FIGHTING CORRUPTION THROUGH COLLECTIVE ACTION - a Guide for Business

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A joint effort with Businesses, NGOs and Multilaterals

FIGHTING CORRUPTION THROUGH COLLECTIVE ACTION - A Guide for Business -

© 2008 The International Bank for Reconstruction and Development / The World Bank (1818 H Street, NW; Washington, DC 20433)

All rights reserved The findings, interpretations, and conclusions expressed here are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank cannot guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply on the part of the World Bank any judgment of the legal status of any territory or the endorsement or acceptance of such boundaries.

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Legal Disclaimer The information contained herein is provided for informational purposes only and should not be construed as legal advice on any subject matter. The reader should always seek the legal advice of counsel in the appropriate jurisdiction concerning any legal questions directly or indirectly related to any subject matter covered by this guide. The Guide was created as Supporting partner: InWEnt Capacity Building a joint effort of: International (Germany)

We thank the following organizations for their feedback and advice

. BDI (Bundesverband der Deutschen Industrie e.V., Germany) Center for International Private . Haylide Chemicals (India) Enterprise (US) . Microsoft (US)

Transparency International USA . Pacto Ethico Commercial Paraguay . Sanlam Limited (South Africa) Global Advice Network (Denmark) . The Prince of Wales International Business Leaders Forum (UK) . ThyssenKrupp AG (Germany)

Short profiles of these organizations are found at the end of the document Table of contents

Fighting Corruption Through Collective Action – a Guide for business

Content

Page . Collective Action Guide – 1. Introduction 3 Introduction

2. Background 8 . Application areas and benefits of the Guide for different target 3. How to fight corruption? 17 groups 26 4. Fighting corruption through . How to use the Collective Action Collective Action Guide

5. How to implement 35 Collective Action?

6. Contact list and best practices 61

Page 3 Collective Action Guide - Introduction

This Guide is designed to help companies meet the legal, these tools or had enough practical information to consider competitive, economic and ethical challenges posed by corruption them. A coalition of interested businesses and other as they do business around the world. Information in this Guide is experienced anti-corruption experts has therefore produced intended for use by business but may also be of interest to this Guide to support the global business community and other governments and other organizations concerned about reducing stakeholders by filling this information gap. corruption. ”Collective action” is a collaborative and sustained process of Major advances are occurring in both the law and internal cooperation between stakeholders. It increases the impact and corporate practice to prevent corruption in business. Specifically, credibility of individual action, brings vulnerable individual international conventions, new national laws, increased players into an alliance of like-minded organizations and levels enforcement of existing laws, and voluntary initiatives against the playing field between competitors. Collective action can corruption all contribute to growing global support for anti- complement or temporarily substitute for and strengthen weak corruption measures. local laws and anti-corruption practices.

Although most attention has focused on government enforcement This Guide explains collective action, its benefits, and how to and steps taken by individual companies to improve their internal use it. It aims at demonstrating that the private sector can be systems and controls, important developments also are occurring part of the solution to prevent and fight corruption and in a third area commonly referred to as “collective action.” provides incentives for companies to become more actively Innovative tools are being developed that allow companies to involved. It also shows how collective action can support come together collectively and voluntarily to raise practice SMEs in their fight against corruption by providing a broader standards and to reduce corruption and competitive risks on a alliance that can support smaller actors. project and sectoral basis. These range from integrity pacts for individual procurements to codes of conduct and collective public The Guide is intended primarily for use by anyone with policy initiatives. responsibility for a major project or market, and who operates in an environment where corruption is, or may be present. Although a significant number of tools for collective actions are Others who may benefit from this material include senior now available, and continue to evolve, many companies that want executives, company board members, government officials, to be more proactive in fighting corruption have not known about civil society and others directly or indirectly affected by the adverse effects of corruption on business and society. Page 4 Application areas and benefits of the Guide for different target groups

Why is this guide useful for me?

Senior Ability for regional and local managers to positively and proactively impact possible corruption situations – management thereby reducing corporate risks of lost business, disputes and/or regulatory involvement

Regional CEOs \ Division heads Practical strategies for proactive treatments of corruption risks

Chief Compliance Officers Practical reference guide when faced with corruption dilemmas

Business Guidance on how to get involved in various forms of collective action, and to positively impact associations membership

Guidance to market participants on ways to supplement and strengthen existing governance framework to Government fight corruption and support competition

NGOs Advice on ways to participate in and facilitate collective action while advancing their own respective goals

Suggested ways to form and be part of a collective action, particularly through business associations, and SME to thereby directly improve the ability to compete with larger companies or to comply with larger companies’ requirements for suppliers to have anti-corruption policies in place

Page 5 How to use the Collective Action Guide

There are several ways that readers can use the Guide: Please note that all processes in this guide are described from a company’s perspective. NGOs and governments If you are new to the threat of corruption, it may be useful to could also benefit from this by better understanding the review the entire document. In particular, Chapters 1 business view and how they could play a role in the process. (“Background”) and 2 (“How to Fight Corruption”) explain why it is critical for companies and others to actively promote Please note that this document and the associated website uniform anti-corruption standards and practices in their (see www.fightingcorruption.org launched in [June 2008]) business environments. will be evolving resources for those interested in using collective action to combat corruption. Readers with a primary interest in the different collective action approaches to anti-corruption may choose to go Members of the business and anti-corruption communities directly to Chapters 3 (“Fighting corruption through Collective are encouraged to share their collective action observations, Action”) and 4 (“How to implement Collective Action”). experiences and methodologies through the website – and to thereby contribute to making this resource more useful over Additional resources and background material are found in time. Chapter 5 (“Contact list and best practices.”)

The guide provides an overview on collective action; it is not intended to be comprehensive* or dispositive. The facts and circumstances of a particular situation determine which possible form of collective action may be used, and how it can be implemented.

* Specific legal rules, such as those covering facilitation payments, are not directly covered in the Guide, since they are treated differently in various countries. Please see http://www.oecd.org/topic/0,3373,en_2649_37447_1_1_1_1_37447,00.html for country-specific and general anti-corruption information.

Page 6 Guide provides instruction on how to initiate a Collective Action and contains examples of the different possibilities

Content of the guide

Find the right approach Follow detailed Benefit from various real life for your situation process steps examples and templates

Integrity Pact / Anti-corruption declaration Principle-based initiative Certifying business coalition

Decision tree1 helps to design the approach for project related Four Integrity Pact contract examples provided – however contracts collective actions 2.1 How to get started? have to be adjusted to specific prerequisites of country and project

Decision tree 1 Initiate business coalition (1/2) Integrity Pact contract examples

Are tender 1 2 3 4 documents Is customer willing to Establish . IP template from . IP from project "Berlin Yes No Yes 1.1. Promote Approach Concept already finalized fight corruption 2) Create contacts to … Transparency International airport" collective concept government note / released? facilitator . Specifically designed for . Seen as best practice action to 4 customer via contracts in the defense example Does your . Identify 1st meeting with . Assess the . Conduct workshop to facilitator potential evaluate business industry . Available in German only company Yes No facilitator appropriate facilitator . Present oversight role of situation, risk of perceive government (e.g. corruption, benefits . Create list of company corruption as anti-corruption of anti-corruption 1 potential partners profile, Examples major barrier to bureaus) activities and best compliance Integrity Pact Integrity Pact Berlin . Companies do business in Are third parties 2 policy and practice examples template defence industry airport respective available to influence . NGOs Company concept for . Summarize intention 1) customer? Facilitator country? Yes 1.2. Involve third . Religious collective action and objective of (e.g. anti-corruption (NGO / IO) groups (one may use initiative in concept . IP contract used by ONGC . IP contract from project party to material from note offices of government, 3 . MDBs India "Hydroelectric power plant", No multilateral donors) promote 4 chapter 4 of this . Facilitator to send collective . Prioritize: which manual) Ecuador (English translation) companies / other out concept note to . Based on contract of Berlin No need for collective action to stakeholders . Ask for potential partners airport . No "Social Witness" feedback / and follow-up action – consider other customer need to take part . Detailed description of No to ensure recommen- ways to continue doing dations Arbitration Tribunal business with integrity sufficient attention / For details please Prerequisites for project-related collective action not met – go to decision tree 2 credibility? refer to slide 55 to evaluate possibility of principle – based / Certified association IP Ecuador ONGC Integrity Hydroelectric IO: International Organization MDB: Multilateral Development Bank IP: Integrity Pact Pact 1) Decision has to be made by internal compliance / risk assessment team in headquarters. Various sources for country specific assessment Source: Interviews Source: Internet, Interviews are given on slides 81 - 83 2) For details: see slide 87 Page 52 January 2008 Page 83 January 2008 Page 39 January 2008 . Classification and definition . Process steps . Contract templates of Collective Action . Highlighted topics and . Profiles of initiatives . Decision trees issues to consider . Contact list (e.g. anti-trust) Additional links and examples can be found on . Definition of corruption, consequences of corruption Basis www.fightingcorruption.org . Overview on various ways to fight corruption

Page 7 Table of contents

Fighting Corruption Through Collective Action – a Guide for business

Content

Page . Definition and consequences of 1. Introduction 3 corruption

2. Background 8 . The business opportunity and SMEs 3. How to fight corruption? 17 . Collective action as a tool to fight 4. Fighting corruption through corruption Collective Action 26 . Characteristics and applications 5. How to implement of Collective Action 35 Collective Action?

