Cultural Influences in Anticorruption Training

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Cultural Nuances in GlobalAnti-Corruption Training

18 October 2012


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Copyright 2012 | SAI Global Ltd. | Confidential

Agenda

Introduction Bribery and Anti-Corruption Anti-Corruption Training Cultural Issues in Corruption Cultural Complications in Training Tools for Evaluating Culture Steps to Intercultural Competency in Training (and Beyond)


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About SAI Globalwww.saiglobal.com/compliance

Partnering with clients to build organizational integrity by integrating ethics andcompliance, understanding and controlling risk, and enabling good governance

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Americas: Plainsboro NJ, Houston TX and Waltham MA

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Learning & communication: training, awareness, certifications, disclosures,surveys, Code of Conduct, hotline

All supported by in-house advisory services; adult learning and technologyintegration specialists

Programs across 120 countries and over 45 languages

2011 SAI Global Ltd. All Rights Reserved.
http://www.saiglobal.com/compliancehttp://www.saiglobal.com/compliance


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Biography

Ethics and Compliance Consultant for SAI Global Written practitioner and academic articles on culture, decision

making, and ethics. PhD. candidate at University of Southampton (England) in

Business Ethics; dissertation focuses on how firm culture isrelated to ethical decision making.

Previously, Director at iGate (Based in India with a 90% Indianworkforce)

Extensive international business experience as a businessstrategy consultant for Accenture, including:

India China Australia UK Scandinavia


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Why countering bribery matters

More than 1 Trillion Dollars are paid in bribes globally each year.(Word Bank) $1 out of every $30 is being spent on bribes, often in the countries

that can least afford the diversion of resources. (TransparencyInternational)

Bribery is estimated to raise the cost of living in some countries15% or more (Transparency International)

"Each time a company pays a briber it is contributing, even in asmall way, to perpetuating a system of corruption that embedspoverty and inequality. Stopping this supply-side bribery is vital if

the fight against corruption is to be successful." Chandu Krishnan While much bribery happens in the developing countries, many of

the recent bribery scandals have taken place in developedcountries.


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The legal framework to combat supply-side corruption


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Enforcement Trends



Bribery and Corruption: Why the Concern?

Foreign Corrupt Practices Act U.S. Law, enacted 1977 Anti-bribery and Books & Records provisions Enforced by DOJ and SEC

Bribery Act 2010 UK law, enforced as of July 1, 2011 Enforced by Serious Fraud Office (SFO)

Most other countries have anti-bribery legislation Enforced to varying degrees Enforcement leaders are Germany, Norway,

Switzerland, US

Organization for Economic Cooperation and Development The OECD Convention requires signatory countries tocriminalize the bribery of foreign officials.




The laws are complicated and continuously evolving US companies operating globally are subject to the laws of other

countries Bribery and corruption enforcement activity continues to increase

in volume and sophistication The penalties for violations are potentially enormous Companies are responsible for the actions of associated third

parties Personal liability exists for executives Corruption scandals make headlines and can ruin companies and

individuals




Risk Exposure

CorporationJoint Ventures Agents/Partners

SuppliersCustomers

Bribery andcorruptionrisks (andliabilities)exist beyondyour

corporateboundaries




Penalties imposed upon violators can include fines, investigation, outside legalfees, disgorgement, potential debarment and the possibility of prosecutions inmultiple countries

Additional onerous and costly repercussions can include the imposition ofmonitors, audits, mandated reporting, and bolstered compliance programs

Company Penalties Other AssociatedCosts*

Siemens AG $1.6B $1B

KBR/Halliburton $579M Not Disclosed

BAE Systems $400M Not Disclosed

Weatherford Pending $106M

Baker Hughes $44M $50M

Daimler $185M >$500M* Associated costs are conservative asthey only reflect disclosed amounts




Source: 2010 FCPA Update, Gibson Dunn

2010 witnessed an 85% increase in enforcement actions over 2009, which wasalso a record year 8 of the top 10 monetary settlements in FCPA history were reached in 2010




