruption policies. Successful policy implementation relies on adopting a suitable company culture, which can be much more difficult to measure or even assess from an external perspective. This is why investors may continue to engage over a longer time horizon, to keep abreast of developments.
Continued informal dialogue, after a collaborative engagement has concluded, can be particularly beneficial to keep highlighting the importance of the issue to the company, and spur further improvement.
Corruption is a global, endemic issue and is a big long term challenge. Even if there are good systems in place, instances will still occur.
Several investors also saw the dialogue efforts made in collaboration as a beginning, not as an end, which may lead to further formal coordination with other investors on antibribery and corruption issues in the future.
I see value in collaboration and feel it would be great if the investment community could undertake a wider effort to tackle the issue. Companies do not like being individually targeted and are more open to dialogue with a wider group.
After initial engagement: the company perspective
Collection and analysis of investor reactions on antibribery and corruption does not cease post-engagement, as continued action allows practices and policies to further improve and develop. For example, investors may require further inclusion of anti-bribery and corruption issues in periodic risk assessments and broader corporate sustainability strategies.
Companies can communicate outcomes of the dialogue with investors to broader stakeholders in the spirit of greater disclosure and transparency. For example, companies that investors had dialogue with provided a public written statement whereby they declared their commitment to being in compliance with all relevant laws. They also reported on the existence and the elements of their antibribery and corruption programme or any updates to it and outcomes achieved. Other companies used investors’ feedback to re-assess their performance, define their next steps and make a more comprehensive use of their website to share information.
Companies are encouraged to use all available communications channels to disclose how their policies have been informed and provide more insights on their assessment mechanisms and continuous corrective actions.
A signal to investors
Currently most companies still view their anti-bribery and corruption system as a tool for managing financial or operational risk in the wake of an incident. However for investors such measures point towards a company’s integrity, the strength of their management systems and, more widely, the companies’ potential for long-term value creation. Corporate integrity is difficult to quantify but companies can consider the following actions to increase trust and enhance dialogue with investors.
- Cultural change from within: establish and review performance-related integrity targets that can help improve ethical behaviour.
- Allocation of responsibility and stakeholders: work with the board and undertake an ongoing review of internal structures; maintain clear lines of management accountability throughout the organisation as well as an open and continuous engagement with key stakeholders.
- Benchmarking against best practice: determine progress against best practice using available tools such as the Transparency International fs corporate anticorruption benchmark.
- Reporting: increase disclosure and demonstrate the link between company performance and integrity. Best practice would cover the gbasic h and gdesired h reporting elements outlined in reporting guidance on the UN Global Compact 10th Principle. The International Corporate Governance Network (ICGN) has also developed guidelines on this area.
Engaging on anti-bribery and corruption
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After initial engagement: a guide