6. Contact list and best practices 61

Page 8 Corruption is the misuse of entrusted power for personal gain.

Definition of corruption

Corruption is commonly defined as the misuse Collective action initiatives typically emphasize of entrusted power for personal or private gain. the “supply” side of bribery, because that is The primary focus of this Guide is on bribery where companies can have the greatest impact. used to obtain or retain business or for any Many of the tools described in this Guide also other improper business advantage. Other address bribery’s “demand” side, particularly forms of corruption include embezzlement, those with a public advocacy component. fraud, extortion, bid-rigging, political corruption and undue influence, and “state capture” (i.e., Bribery and other anti-corruption laws can be fixing rules of the game). complicated and it is important to seek expert guidance to understand them. Common examples of bribery include cash or other payments to secure a contract, kickbacks, A good practical rule of thumb for business steered subcontracts, improper political or operations is that if you wouldn’t want others to charitable contributions, excessive gifts, and know about a payment, it probably shouldn’t be illicit payments to obtain a license or other made. regulatory action.

Page 9 Corruption negatively impacts all levels of society

The consequences of corruption Facts

“…since 1990, the [U.S. Department of Individuals Justice] has brought over twice as many prosecutions against individuals . Triggers criminal, civil and employment sanctions as it has against corporations. The . Ruins careers & reputations burden of responsibility continues to be borne by individuals alongside Businesses companies….” (Shearman & Sterling) . Causes loss of reputation . Increases cost of doing business "Corruption adds as much as 25% to the cost of public procurement" . Undermines innovation since bribes, instead of performance, determine (UN Global Compact) project award "31% of firms in Latin America had to . Jeopardizes mergers & acquisitions and inhibits ability to conduct capital pay bribes to 'get things done'" (World Bank survey) market transactions . Debars firms/businesses from tenders (government, development banks) The World Bank website contains a list Governments / markets of debarred firms and individuals which/who have been discovered . Hampers the development of markets and drives away investments through Bank investigations to have . Undermines the rule of law engaged in fraudulent, corrupt, . Leads to loss of confidence in institutions and the de-legitimization of collusive, or coercive practices. Listed firms and individuals are subject to government restrictions concerning eligibility for . Increases costs of services/products and lowers the quality of services as future contract awards. contracts are not ordinarily awarded to the appropriate bidder http://go.worldbank.org/G9UW6Y0DC0 Page 10 Fighting corruption collectively with all stakeholders increases the impact of individual action

Key characteristic ”Collective Action”:  Is a collaborative and sustained process of Collective action usually cooperation between stakeholders. involves various  stakeholders Increases the impact and credibility of individual action.  Brings vulnerable individual players into an alliance of like-minded organizations. Companies  Levels the playing field among competitors.

Collective  May complement, or temporarily substitute for and Action strengthen, weak local laws and anti-corruption practices. Civil society Government

BUT: Collective Action is not easy or quick, and requires patience, hard work and expertise.

Page 11 Why should companies also engage against corruption collectively - as well as individually?

Businesses understand that corruption is both socially “integrity pacts” * containing specified non-compliance destructive and endemic in many areas. Society and remedies, to business associations with more general business benefit where corruption is driven from consensus-building purposes, such as codes of markets – and where fair competition on the merits of conduct. goods and services, reduced costs and better value to the customer are therefore possible. It increases an individual company’s impact by making fair business practices more common and Smart businesses therefore apply different anti- elevating individual action or vulnerable individual corruption practices and efforts, including collective players such as SMEs into an alliance of like-minded action, in a variety of ways. With the continuing and organizations. growing attention to corruption from the media, regulators, and society in general, companies are well Operationally, collective action can be incorporated advised to be proactive rather than passive in this area. into a company’s project management, corporate risk management, and compliance activities. Collective action is a proven method of fighting corruption. Mexico, Indonesia, Ecuador and Germany Strategically, using collective action is a tangible (among many others) are locations where business and demonstration of a company’s commitment to many of other stakeholders presently use various forms of the principles underlying corporate social responsibility collective action. and “effective” compliance program activities. Ancillary corporate benefits may develop from these practices as It is used in a variety of industry sectors (e.g. energy third party stakeholders (investors, non-governmental and construction) and conditions (in both emerging and organizations and regulators) recognize a company’s in developed markets). Collective action also exists in a emphasis on positive and sustainable business variety of different forms – from project-specific behavior.

* The integrity pact approach was originally developed and is still primarily used by Transparency International and its various national chapters, as a multi- stakeholder tool for promoting project integrity. Integrity pacts involve government, the private sector and civil society in substantive anti-corruption activities. Page 12 Small and Medium-sized enterprises (SMEs) can also benefit from and participate in Collective Action

• SMEs are affected disproportionately by corruption and often lack the financial and human resources to install the necessary systems to prevent corruption or to resist corruption demands

• Corruption is a major reason for SME business failure – particularly in developing and emerging markets

• Collective action can be a way for SMEs to leverage influence and power to more effectively resist corruption

• Business & professional associations are often a primary support resource for SMEs and can support SMEs in implementing better anti-corruption systems and provide a platform for SMEs to engage against corruption collectively

• Some business & professional associations working with SMEs have already developed simple and efficient anti-corruption tools in various high risk situations*

[*www.business-anticorruption.org] Page 13 Collective Action is an advanced step of fighting corruption and helps to “level” the playing field

Business Three levels to fight corruption as a company environment with corruption 3. Collective reduced or eliminated 2. External

1. Internal . Reach out to industry . Share internal policies, . Assess risks peers, suppliers and other experiences, best stakeholders1) via neutral . Implement anti-corruption practices and success facilitators and initiate joint policies and compliance stories with external activities to fight corruption programs stakeholders . Provide guidance to managers

Even companies that have Collective Action implemented internal measures helps to "level the to fight corruption may fear playing field" and competitive disadvantages or creates a business lack the leverage to change the environment with business environment through reduced risk of their individual action… corruption

* E.g. Non-Governmental organizations, business associations Source: Global Compact – Business against Corruption, a framework for action, 2006 Page 14 Collective Action involves various stakeholders; the activities and degree of enforcement can vary

Characteristics of collective action

Key characteristic Degree of application and enforcement

Ethical commitment External enforcement Collective action usually involves various Anti-corruption declaration Integrity pact stakeholders Short- . Principles bind signatories to . Formal, written contract between term / not engage in corruption customer and bidding companies project during project . Bidding and implementation based . Public commitment leads to processes monitored by external agree- enforcement 'by honor' and monitor Companies ment peer pressure . Sanctions apply in case of violations Collective Action Collective Action Principle-based initiative Certifying business coalition . Principles bind signatories to . Compliance-related Long- not engage in corruption in prerequisites for membership term- their daily business Civil society Government initiative . Adoption of membership . Public commitment leads to requirements checked by external enforcement 'by honor‘ audits . Initiative can advocate anti- . Members get certified or will be corruption with government excluded

Page 15 Collective Action can be applied in every region and sector, but it is especially relevant for high-risk regions and sectors

Direct relationship between strong governance and risk of corruption

High-risk regions High-risk sectors High-risk transactions

The risk of corruption exists, to some degree, in every region and The risk of corruption exists in The risk of corruption exists in country. every sector. every transaction.