UK Bribery Act 2010 in force and includesnew bribery offenses, setting stage forfuture enforcements

German authorities more vigorouslyprosecuting bribery cases since Siemenssettlement

Transparency International laudsGermany, Norway, Switzerland, and USas active enforcers of OECD

Convention Australian Federal Police currently

investigating allegations of bribery bySecurency International

2010-Lanny Breuer announces thatDOJ is currently hiring additionalprosecutors in the Fraud Unit tohandle FCPA Cases

FBI has dedicated FCPA agents SEC expanding FCPA focus; creates

FCPA unit in 2009 and opens newoffice in San Francisco in 2010

Number of individuals prosecuted forFCPA was 44 in 2009, up from 9 in2008

OECD pledges to monitor anti-corruption commitment andenforcement by signatory countries

The Enforcement Trend is Likely To Continue




Additional Enforcement Techniques and Theories Are Being Utilized

Increased cooperation between US Department of Justice and othergovernments, including use of Mutual Legal Assistance Treaties (MLATs) tofacilitate assistance

Increased effort to pursue foreign third parties, including foreign officials,involved in bribery

FBI now using traditional criminal law enforcement techniques such aswiretapping, surveillance, informants and undercover sting operations fordetecting and prosecuting bribery

DOJ enforcement strategy increasingly includes prosecution of individuals tohold them accountable and gain leverage over corporations

Use of Travel Act to criminalize commercial bribery, making all bribery ofconcern to US companies

No Double Jeopardy



FCPA UK Bribery Act 2010

Jurisdiction

Corporations registered in the U.S. (issuers), domesticconcerns (individuals and corporations), and non-U.S.registered foreign companies under certain circumstances

Applies to employees and agents

British nationals and corporationsCommercial organizations which have a business presencein the UK*

Applies to associated persons

ProhibitionsBribery of foreign officialsDeceptive books and records

Paying or receiving commercial bribes *Bribery of foreign officialsFailure to prevent bribery *

Defenses &Exceptions

Facilitating payments (exception)Payment lawful under written laws of foreign country(defense)Bona fide expenditure related to the promotion of products orservices or performance of a contract (defense)Corrupt intent required

Company had adequate procedures in place to preventbribes *No exception or defense for facilitating payments *No exception or defense for bona fide expenditures * No corrupt intent required *

Penalties

Criminal penalties up to $2,000,000 and five yearsimprisonment per violation

Add'l penalties may be levied under other laws Civil fines, debarment, disgorgement, private actions alsolikely

Criminal Statute onlyUp to 10 years in prisonUnlimited fines *Mandatory debarment under UK Public Contracts Regulation2006**

EnforcingAuthority

Department of Justice (DOJ) - criminalSecurities Exchange Commission (SEC) - civil

UK Serious Fraud Office (SFO)

Of Interest

Books and Records provision greatly expands jurisdictionand penaltiesEffective ethics and compliance programs can lowerculpability score under Federal Sentencing Guidelines

Draft Guidance has been released for comment Act in force as of July 1, 2011. Not retroactive.

*Different from FCPA**Not written in Act, but appears possible

The Regulations : FCPA & UK Bribery Act Details


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What Does it Mean to Me?

Components of an Effective Program-USSG & Recent DPAs

Risk assessment Clear anti-corruption culture supported by board & senior officers Regular reporting to Board on anti-bribery and corruption initiatives

Code of Conduct and relevant written policies prohibiting bribery Clear procedures for hiring and conducting due diligence on 3 rd

parties (background investigations) Ongoing assessments of 3 rd party risk Training & communication plans for employees and third parties

Appropriate and consistent disciplinary procedures Well advertised hotline and strong anti-retaliation policies Rapid and thorough investigation capabilities


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What Does it Mean to me?

