28/08/2008 - 09:54

ASX50 under par in bribery reporting

28/08/2008 - 09:54

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Australia's top companies are failing to follow global guidelines on bribery and corruption reporting and fall short of world's best practice, according to research by the Association of Chartered Certified Accountants and Net Balance Foundation Ltd.

Australia's top companies are failing to follow global guidelines on bribery and corruption reporting and fall short of world's best practice, according to research by the Association of Chartered Certified Accountants and Net Balance Foundation Ltd.

The Bribery & Corruption Report assesses the extent to which Australia's 50 largest publicly-listed corporations have implemented and reported on anti-corruption measures.

Companies were assessed against five criteria groups; policy, organisation, program implementation, performance, and materiality & responsiveness.

Each organisation was given a score out of 100 against each criteria group and an overall score. The two international standards against which organisations were assessed were the AccountAbility AA1000 framework and the G3 Guidelines of the Global Reporting Initiative (GRI).

"Historically, Australia hasn't been considered a country that has a problem with corruption. It was ranked in the top ten nations in the Global Corruption Perception Index1 from 2003 to 2007, however Australia's rank slipped to 11 in 2007, following the Australian Wheat Board 'Oil for Food' scandal," says ACCA Global chief executive Allen Blewitt said.

"Recent allegations of corruption within RailCorp, Wollongong Council and NSW Fire Brigades, highlight a need for greater focus on bribery and corruption measures in Australia."

The report scored the overall performance of the ASX50, in terms of their transparency and disclosure of anti-bribery and corruption prevention initiatives. Stockland was the top scorer with 80%, followed by BHP Billiton with 73%, Rio Tinto 66%, NAB 64% and Westpac rounding out the top five with a score of 60%.

ASX50 companies score an average of 74% in the 'policy' criteria, acknowledging that anti-corruption policies or at least codes of conduct were in place. In contrast, publicly communicating how the organisation is structured to manage bribery and corruption scored an average of only 43%.

"This report looks at an organisation's ability to disclose information on counter-corruption programs and performance. It would appear that top Australian companies are creating anti-corruption policies and codes of conduct, but most are not transparent in how those policies are governed, implemented and reviewed," Mr Blewitt said.

Mr Blewitt added that policies to combat bribery and corruption must be openly communicated and adopted by all stakeholders including staff, suppliers, shareholders and customers, to ensure programs are effective.

"Companies that report on anti-corruption programs show they take responsibility for their, and their employees, behaviour and understand the negative effect a bribery or corruption scandal would have on their organisation," he said.

The Report also found ASX50 companies score an average of only 27% when it comes to following international guidelines for bribery and corruption disclosure, such as the relevant elements of the AA1000 framework or the GRI G3 Guidelines.

"Australian organisations need to improve reporting transparency to meet international standards and show that they are safeguarding their companies, their reputation and the economy against corrupt behaviour," Mr Blewitt explains.

The top ten performing companies of the ASX50 had an overall average score of 62% and were Stockland, BHP Billiton, Rio Tinto, NAB, Westpac, Commonwealth Bank, Insurance Australia Group, Brambles, Transurban Group, Foster's Group, GPT Group, Macquarie Group and Mirvac Group. Four companies scored 48% to tie for tenth place.

The ACCA report also included an analysis of the top 21 ASX-listed companies operating in sectors categorised as 'high risk' as defined by the UK's FTSE4Good anti-bribery criteria. These sectors include oil and gas producers, chemicals, industrial metals, mining, pharmaceuticals, telecommunications.

BHP Billiton was the highest scoring organisation in this 'High Risk 21', closely followed by Rio Tinto. The average overall scores were comparable to the rest of the ASX50, however Blewitt says high risk organisations should be doing more than other publicly-listed companies.

"Companies operating in high risk sectors should be adopting a more rigorous approach to bribery and corruption disclosure. In particular, multinational mining corporations operate in countries that rank poorly in the Global Corruption Perception Index and are therefore more susceptible to bribery and corrupt behaviour," Mr Blewitt said.

"Only 12 of the 'High Risk 21' adhere to or employ internationally recognised standards against bribery and corruption and across the ASX50 the average score is just 27%. This review shows there is much to be done to improve the transparency in reporting of countering bribery and corruption."

The Report found that a small number of ASX50 companies reported comprehensively on the issue of countering bribery and corruption; however the majority of disclosures lacked detailed information. The overall picture is that there is a need for improvement. Recommendations to improve reporting of countering bribery and corruption in Australia include more and better disclosures of the following:

1. The full suite of anti-corruption program documents.
2. The internal and external communication strategy for the anti-corruption program.
3. The governance structure in place to oversee anti-corruption program.
4. The risk management and assessment processes of the anti-corruption program.
5. Targets (with explanations) to drive improvement in the anti-corruption program.
6. A detailed account of any non compliance or violations of the Code of Conduct.
7. Political donations and charitable contributions.
8. The effectiveness of the anti-corruption programme should be included in the (sustainability) report assurance process.

The Report recommends companies can strengthen their anti-corruption program in the following ways:

1. Develop a Code of Conduct or Ethics Policy that strictly prohibits bribes to be made by, or received by, company personnel and prohibits, or at least regulates, facilitation payments.
2. Implement a 'gift policy' which defines what a gift is and requires anything over a certain amount to be reported.
3. Ensure implementation of the code, along with a robust system to encourage and monitor compliance. This includes awareness raising, performance monitoring, reviews and proposed actions plans in the event of any non-compliance.
4. Implement transparent practices for employing senior executives, remuneration, governance and risk management
5. Take part in industry wide initiatives, such as the Extractive Industries Transparency Initiative (EITI), which requires signatories to transparently disclose payments made to foreign officials in an attempt to eliminate the instances of bribery
6. The Code of Conduct should not only be applicable to direct, permanent employees of the organisation but also any contractors, agents, suppliers and subsidiaries/business partners with appropriate methods of communication used.
7. Ensure a management system is in place to manage anti-corruption, minimising the risk of occurrence. If an incident does occur, ensure a robust system is in place to process the incident and put the necessary procedures and reviews into place.

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