Country specific sources of Information on sector specific Information on high-risk information for assessment of corruption risks in selected transactions in selected countries specific risks are given on slides 62 countries can be found at can be found at www.business- - 64 www.business-anti-corruption.org anti-corruption.org under country profiles. Good state governance limits the Bringing transparency to risk of corruption. Governance Implementing sectoral codes of transactions related to public includes the process by which conducts or industry specific anti- procurement, high value national, regional and local corruption standards can limit the transaction or projects with many governments are selected, risk of corruption in high risk sub-contractors or involvement of monitored and replaced; the countries. The formation of intermediaries and agents can capacity of the government to industry focused anti-corruption greatly reduce the risk of effectively formulate and implement alliances can also be an effective corruption. Integrity pacts, policies sound policies; and the respect of anti-corruption response. on agents/ intermediaries can citizens and the state for the Examples and can be found at support transparency in such institutions that govern economic wwww.fightingcorruption.org transactions. and social interactions (including under resources. respect for a free and open media).

* Certain conditions increase the success probability for Collective Action; see e.g. slide 58 Page 16 Table of contents

Fighting Corruption Through Collective Action – a Guide for business

Content

Page Three levels to fight corruption 1. Introduction 3 . Internal corporate compliance 2. Background 8 programs

. External communication 3. How to fight corruption? 17 . Collective Action 4. Fighting corruption through Collective Action 26

5. How to implement Collective Action? 35

6. Contact list and best practices 61

Page 17 There are three levels at which a company may fight corruption – Collective Action is an advanced step.

Three levels to fight corruption as a company:

Each company individually Collectively Business environment with corruption 3. Collective reduced or eliminated 2. External

1. Internal

1. Assess corruption risks 4. Share internal policies, best 5. Reach out to industry 2. Implement anti-corruption practices, experiences, and peers, suppliers and other policies as part of an success stories with stakeholders via neutral overall corporate external stakeholders facilitators and initiate joint compliance program activities to fight corruption 3. Provide specific guidance to managers

Slides 19–21 Slide 22 Slides 23–25 / Chapter 4–6 [] Source: Global Compact – Business against Corruption, a framework for action, 2006 Page 18 1. Internal

To deal with corruption risks, a company needs to establish an ethical corporate culture and implement a strong anti-corruption policy

Ethical and compliance risks - examples

- , M d s l r r s a r i p o o e r o u h c a n t t e i l t n l o f n n t t k R f y e s r b c s d e s o u o e m y e t a r h e e p c v a n e p b q e n t o e t o r o p : u i i o s m r o r n n h s & e e m h e p n t s e s g i i s n R m a s o is t t t s c f r o s g y s t / D f n h l e i o n D a p i s i a e s ia f q s t t p i c o t o g c s u i s D i b o l o a f i , e f f r n t n o a i i t s p b t c r c a r a a t i e i l b v f y i s l o t u e m a , r t l t i , e i o o n n n t s A s , n

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Corporate assets to be protected: People, Property, Reputation etc.

Page 19 1. Internal

‘Effective' corporate compliance programs start with leadership commitment and include a number of general accepted principles

Success factors and principles of corporate compliance programs

Success Factors Principles *

1 Standards and procedures to prevent and detect mis- Leadership, communications, and behavior – and specifically prohibiting bribery in any form actions which visibly and consistently Strong 'tone 2 Oversight from a knowledgeable Board of Directors support the program and its underlying from the top' principles. Avoid any appearance of 3 Program management by senior personnel with double standards in behavior operational responsibility and clear lines of authority 4 Preventive operational safeguards consisting of conduct codes, internal controls and audit, anti-retaliation Involving compliance in operations measures and background screening of candidates for A business and recognizing it as supporting, not substantial authority positions – among other activities culture which preventing, corporate sales – so that values 'good 5 Communications and training to support the program sales are more likely to have less sales' corruption risk 6 Reinforcement of appropriate behaviors through incentives and consistent discipline 7 'Lessons learned' responses to discovered incidents – Practices A program which is prioritized, well- emphasizing root causes, process adjustments and and communicated and focused on the accountability processes particular facts and circumstances of 8 Engagement with other businesses and other stakeholders which are the business practical 9 Separation of internal functions and responsibilities

* Both regulatory frameworks (OECD Convention on Combating Bribery, UN Convention Against Corruption, US Sentencing Guidelines, etc) and voluntary frameworks (TI Business Principles, among others) generally reflect many of these program principles. Page 20 1. Internal

To continuously improve a compliance program* a company should follow the practices of "Assess“ - "Prevent“ - "Detect" - "Respond"

Assess Prevent Detect Respond

. Self Assessment of . Policies & . Compliance . Consequences for Corruption Risks Procedures controls misconduct . Create risk profiles . Business conduct . Risk management . Policy of misconduct based on: guidelines system and sanctioning . regions . Specific procedures . Guidance and process . governments for agents, gifts & thresholds for . Global case tracking entertainment escalation of . project size . Tracking tool for . Checks/balances compliance issues compliance . project type (e.g. . Integration with . Program . Internal and external medical, natural existing internal communication reporting on resources etc.) control (e.g. FCPA) . Internal and compliance cases . agents / brokers/ external (CSR) . Whistleblower intermediaries . Application of . Training mechanisms involved lessons learned Targeted training . Forensic & part of . Identify root causes . supply and programs for standard audits and correct distribution chains managers and - Forensic audit processes operational function personnel - Audit review board

* Additional compliance program information can be found at the websites of various anti-corruption and compliance related organizations. Page 21 2. External Publicly communicating company standards and policies will help employees and business partners to resist bribery, and encourage the reporting of bribe incidents

External communication

. Make a clear and unambiguous statement of principles and Benefits policy . Set expectations that business partners and supply and . Might trigger interaction distribution chain participants will conform to company policy with other organization . Report to stakeholders on internal activities to fight corruption that can give feedback, propose changes and . Share experiences and best practices share best practice examples . Annual report . Separate . Contributes to mitigate . CSR report section on company risk of corruption and will . Case studies website help employees to withstand potential demands for bribes and . Presentations . Press have confidence to report at anti- releases them corruption and . Round table . Builds reputation of being business discussion an ethical company conferences with journalists

CSR: Corporate Social Responsibility Page 22 3. Collective

Collective Action can help to overcome corruption dilemmas by making compliance the norm and isolating bad actors

Corruption Dilemma Collective Action . Corruption has a negative impact on companies, . Collective Action: governments, societies, and economies . Is a collaborative and sustained process of . Despite costs to some, certain individuals or cooperation between stakeholders groups benefit from corrupt transactions . Increases the impact and credibility of individual . Efforts by one individual organisation might not be action sufficient to change a corrupt environment . Brings vulnerable individual players into an alliance of like-minded organizations Governments Companies Civil Society . Levels the playing field between competitors . May complement, or temporarily substitute for and strengthen. weak local laws and anti- corruption practices . Officials often . Sales employees . Civil society have are often paid extra often lacks discretionary salary or bonuses if access to . The central objectives of Collective Action are to: authority they win contracts information on . Strengthen anti-corruption commitments . Weak governance . Companies with public between and among different stakeholders prevents strong anti- procurement monitoring and corruption policies transactions . Create incentives for stakeholders to avoid sanctioning of lose contracts to bribery and corruption in transactions and corrupt behavior corrupt competitors eliminate violations by individual members . SMEs lack resources to . Create incentives to avoid corruption by counter demands individuals within companies and governments

Page 23 3. Collective

All stakeholders benefit from Collective Action

Benefits of anti-corruption Collective Action from different stakeholders' perspective*

Bidding companies Customer . Increased chance of fair selection as a supplier and . Enhanced competition in bidding process – most efficient, enhanced access to markets not best connected bidder wins bid . Protection from legal penalties . Enhanced reputation . Saving of costs, formerly paid as bribes . Avoid time consuming lawsuits / blocking points after . Enhanced reputation decision on supplier company . Employees and competitors behave ethically and . Focus of business relationships on quality and reliability responsibly of goods and services

Government Civil Society/Non-governmental Organizations

. Incentives to be transparent . Improved access to essential resources, such as health care and . Strengthened rule of law, increase credibility and education and better social development if money is invested in political stability social projects instead of in bribery . Higher investment levels from domestic and . Higher quality products and services, less risk of ‘faulty’ products and foreign investors accidents . Improve image of country . Increased trust and confidence in business . Effective governance mechanisms and more . Consistent and fair enforcement of regulations effective procurement . Greater traction for their objective of more transparent environment and attention to corrupt practices

1) Furthermore, Collective Action indirectly supports the internal control over decision-making processes: if bribery occurs, that also normally means that the usual controls and chains of command within one or more organizations have been avoided or manipulated, and are therefore weakened.)