Types of Organizations at Most Risk

Any global company that has a significant distribution channel, usesa significant number of agents or engages in joint ventures

Oil, Gas and Energy (extractives)

Pharmaceutical, Medical Device and Healthcare High Tech and Telecommunications (newest target) Aerospace and Defense Chemicals Conglomerates


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Countries with Most Risk (Transparency International)


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Risk Posed to Corporations & Executives

Significant corporate fines Reputational loss & front page headlines Diversion from business

Personal liability (fines and/or prison) to senior management, boardmembers and anyone involved in the act of bribery

Dealing with monitor, management of Corporate Integrity Agreement, etc.

Career derailment


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Factors Increasing Bribery and Corruption Risk

Industries relying upon government customers, contract work orgovernment approval

Use of 3 rd parties, particularly in certain geographic regions

Reliance upon 3rd

parties to interact with government officials Inconsistent hiring and due diligence procedures (background

investigations) Unclear gift policies and use of petty cash Weak auditing function, or audits not directed towards this risk area Lack of management commitment to ethical standards (eg. lack of

discipline for violations, or pressure to make sales at any cost) Lack of training, communication, and awareness of policies Lack of Ethics and Compliance resources Culture of retaliation against whistleblowers


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Common Third Party-Related Red Flags (Non-Exhaustive)

The country where the transaction is taking place has a history of corruption, bribery or FCPAviolations.

The partner, consultant or agent was specifically recommended by a foreign official.

You are not clear or are suspicious about the reputation of a partner, agent or consultantbecause they are not forthcoming with information.

The partner, consultant or agent will be interfacing with governmental officials

The requested method of payment is unusual for a business transaction, or cash is requested.For example, the partner, consultant or agent requires that payment be made to a third partyor in some other country.

The partner, consultant or agent seems unqualified or lacks the resources to perform theservices offered. The only qualification the representative has is influence over foreignofficials.

The partner, consultant or agent has undisclosed principals, associates or subcontractor withwhom fees or commissions are split.


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Practical Advice

You cannot help your firm or yourself by participating in prohibitedbehavior

Seek assistance from Legal or Compliance with questions andbefore taking any actions

Do not turn a blind eye to suspicious behavior or circumstances Pay attention to employees potentially exposed to corruption risk Always ensure third parties are properly vetted and remain

compliant Ensure your employees are trained and understand firm policies


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Practical Advice, cont .

Encourage employees to report suspected wrongdoing Be careful with Gifts & Hospitality expenses.

Avoid facilitation payments Pay particular attention to all dealings with foreigngovernments (including government-owned businesses)

Help incorporate anti-bribery initiatives into standardbusiness processes

Help promulgate tone from the top


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Integrity has become a larger issue

Increased scrutiny by governments New legislation like Dodd-Frank, UK Bribery Act, etc

Stakeholder demand for transparency Fines and criminal prosecutions have reputational,

management and financial impact Client and business partner requirement for partnerships

based on integrity Global reach of companies increases span of risk No one wants to be associated with an organization

that isnt ethical Walking the walk and not talking the talk is more than an

oft-repeated phrase, but an expected part of whatorganizations do


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Finding & fixing problems has become more difficultdue to both the volume & the complexity

OECD

NACD

SEC

NYSErules

SOX

NASDAQrules

Employment & Labor

AS 3806

FSG

Thompson Memo

TIAACREFF

PCAOB

ISO9000ERM

AS 4360Baldridge

EuropeanQuality

CSRGRI

SA 8000ISO14000Quality

Legal Compliance

Prosecutorial Guidance

Wage &Hour

WorkplaceViolence

FDA

AS 4269

Government Contracts

Anti-Harassment

ContingentWorkforce

Hiring & Retention

HIPAA

Employee Information

GLBA

ISO 17709

COBIT

NIST

Whistleblowing

Turnbull

AFL-CIO

FFIEC

WebTrustSysTrust

COCO

CMM

FCPA

OFEHO

HumanCapital CMM

CISA

HHS Guidance

IIAGuidance EPA AML

Antitrust

Anti-Fraud

USA

PATRIOT

IRS & Tax CompetitivePractices

CCGG

SAS 94

Global Markets &Jurisdictions

Outsourcing &Extended Enterprise

M&A

National, State/Provincial &Local Jurisdictions

Used with permission of Corporate Integrity, LLC


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Whats the same and whats different

Size of an organization Industry Global reach Specific regulations Culture of the organization Culture of the industry Regional/country culture


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Culture is what is assumed

Greetings: U.S: One handed handshake Japan: Bowing and accepting a handshake. Egypt: Kiss on both cheeks (depending on relationship)

Gifts Japan: Exchanging gifts symbolizes the depth and

strength of a business relationship to the Japanese andare usually exchanged at the first meeting. One isexpected to be prepared to reciprocate.