Page 24 3. Collective

Collective action tends to be more successful if convened and supported by a neutral facilitator

Model 1. One or more companies Model 2. Facilitator convenes Role of facilitator convene collective action collective action . Bring stakeholders together and provide neutral platform . Best-practice sharing / advice . Nominate external monitor or auditor

Role of company . "Make first move" and initiate action . Act as champion

Facilitator candidates

. NGOs . May raise anti-trust concerns . Individual company can . Leading role of one company indirectly initiate Collective . Credible individuals may prevent other companies Action . Business chambers from participating . Facilitator has better . If only companies participate in opportunities to approach List of potential initiative, civil society may different stakeholders facilitators on slide 65 question the outcomes . Increased credibility of initiative

NGO: Non-Governmental Organization … convening party / facilitator Page 25 Table of contents

Fighting Corruption Through Collective Action – a Guide for business

Content

Page . Decision making process 1. Introduction 3 . Examples of Collective Action 2. Background 8 . Possible types of Collective Action 3. How to fight corruption? 17 . Anti-corruption declaration 4. Fighting corruption through Collective Action 26 . Integrity Pact . Principle based initiative 5. How to implement Collective Action? 35 . Certifying business coalition

6. Contact list and best practices 61

Page 26 Collective Action is more successful if key questions are asked at an early stage

Key decisions

Is collective action the best Which type of collective Which factors are needed to way to address the problem? action is appropriate? sustain the collective action?

. Does the company have anti- . Project-based: . Timeline: corruption policies in place? . Corruption problem exists only . Milestones for short-term . Do competitors have anti- in one project? deliverables and long-term corruption policies . A bigger alliance of companies goals . Are there doubts about the clients and stakeholders is not . Is there an end-point? behavior? possible? . Organization: . Is the company operating in a high . Company wants to test . Who will be responsible to risk country / sector / or is this a collective action in a pilot manage the project? high risk transaction? project first . Who will be the facilitator? . Could individual action be sufficient . Long-term initiative: . Who will host the initiative to address the problem? . A broader change of behavior physically? is required . Funding: . Decision tree 1 . Project-based initiative is not . Who will fund the initial stage possible (facilitator, monitor, auditor, . A successful project-based other external parties required) initiative is expanded into a . How will the initiative be wider alliance funded in the longer-run? . Decision tree 2

Page 27 How can a company decide if Collective Action is appropriate for its particular situation?

Decision tree 1 “Collective action – yes or no?” No need for Collective START Are there Action reasons to Is corruption a Does your Do all your doubt that the major risk for your company have competitors customer (govt. No company * an anti- have anti- or company) -High risk country Yes corruption Yes corruption Yes will conduct a - High risk sector policy and policies and fair tender? - High risk procedures? procedures in transaction place? Did other Consider No or don’t companies other No No express know No possible willingness to responses fight (slide 57) Are there No need for Collective Implement internal Promote corruption? local Action –continue doing anti-corruption collective action facilitators business consistent policies and No or other with law and internal procedures Yes compliance policies corruption initiatives? Promote collective action Yes

* Decision should be made by, or with the involvement of, the internal compliance / risk assessment team in corporate headquarters. Various sources for country specific assessment are given on slides 62 - 64 Page 28 There are various types of Collective Action with different degrees of application and enforcement Color-code used on following slides to show link to Collective Types of collective action Action forms covered in the guide

Applications Degree enforcement

Ethical commitment External enforcement Project / transaction based agreement Integrity pact Anti-corruption declaration . Formal, written contract between . Anti-corruption principles bind customer and bidding companies signatories to not engage in corruption during project . Bidding and implementation processes monitored by external . Public commitment leads to monitor enforcement 'by honor' and peer pressure . Sanctions apply in case of violations (Details on slide 32) (Details on slide 31) Collective Action Principle-based initiative Certifying business coalition Long-term initiative . Ethical principles bind . Compliance-related prerequisites for membership Business coalition signatories to not engage in corruption in the daily business . Adoption of membership Independent . Public commitment leads to requirements checked by external Company facilitator A enforcement 'by honor‘ audits Company . Initiative can advocate anti- . Members get certified or will be Organi- C zation A corruption with government excluded (Details on slide 33) (Details on slide 34) * These four primary options are illustrative of the many different variations of collective action that exist. Individual facts and Page 29 circumstances will define the best option for a given potential collective action situation. Successful examples of Collective Action exist that can be used for guidance

References to detailed case descriptions

Ethical commitment External enforcement

Project / transaction Anti-corruption declaration Integrity pact based agreement Code of Mexico pharmaceutical suburban train marketing (page 67) practices Frankfurt (page 68) Berlin waste airport incinerator Contract (page 66) (page 69) templates and Collective more case Action "Empresa EMB Bavarian studies on Long-term initiative Limpa" construction slides 82 - 83 Brazil industry Business coalition (page 78) China (page 71) Independent business Pacto Etico Company facilitator leaders Comercial A Company forum Paraguay Organi- C (page 76) (page 72 - 75) zation A Principle-based initiative Certifying business coalition

Page 30 Project / transaction based agreement: Anti-corruption declaration

Anti-corruption declarations are a public commitment, without external monitoring, to act appropriately during a project

Concept of anti-corruption declarations

Objectives

. Prevent corruption in Signs Sign individual projects and Anti-corruption business transactions declaration . Initiate open discussions on corruption . Transparency . Collectively set individual . No corruption behavior expectations Customer . No bribery Bidding companies . Reduce risk of corruption (Government entities or . Fair business . Includes anti- as bribe givers and takers large companies) conduct corruption declaration in tender documents realize that inappropriate . Commitment that . (generally no behavior may be employees will not sanctions . Commitment that scrutinized accept or solicit bribes included) employees will not offer, pay, accept or . Create a signed solicit bribes statement that can be published and shared with sub-contractors

Page 31 Project / transaction based agreement: Integrity Pact

Integrity pacts are formal contracts which are externally monitored and help increase transparency in projects Concept was developed by Transparency International Concept of Integrity Pacts in the 1990's

Objectives External monitor . Monitors all transactions, documents and meetings . Informs customer in case of violations . Preventative measure to Monitors reduce risk of corruption by increasing transparency of individual projects and Signs & Integrity Pact Sign & performs perform business transactions Customer contract . Create level playing field (Government entities . Formal, written contract to among bidding companies or large companies) establish mutual rights and by external monitoring of . Commits that obligations between processes employees will not customers and bidders . Introduced at pre-tender Bidding companies . Provide consequences for accept or solicit bribes & phase . Commits that employees corrupt behavior enforces policy . Principles: will not offer, pay, accept or . Transparency solicit bribes, or collude . Help protect participants . Allows external from improper demands . No corruption . Allows external monitoring monitoring . No bribery . Discloses expenses related . Send a visible anti- . Discloses relevant . Fair business conduct to offer preparation corruption message to the project information . Sanctions apply in case of public . Often initiates the infringement of contract . Cooperates in case of Integrity Pact . Dispute resolution through violations arbitration Source: Transparency International Page 32 Long-term initiative: Principle-based initiative

Principle based initiatives against corruption engage various stakeholders to promote transparent business conduct

Concept of principle based initiatives

Objectives

. Long-term initiative to Different stakeholders get l l ona ona promote appropriate together to establish an Opti Opti ent ent business conduct within initiative against corruption elem elem certain country / sector Advocacy / external Training . Leverage the voice of the communication program e public, NGOs, religious Cor ent bodies and others to elem effectively address the Shared problem of corruption Agree on principles / l shared Charter ona . Join forces to push the Opti principles ent government to implement elem o N & anti-corruption laws (if ion ficat Best practice veri tion country legal system ifica exchange / cert does not yet have anti- Information database corruption laws or if enforcement is weak)

Source: WBI e-discussion documentation, others Page 33 Long-term initiative: Certifying business coalition

Certifying business coalitions monitor and certify compliance of their members with core shared principles against corruption

Concept of Certifying business coalitions

Objectives

* . Long-term initiative to Auditor l l ona ona promote standards of Checks whether companies take Opti Opti ent ent business conduct within effective action to implement elem elem certain country / sector principles Advocacy / external Coalition . Signal to the public that Audits communication training members take measures Core program ent to fight corruption elem . Position standards as a Shared competitive advantage principles / t l (e.g. certified members en Charter iona elem Opt do not need to document Core ent elem their compliance Verification of measures in every compliance & Best practice tender) resulting certification exchange / Information . Strengthen anti- database Optional: Involve government, corruption mechanisms NGOs, IOs and others as facilitator / knowledge source / interested parties * Independent accounting / auditing companies; trusted third parties (e.g. academic advisor, NGO or association) Page 34 Table of contents

Fighting Corruption Through Collective Action – a Guide for business

Content

Page . Decide whether collective action 1. Introduction 3 is project based or longer term

2. Background 8 . How to implement a project / transaction based 3. How to fight corruption? 17 initiative?

4. Fighting corruption through . How to implement a long- Collective Action 26 term initiative . Success factors 5. How to implement 35 Collective Action? . How to avoid anti-trust issues

6. Contact list and best practices 61

Page 35 Decide which type of collective action is the most appropriate form given the circumstances*

Ethical commitment External enforcement

Project / transaction Anti-corruption declaration / Integrity pacts: (slide 43-51) based agreement Preferred approach if company concentrates on large projects . Infrastructure (e.g. Power Plants, Transportation) . Events (e.g. Olympics, National Games) . License application . Post-contract-award implementation

Collective Action Long-term initiative Principle-based initiative Certifying business coalition (slide 52) (slide 53) Business coalition Preferred approach in difficult / Preferred approach if company multicultural business environments wants certain level of enforcement / Independent verification Company facilitator Focus on changes outside of the A initiative (e.g. improve legal system) A trusting business relationship among Company Organi- C rather than enforcing policies industry peers is required zation A

* The use of one form of collective action does not necessarily preclude the simultaneous use of other forms of collective action or other anti-corruption measures. Facts ands circumstances will define what is appropriate to use in the given situation. Page 36 Decision tree2 helps to decide if stakeholders should engage in project based or long-term collective action initiatives

Decision tree 2 “Which type of collective action is appropriate for me?” Project / transaction Are tender Is customer based initiative Project documents already No willing to fight Yes (slides 38 -50) finalized? corruption?

START Yes No Try to implement a long-term initiative

Do you face Do any appropriate corruption risk in a business coalitions Yes particular project already exist? Join coalition and or in general?* setup anti- corruption No initiative Long-term initiative Country (refer to slide 55) (slides 38-41 and 51- 56) Did major companies Sector express their will to fight corruption in Yes respective country / How to get sector? started (refer to slide 38) No

* high-risk country or Prerequisites for collective Are any potential action not in place high-risk sector No facilitators available? (refer to slide 57 for suggestions how to deal with this situation)

Page 37 Project based initiative Long-term initiative

How to get started? The first steps are similar for both types of collective action

Initiate collective action (1/2)

1 2 3 4 Establish Develop Define Assess role of contacts with concept … stakeholders government facilitator note 4 . Identify 1st meeting with . Assess the . Conduct workshop to Company appropriate facilitator* potential oversight evaluate business facilitator . Present role and situation, risk of seriousness of corruption, benefits . Create list of company purpose of of anti-corruption 1 potential partners profile, compliance government (e.g. activities and best . Companies 2 policy and anti-corruption practice examples . NGOs bureaus) Company concept for . Summarize intention Facilitator . Religious Collective and objective of groups Action (one may initiative in concept 3 . MDBs use material note 4 from chapter 3 . Facilitator to send . Prioritize: which of this guide) companies / other out concept note to stakeholders . Ask for potential partners need to take part feedback / and follow-up recommen- Government Company to ensure sufficient dations Refer to slide 40 attention / for details credibility?

IO: International Organization MDB: Multilateral Development Bank *Facilitator: ie. trusted third party (e.g. academic advisor, NGO or business association)

Page 38 Project based initiative Long-term initiative

How to get started?

Initiate collective action (2/2)

5 6 Define 7 Involve further Start-up workshop governance participants … structure

. Establish permanent . Working Group to . Facilitator may Working Group to follow- schedule regular approach further 7 up with open issues meetings to decide on potential participants . Agree on shared . Who represents principles and objectives initiative? . Agree on general . Funding? roadmap how to proceed . Charter of the . Involvement of media initiative Company 7 Facilitator increases commitment of . Monitoring of participants and public compliance awareness . Sanctions . Participants need to . External auditors assign sufficient resources to Working Group Continuous consul- tations with different stakeholders required (government, other IO: International Organization NGOs, media) Source: Interviews Page 39 Project based initiative Long-term initiative

The concept note should summarize the status of discussions - MDBs* and Co-Investors can provide feedback and support

Key elements of concept note, potential role of MDBs and Co-Investors

Potential support from Key elements of concept note MDBs / Co-Investors

. Motivation / need for action . Initiating company / group of companies . Downside risk of non-compliant behavior may approach MDBs / Co-investors with concept note directly and ask for feedback . Key objectives of initiative and benefits for / recommendations participants . MDBs / Co-Investors can be a source of . Introduction of facilitator information and technical assistance in . Ways of participation / roles and organizing and informing obligations of participants / . Frequently MDBs / Co-Investors support . Current status and next steps establishment of anti-corruption policies . Wording should emphasize benefits and legislation such as reforms in and past experiences procurement laws . Concept note should not be too specific to allow other stakeholders to influence approach

MDB: Multilateral Development Bank Page 40 Project / transaction based initiatives

Decision tree3 checks whether prerequisites are in place for project / transaction-based action

Decision tree 3

START

Is corruption a major risk for your Are tender * documents Is customer willing to company Yes No Yes 3.1. Promote already finalized fight corruption / released? Collective Action to customer via Yes facilitator

No 3.2 Additional No elements of an Integrity Pact No need for Collective Action – continue doing business consistent with law and internal compliance policies

Prerequisites for project-related Collective Action not met – go to decision tree 4 (slide 52) to evaluate possibility of principle – based initiative / certifying association

* Decision should be made by, or with the involvement of, the internal compliance / risk assessment team in corporate headquarters. Various sources for country specific assessment are given on slides 62 - 64 Page 41 Project / transaction based initiatives

3.1 Even where close customer relationships exist, it is advisable to involve an independent facilitator in project-based initiatives

Promote Collective Action to customer via facilitator (1/2)

1 2 3 Facilitator Establish Align concept approaches contacts to … with facilitator other potential facilitator bidders

. Identify appropriate 2nd meeting: . Promote concept of Bidding 3 company facilitator . Discuss whom to project-related 1 . 1st meeting with approach with Collective Action facilitator customer . Ask for feedback 2 . Present company . Identify other likely Bidding profile, compliance bidding companies company Facilitator policy and concept for . Adapt concept to Collective Action (one individual situation / may use material from needs of customer chapter 3 of this guide) . Ask for feedback / recommendations Customer Bidding company could Support of other initiate Collective Action; bidders will help facilitator will be more to convince successful in bringing customer IO: International Organization stakeholders together. Source: Interviews Page 42 Project / transaction-based initiatives

Customer should be the official owner of project-related 3.1 Collective Action

Promote Collective Action to customer via facilitator (2/2)

4 5 Customer Customer and officially facilitator meet and … launches agree on principles Collective Action

. Facilitator asks . Agreement on customer for meeting Collective Action to at appropriate level be included in . Facilitator presents tender documents concept of project- . Signature Bidding related Collective recommended for company Facilitator Action and all bidding emphasizes benefits companies . Sign agreement of (inclusion of sub- contractors 5 4 “agree in principle” recommended)

Customer Collective Action needs to be launched before tender documents IO: International Organization are distributed Source: Interviews Page 43 Integrity Pact

3.2 If project-based initiative takes the form of an integrity pact, additional elements have to be considered (contract, monitor)