Germany: Giving gifts is considered inappropriate. Muslim nations: No gifts of food during Ramadan. China: Gifts are given upon leaving. Giving a gift of a

clock is bad luck.


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Culture is hard to talk about

Its nearly impossible to talkintelligently about corporateculture.

Culture means different thingsat different levels of analysis.

You only notice it when itsdifferent from your own/whensomeone makes a mistake.

Speci c to the individual Inherited and learned

Speci c to group or category Learned

Universal Inherited

Personality

Culture

Human Nature


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Layers of Social Abstraction

Individual team functional organizational social identity

groupnational/ societal


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Hofstedes Dimensions of Culture

Hofstede (1997) has postulated five different work-related valueswhich characterize different cultures around the globe - Power distance index (PDI): Power distance is the extent to

which the less powerful members of organizations and institutions(like the family) accept and expect that power is distributed

unequally. Individualism (IDV) vs. collectivism: The degree to whichindividuals are integrated into groups.

Masculinity (MAS), vs. femininity: The distribution of emotionalroles between the genders.

Uncertainty avoidance index (UAI): a society's tolerance foruncertainty and ambiguity. Long term orientation (LTO), vs. short term orientation: First called

Confucian dynamism, it describes societies time horizon.


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Dimensions of Culture: U.S.A.


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Dimensions of Culture: Brazil


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Dimensions of Culture: China


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Dimensions of Culture: India


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GLOBE Cluster Analysis

N o r d i c An g l o

G e r m a n i c

L a

t i n

E u r o p e a

n

A f r i c a n

E a s t e r n E u

r o p e a n

M i d d l e E a s t e r n

C o n f u c i a n

S o u

t h e a s t

A s i a n

L a t i n

A m e

r i c a n

Ph

ilip

p ines

Indo

n e s ia

M a l a

y sia

India

Th

ail

a nd

Iran

E c u a d o

r

E l S a l v a

d o r

C o l u m

b i a

B o l i v i

a

B r a z i l

G u a t

e m a l a

A r g e n t i n a

C o s t a R i c a

V e n e z

u e l a

M e x i c o

D e n m a r k

F i n l a n d

S w e d e n

C a n a d a U .S .A.Au s t r a l i a I r e l a n d E n g l a n d S o u t h Af r i c a ( W h i t e S a m p l e ) N e w Z e a l a n d

A u s t r i a

T h e N e t h e r l a n d s

S w i t z e r l a n d

( G e r m a n S p e a k i n g )

G e r m a n y

I s r a e l

I t a

l y

S w

i t z e r l a n

d

( F r e n c h

S p e a

k i n g )

S p a

i n

P o r t u g a

l

F r a n c e

Z i m b a b w e

N a m i b i a

Z a m b i a

N i g e r i a

S o u t h

A f r i c a

( B l a c k

S a m p l e )

G r e e c e

H u n g a r y

A l b a n i a

S l o v e n i a

P o l a n d

R u s s i a

G e o r g i a

K a z a k h s t a

n

T u r k e y K u w a i t E g y p t M o r o c c o Q a t a r

S i n g a p o r e

H o n g K o n g

T a i w a n

C h i n a

S o u t h K o r e a

J a p a n


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Power distance andcorruption

An example of using publicdomain data to predictcorruption risk.