Additional steps and elements of an integrity pact

4 5 6 Customer Customer and Facilitator officially 5 facilitator sign nominates … launches agreement external monitor External Collective Action monitor . Facilitator asks . Customer / . Contract on customer for meeting government needs Collective Action on appropriate level to trust external has to be included . Facilitator presents monitor, but must in tender concept of project- not nominate documents Bidding related Collective monitor itself to . Signature company Facilitator Action and ensure objectivity mandatory for all emphasizes benefits . External monitor bidding companies . Decide jointly on: has to be (inclusion of sub- contractors 6 4 . Nomination and . Expert in the role of external Subject matter / recommended) monitor can get access . Sanctions to experts . Trusted by all Customer . Contract rights Collective Action and stakeholders needs to be responsibilities . Highly credible launched before . Sign cooperation . For further details tender documents IO: International Organization agreement refer to slide 51 are distributed Source: Interviews Page 44 Integrity Pact

An Integrity Pact requires certain mandatory elements such as a formal contract, external monitoring and sanctions

Mandatory elements of an Integrity Pact

Why to include monitoring? . Formal, written contract, to be Align signed by CEOs of all primary . Objective of Collective Action concept participating entities (bidding is to "level the playing field" companies, joint venture . Independent participation in and documentation of process . Adapt members etc.) further reduces risk of non- concept to compliant behavior or non- individual . Description of rules & principles awarded companies initiating situation / that apply to this project. Rules lawsuits later on needs of may be described by referring to customer . External monitor can advise applicable law or by explicitly the customer on process- . Discuss specifying them related issues = additional how to benefit for the customer align . Third party monitoring Collective Action Why define sanctions? . Arbitration as dispute resolution concept . To increase credibility mechanism with . "Actions speak louder than policies of words" co-investor . Sanctions / consequences . However, details have to be considered (refer to slide 47) Source: Based on Transparency International's Integrity Pact concept, Project team Page 45 Integrity Pact

The ideal external monitor is an expert in the subject matter, nominated by the facilitator, and paid by the customer

Characteristics of an 'ideal' external monitor:

External monitor Who nominates external monitor? Tasks and authority . Facilitator, as independent third party, . Participates in all meetings (bilateral + nominates external monitor multilateral) at all project stages . Customer / government needs to trust . Receives tender documents and all the nominated person, but must not offers for transparency-focused review nominate external monitor itself to (and not from general business ensure independence perspective) . Participates in all communication Who pays? (e.g. copied in emails as ‘CC’) . Is subject matter expert or has . Issues final report documenting tender . Customer decides who pays and how access to experts process / decisions . Monitor costs and expenses can be . Asks questions for clarification . Has no conflicts of interest and included in overall project cost is trusted by all stakeholders ("Why…") . Costs are transparent and reasonable . Has good general reputation . Informs customer about any irregularities and seeks changes/ and credibility Where to find appropriate candidates? remediation . Must not see role as . NGOs / IOs . As a possible consequence, external opportunity to promote career . Universities (active or emeritus monitor could announce that he/she . Does not seek high project professors) will withdraw from the project if visibility . Independent institutions transparency is not ensured . Long-term availability (e.g. Society of Civil Engineers) External monitor is “witness, not decision Page 46 maker in the process" Integrity Pact

Sanctions give Collective Action strength and credibility but must be carefully designed and enforceable

Forms of sanction Potential problems / pitfalls Recommendation Sanctions / consequences possibilities for violations

. Exclusion from tender . Negotiating sanctions may be . External lengthy process, and involve monitor needs . Exclusion from future lawyers rather than business tenders for several years to have the right people concerning issues such to report as defining violations and . Penalty (e.g. 3% of contract infringements enforceable sanctions value has to be paid to and publicly customer) . Sanctions may have problematic resign from consequences: project . Institute disciplinary . Exclusion of a company measures to employees who from project may lead to have been suspected of higher cost and time delay . Penalty may be agreed upon in corruption . Competition level may be advance . External monitor can weakened if one bidder is excluded from tender (declared as Overall objective: highlight issues in public, compensation . External monitor may feel . Ensure commitment of all seek for remediation and payment or intimidated if a violations needs signatory stakeholders finally resign from project liquidated to be reported (=> bad publicity) damages) . Increase credibility of . Lawsuits or prosecutions may be Collective Action . External monitor has unavoidable obligation to inform law enforcement bodies

Page 47 Integrity Pact

Sanctions must be fact-based, and should not rely on mere suspicion

Possible Legal basis / approaches to Arbitration Process permanent arbitration establish violations committee

. Employees of . Without involvement . Each party . 'Convention on the accused company of state / country nominates recognition and confess independent enforcement of . Based on arbitrator foreign arbitral agreements of awards' involved parties . Arbitrators nominate ("New York . Application of chairman contractual Convention", 1959) standard, e.g: . Specific processes . ICC Arbitration Court 'Sanctions apply if, and involved in light of available institutions have to evidence, no be described and reasonable doubt nominated in is possible‘ contracts

. Arbitration ICC: International Chamber of Commerce Sources: Transparency International, Berlin Airport and ONGC India Page 48 Project / transaction based initiatives

Involvement of Co-Investors / Multilateral Development Banks* (MDBs) can help to reduce the risk of corruption

Possible involvement of Co-Investors and MDBs, examples Selected Co- Involvement of multilateral donors may deter corrupt practice Investors / MDBs

. Co-Investors / MDBs 1) generally require borrowers and bidders to . African Development Bank observe good business practices and high standard of ethics . Asian Development . Co-Investors / MDBs may require a provision in the bidding Bank documents whereby bidders, suppliers and contractors agree to . Canadian permit the co-investor / MDB to inspect all accounts, records, and International Development other documents relating to the bid submission and contract Agency performance, and to have them audited by auditors appointed by . Department for the co-investor / MDB International Development . In case of accusations of corruption, MDBs undertake thorough . European Bank investigations and publish the names of companies sanctioned for for Reconstruction wrong-doing and Development . Sanctioned companies / individuals may face cross-debarment . Export-Import Bank across MDBs . Kreditanstalt für Wiederaufbau . World Bank

* Many MDBs are currently reviewing their respective anti-corruption safeguards. Certain of these requirements may be strengthened in the future. Page 49 Project / transaction based initiatives

MDBs and other Development Donors can be a resource to support project / transaction based collective actions

How to involve MDBs / other development donors

Customer to approach MDB / Align Collective Action with Launch Collective Action Development donor existing policies

. A bidder may approach its . MDBs usually already have own . Contract on collective action has to be customer, who will in turn anti-corruption policies included in tender documents approach the MDB / Co-Investor . Discuss how to align collective . Signature mandatory for bidding and ask to include an Integrity action concept with those policies companies (inclusion of sub-contractors Pact or similar safeguard recommended) . This could enhance the existing anti-corruption policies of the Co- Investor/MDB

Co-Investors/MDBs may incorporate specific Collective Action elements such as Integrity Pacts, if the government agrees. Once there is agreement with the government, Co- Investors/MDBs can be a resource to provide details and organizational support.

Page 50 Long-term initiative

Decision tree4 helps you evaluate the possibility to setup or join a long-term anti-corruption initiative

Decision tree 4 “long-term initiatives”

START 4.3 Principle-based Does your company Join coalition and initiative perceive corruption Do any appropriate setup anti- as major barrier to Yes business coalitions Yes corruption Foster improvements in do business in a already exist? 2) initiative 4.1 business environment / particular region or (refer to slide 55) advocate government country? 1) (refer to slide 52) No

Certifying business Did major companies How to get No coalition express their will to Yes started (refer to fight corruption in slide 38) 4.2 Foster independent respective country? verification to increase credibility (refer to slide 53) No need for No Collective Action – continue doing business with Are any potential integrity facilitators locally active? 3) Prerequisites for anti-corruption initiative not in place? No (refer to slide 57 for suggestions concerning this situation) 1) Decision has to be made by internal compliance / risk assessment team in headquarters. Various sources for country specific assessment are given on slides 62-64 2) Criteria to assess coalitions can be found on slide 56 3) E.g. local anti-corruption NGOs, local offices of global anti-corruption NGOs, international organizations, Multilateral Development Banks Page 51 Principle-based initiative

4.1 Principle-based initiatives focus on urging governments to adjust anti-corruption policies and promote anti-corruption efforts

Key steps of Principle-based initiative:

Focus on communication Additional value-added Core element and awareness raising services could be provided

External comm- External comm- unication / unication / Training public policy public policy advocacy * advocacy *

Shared Shared Shared principles / principles / principles / Charter Charter Charter

Best Practice Audit & Exchange / Steps: certification Information . Shared principles agreed upon database . Funding and representation of initiative . Participating companies can benefit from . Focus mainly on: clarified Best Practice Exchange, predefined . Guiding governments to optimize anti- training content and external marketing Examples for principles: corruption policies Who could offer additional services? . Transparency International Business . Actively communicating members‘ Principles for Countering Bribery . InWEnt activities to fight corruption (www.transparency.org) . American Chamber of Commerce (e.g. internal compliance program) . World Economic Forum Partnering . PACI . "Zero tolerance“ statement by Against Corruption Initiative (“PACI”) Examples members‘ CEO‘s (www.weforum.org/paci) . Empresa Limpa (Refer to slide 78) * Sponsorship and support of public policy issues, consistent with local legal requirements Page 52 Certifying business coalition

4.2 A certifying business coalition adds credibility by verifying compliance with its principles and/or certifying eligibility of members

Certifying business coalition – additional elements

* Auditor nal nal ptio ptio Checks whether companies take O nt O nt leme leme effective action to implement e e principles Advocacy / external Coalition Audits communication training Core program ent elem Shared principles / t l en Charter iona elem Opt Core ent elem Verification of compliance & Best practice resulting certification exchange / Information database Optional: Involve government, NGOs, IOs and others as facilitator / knowledge source / interested parties

* Independent accounting / auditing companies; trusted third parties (e.g. academic advisor, NGO or association) Page 53 Certifying business coalition

4.2 Key elements of an independent audit / verification

Independent verification

Incentives for verification / Independent verification certification . Successful implementation of internal compliance Company meets audit standards What is program based on checklist / agreed upon principles . Company is awarded certification by initiative audited . Association has to clearly define minimum . Initiative publicizes list of certified companies requirements for certification . Initiative promotes certificate with customers . Company has to fill in questionnaire and government to achieve certain benefits for certified companies (e.g. simplified . Auditor interviews company management, supplier qualification process) Typical reviews training material & other documents . Increased trust in company’s policies process . Random interviews with employees . Audits can be the basis to showcase areas for . Written report to audit committee improvement . Audit council confirms successful audit

. Frequency to be decided by association Company rejects audit or does not Fre- meet standards quency . Periodic re-audits required to ensure sustainability of anti-corruption program . Exclusion from initiative . Potential publication of exclusion from initiative . Independent accounting / auditing companies Auditor . Previously issued certificates are no longer . Trusted third parties (e.g. academic advisor of valid association)

Source: Interviews Page 54 Long-term initiative

4.3 Steps to set up a Collective Action against corruption with an existing business coalition

Scope 1 2 3 4 Perform due Get support of Define of Include other diligence on business governance topics stakeholders business coalition coalition of initiative

d Appropriate a

o chamber of r

B commerce / . Is the chamber of . Propose topic in . Approach other . Schedule regular business commerce / regular meetings organizations via meetings of coalition business coalition / of business representative of initiative to decide trade associations coalition business coalitions on: an appropriate . Identify supporters . Other coalitions . Who represents Anti- basis to set up w within business . NGOs initiative o

r corruption anti-corruption r coalition . Funding a initiative initiative? . Religious N groups . Charter of the Business only Reflecting . Refer to next slide . Assess the initiative various groups for assessment potential oversight . Need to establish of society criteria role of government permanent Scope of participants (e.g. anti- structures or an corruption office (may be part bureaus) of the business Refer to slides 79 - 80 for coalition's specific examples from the Existing business coalition may act as administration) Philippines / Colombia facilitator in this context – however involvement of NGOs will further increase credibility

Page 55 Long-term initiative

4.3 How to assess whether a particular business association is a good partner? Similar criteria apply when assessing potential facilitators for Collective Action Assessment criteria for business coalitions

Assessing the partnership potential of associations An association could be an Internal considerations inappropriate partner if it . History of organization’s establishment . Autonomous of any particular commercial or political interest, espouse open market competition and rule of law . Represents narrow interests . Mission-driven and have a track record of promoting ethical business / or does not have a large accountable government and experience with public policy advocacy membership base and has demonstrated facilitation skills . Has actual or perceived . Proper accounting and disclosure of its own operations, proper ethical issues because of its governance mechanisms, and a strong certification process members’ questionable . Local knowledge and credibility dealings with government . Duties and responsibilities to members officials . Broad representation of business community . Stable and diversified funding sources . Is poorly managed financially or poorly governed . Sufficient capacity, technical expertise, strong leadership and professional staff . Cannot effectively mobilize External considerations its membership . Association’s standing in the community - through conversations with the media, public officials, civil society groups, members, etc A poorly governed association may be a liability . Credibility among other NGOs and business associations and weaken the legitimacy of the Collective Action effort

Source: CIPE Diagnostic Tool – contact CIPE on details related to conducting assessments of business associations Page 56 What to do if prerequisites for collective action against corruption are not in place?

Possible company responses* to minimize the risk of corruption under the circumstances

. Strengthen and improve internal compliance and anti-corruption programs

. Engage in outreach programs with the public and media, e.g. develop and disseminate issue paper on negative consequences of corruption for companies / sector and society in general

. Continue to actively seek / create window of opportunity, e.g. political changes, economic reforms and/or advocate for less sensitive topics, such as transparency and accountability

. Join regional/global anti-corruption initiatives, such as UN Global Compact, TI, PACI, etc.

. Work with recognized anti-corruption champions, such as the World Bank, TI local chapters, UN Global Compact and join their anti-corruption programs and activities

. Publicly exit from a project / sector / country where corruption is problematic, and communicate the reasons why the company believed that this action was necessary

* More than one response at the same time may be possible and desirable.

Page 57 Conclusion: collective action is not easy and requires patience, but considering certain factors can increase the probability of success

Success factors

Involve a facilitator as a neutral party in the process when initiating and implementing a Collective Action

Be patient. Do not rush for success. Building trust and confidence among stakeholders takes time

A well defined and narrow scope (specific sector, specific country) increases credibility and allows easier monitoring and audit

Clarify funding of initiative at the early stages of the project

Focus on achievable results and improvements to provide the foundation upon which to build more challenging initiatives later on

Get the top-management commitment of participating companies

Create public awareness / initiate broad communication campaign

Establish certification as positive incentive for participants

Agree upon clear consequences in case of violations

Source: Global Compact: Business against Corruption - case stories (page131), Business against Corruption – a framework for action (page16, experience from IBLF), interviews Page 58 Companies need to be careful not to violate anti-trust laws / competition laws* when initiating Collective Action

Anti-trust / competition law issues Special areas of concern

1. Relating to companies launching a Collective Action program, e.g. . Limiting the number of participants . Presence of self-regulatory regimes . Geographical barriers . Requirements on disclosing key business . Communicating or sharing of information competitive information is generally inappropriate and may be illegal 2. Relating to specific procurement projects, e.g. . Non-public meetings of different . Limiting the number of participants companies / competitors may raise suspicion of violation of competition / . Presence of specific licenses or permits anti-trust laws . Costs of entry or exit . Price controls . It is advisable to have legal counsel . Restrictions on advertisement present at any competitor meetings – . Biased standards to ensure legal compliance

Page 59 * The need to observe and respect anti-trust/competition laws applies in general, and is not limited to the Collective Action context. Steps to consider to help avoid possible violation of anti-trust regulations/ competition laws

. Many countries have their own competition policies which can differ from one another – consult both your home country regulations as well as project-related country laws . Do not approach competitors directly, avoid bi-lateral meetings with competitors without a facilitator being present . Legal counsel should carefully document content and outcome of meetings . Avoid communication or other disclosure of actual or perceived competitive information . Focus on processes which are applicable to all participants, not involving specific competitive information . Central principle underlying anti-trust regulations: avoid restricting competition by using measures that are not supported by objective business reasoning For more information consult the OECD Competition Assessment Source: OECD Competition Assessment Toolkit, Interview with Clifford Chance Toolkit at www.oecd.org Page 60 Table of contents

Fighting Corruption Through Collective Action – a Guide for business

Content

Page . Information resources for country 1. Introduction 3 assessment . List of potential facilitators 2. Background 8 . Project profiles 3. How to fight corruption? 17 . Integrity Pact

4. Fighting corruption through . Certifying business coalitions Collective Action 26 . Principle based initiatives . Detailed examples 5. How to implement 35 . Integrity Pact templates Collective Action? . Case stories 6. Contact list and best practices 61