Transparency InternationalCorruption Perception Index,2010

Hofstede 2008

20 40 60 80

2

4

6

8

pdi

i n d e x


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Appendix A: Other Models of Culture


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Fons Trompenaars Dimensions of culture

Universalism versus particularism

Universalism: People place a high importance on laws, rules, values, andobligations. They try to deal fairly with people based on these rules, but rules comebefore relationships.

Particularism: People believe that each circumstance, and each relationship,dictates the rules that they live by. Their response to a situation may change, basedon what's happening in the moment, and who's involved.

Individualism versus communitarianism Individualism: People believe in personal freedom and achievement. They believe

that you make your own decisions, and that you must take care of yourself. Communitarianism: People believe that the group is more important than the

individual. The group provides help and safety, in exchange for loyalty. The groupalways comes before the individual.

Specific versus diffuse Specific: People keep work and personal lives separate. As a result, they believe

that relationships don't have much of an impact on work objectives, and, althoughgood relationships are important, they believe that people can work togetherwithout having a good relationship.

Diffuse: People see an overlap between their work and personal life. They believethat good relationships are vital to meeting business objectives, and that theirrelationships with others will be the same, whether they are at work or meetingsocially. People spend time outside work hours with colleagues and clients.


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Fons Trompenaars Dimensions of culture Neutral versus emotional

Neutral: People make a great effort to control their emotions. Reason influences

their actions far more than their feelings. People don't reveal what they're thinkingor how they're feeling. People want to find ways to express their emotions, even spontaneously, at work.

In these cultures, it's welcome and accepted to show emotion. Achievement versus ascription

Achievement: People believe that you are what you do, and they base your worthaccordingly. These cultures value performance, no matter who you are.

Ascription: People believe that you should be valued for who you are. Power, title,and position matter in these cultures, and these roles define behavior.

Sequential time versus synchronous time Sequential: People like events to happen in order. They place a high value on

punctuality, planning (and sticking to your plans), and staying on schedule. In thisculture, "time is money," and people don't appreciate it when their schedule isthrown off.

Synchronous: People see the past, present, and future as interwoven periods. Theyoften work on several projects at once, and view plans and commitments asflexible.

Internal direction versus outer direction Internal Direction: People believe that they can control nature or their environment

to achieve goals. This includes how they work with teams and within organizations. Outer Direction: People believe that nature, or their environment, controls them;

they must work with their environment to achieve goals. At work or in relationships,they focus their actions on others, and they avoid conflict where possible. Peopleoften need reassurance that they're doing a good job.


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The GLOBE Project's Dimensions of Culture

Power Distance: The degree to which members of a collective expect power tobe distributed equally.

Uncertainty Avoidance: The extent to which a society, organization, or grouprelies on social norms, rules, and procedures to alleviate unpredictability of futureevents.

Humane Orientation: The degree to which a collective encourages and rewardsindividuals for being fair, altruistic, generous, caring, and kind to others.

Collectivism I: (Institutional) The degree to which organizational and societalinstitutional practices encourage and reward collective distribution of resourcesand collective action.

Collectivism II: (In-Group) The degree to which individuals express pride, loyalty,and cohesiveness in their organizations or families.

Assertiveness: The degree to which individuals are assertive, confrontational,and aggressive in their relationships with others.

Gender Egalitarianism: The degree to which a collective minimizes genderinequality. Future Orientation: The extent to which individuals engage in future-oriented behaviors such as delaying gratification, planning, and investing in thefuture.

Performance Orientation: The degree to which a collective encourages andrewards group members for performance improvement and excellence.

The Global Leadership and Organizational Behavior Effectiveness (GLOBE)

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Questions?

JAMES MEACHAM, CRISC

Ethics and Com pliance Consul tant ,Adviso ry ServicesCompliance Americas

[email protected] www.saiglobal.com/compliance

5637 E 2nd Street

Long BeachCA 90803

+1 562 219 2389 O+1 206 650 7490 M+1 562 200 0184 F
mailto:[email protected]://www.saiglobal.com/compliancehttp://www.saiglobal.com/compliancemailto:[email protected]

Cultural Influences in Anticorruption Training

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