Page 61 Potential sources to assess the risk of corruption in specific countries

WB - Doing business Benchmarks on business regulations by the World Bank Group. Country www.doingbusiness.org indicator and Rankings available, topic specific and country assessments available; simulator custom comparisons and country snapshot available

WB - Business perceptions on the investment climate, including corruption, by enterprise the World Bank Group. Regional and country assessments available; www.enterprisesurveys.org surveys custom query available; country snapshots available

WB - Present measurable indicators across a wide range of business Business environment issues and over time. This new web-enabled tool compiles http://rru.worldbank.org/ Environment many data on the business environment for each country in an easily besnapshots Snapshots accessible, consistent and usable format Data on six dimensions of governance (Voice and Accountability, Political WBI Gover- nance and Anti- Stability and Absence of Violence, Government Effectiveness, Regulatory www.worldbank.org/wbi/ corruption Quality, Rule of Law, Control of Corruption) by the World Bank Institute, governance/data indicators comparisons across dimension, countries and time available

OECD Reports on bribery by the OECD, reports of selected countries country www.oecd.org reports available

WBI: World Bank Institute WB: World Bank Source: WBI Page 62 Potential sources to assess the risk of corruption in specific countries

Resources for country analysis (2/2)

TI bribery Corruption Perception Index (ranking countries), and Bribe Payers Index indices and (ranking supply side), National Integrity Systems (country studies and www.transparency.org/ other tools surveys) tool, topic-specific Global Corruption Reports and other materials

Business anti- Assessment of state of corruption in selected countries and industries www.business-anti- corruption corruption.com portal

World Benchmarks on competitiveness, including corruption by the World Economic www.weforum.org/gcr Forum Economic Forum. Country rankings available

Control risks Business perceptions on corruption in selected countries, analysis benchmarks available www.crg.com

Global Benchmarks on effectiveness of anti-corruption mechanisms in integrity selected countries by Global Integrity, country rankings available. www.globalintegrity.org index Country reports on government and corruption in selected countries

http://forum.maplecroft.com/ Maps on corruption perceptions by the World Economic Forum. Maplecroft loadmap?template=map&issue maps World, regional and country maps available ID=22

Source: WBI . TI: Transparency International Page 63 Business Against Corruption portal provides practical information on corruption in 50 Countries

Information to be found via: www.business-anti-corruption.com/

Type of information to be found on the portal Country profiles for 50 countries available

. Political climate, regulation & treaties . Profiles available for the dark colored . Current corruption status in the country countries . Public and private anti-corruption initiatives . Links to resources for detailed country information and research . Links to organizations (e.g. NGO‘s) to fight corruption in the country

Page 64 Reaching out to potential facilitators is an advisable practice for Collective Action

Examples of potential facilitators

Examples

. Establishing Transparency International www.transparency.org a trustful Recognized AmCham (American Only local sites, relationship Anti-corruption Chamber of Commerce) e.g. www.amcham.de individuals offices of local to a neutral FIDIC (International Fede- www.fidic.org facilitator is government ration of Consulting Engineers) ICC (International Chamber essential www.iccwbo.org prerequisite of Commerce) International Business Leaders www.iblf.org … Forum . If your CIPE (Center for International www.cipe.org company Private Enterprise) does not have such an external Additional facilitators can be found network yet: on www.fightingcorruption.org start to reach out to Refer also to www.business- anti-corruption.com for potential country specific lists of facilitators Business NGOs potential facilitators (see Associations under "country profiles")

NGO: Non-Governmental Organization Page 65 The Integrity Pact implemented in Berlin is considered a best practice example

Case example: Integrity Pact at Berlin airport

Main achievements Customer / Principal . Flughafen Berlin Schönefeld GmbH .The involvement of external monitors helped Project . Construction of a new state-of-the-art airport south description of Berlin to replace the existing ones to re-start the . … tender process, which had been stopped due to the high amounts . Large project volume of 2 billion EUR of the originally Specific . First case in Germany where third party is character- submitted bids. monitoring tendering process istics of Integrity . Bidding companies have to make sure that their Pact suppliers adhere to the principles and also sign the contract

Source: FBS GmbH, newspaper articles Page 66 External monitor increased confidence of participants and public that processes were transparent and objective

Case example: Integrity Pact for Suburban Train project in Mexico (2005)

. Participants signed declarations of integrity stating Key Learnings Descrip- under oath that they would abstain from any conduct tion that could affect evaluation of bids submitted . Funding by . Independent monitor assigned by TI Mexico – was government to avoid misinterpretations present at all events (>80) related to the bidding . Monitor must be . Observe every stage and act of the bidding process known and . Ensure rules and norms are respected recognized in Mission his field . In case of deviations make sure that the process is transparent and fair . Integrity Pact should be simple and easy . Publish a report on what was witnessed in local press to understand (no legal complexity) . Integrity Pact caused additional cost of ~100.000 USD Participants (Total Project 600 million USD) . Main instrument for Costs pressure is public . ~8 . Monitor was paid based on spent hours withdrawal from companies (~160 hours for initial tender, 80 for sub-sequent tender tenders) Customer: “I think the Integrity Pact is a tool to move . No recourses or forward in fighting corruption in our country. We need complaints the tool today, the Independent Monitor, project by project, but if we add up these experiences, Source: Interviews consistently over time, it will become something Page 67 structural that guides our behavior.” Federation of Pharmaceutical Manufacturers created an industry wide "Code of marketing practices"

Case example: Code of pharmaceutical marketing practices

. The “promotion and support of ethical practices” was Key Learning Descrip- one of the principles on which the IFPMA was tion founded in 1968. . A principle- . In 1981 the first version of a "Code of Pharmaceutical based initiative Marketing Practices" was created. The latest revision can also be of the IFPMA Code came into effect in January 2007. created and published in a . Key elements include more restrictive provisions on sector-wide travel, gifts and scientific events, plus the effort establishment of a Code Complaint Procedure and a Code Compliance Network, bringing together code . IFPMA shows experts from all over the world. that it is possible to bring together . The International Federation of Pharmaceutical companies from developed and Manufacturers & Associations is a non-profit, non- developing governmental Organization (NGO) representing Partici- countries to national industry associations and 25 research-based agree on shared pants pharmaceutical, biotech, and vaccine companies principles from both developed and developing countries

Source: Interviews, www.ifpma.org Page 68 Anti-corruption declaration among contractors at AVA GmbH (Frankfurt) forms basis to conduct discussions on compliance topics – no external monitor involved

. Contract signed by direct contractors in execution Key Learning Descrip- phase only – no involvement of all bidding companies tion in tender phase . Open and . Direct contractors did not want to include sub- continuous contractors discussion of issue is seen as . No external monitoring constructive . The document emphasizes the importance of the laws step to reduce risk of and is a good basis to discuss corruption issues. corruption Mission . The fact that the topic is discussed openly is seen as major step towards environment free of corruption . Important that contract is Participants signed by top- All direct management in Costs contractors for . Costs were limited - AVA GmbH took over costs headquarters execution and actively phase (>10 communicated companies and to workers on individuals) site

Source: Interview with Managing director of AVA GmbH Page 69 Transparency International Provides Global Multi-Stakeholder Approaches to Developing and Promoting Anti-Corruption Tools

Driving Local Systemic . Since 1993, mobilizing a global network of business, Approach government and civil society leaders in 95 countries Across Global to promote anti-corruption efforts and increase Network transparency.

. Creator of Integrity Pacts and provider of credible, independent third party monitors. . Facilitator of multi-stakeholder initiative to develop model anti-bribery codes and programs -- “Business Principles for Countering Bribery”; “SME Edition” for small- and mid-sized enterprises, Guidance Partnering with Document; Self-Evaluation Tool and external Private Sector assurance (under development.) . Convenor of industry sectors (Wolfsberg international banks, defense industry sector, World Economic Forum PACI)

. Monitor of agreements to prohibit foreign bribery and increase regulatory transparency, particularly for Promoting procurement. Policy . Contributor of anti-corruption and governance Reform expertise to development assistance providers.

Page 70 World Economic Partners Partnering Against Corruption Initiative (PACI) is a global anti-corruption initiative of the private sector

. Founded by member companies of the World Main achievements Economic Forum in partnership with Transparency History International and the Basel Institute on Governance in 2004 to level the playing field among industry . Global and multi-industry . To create a common language on corruption and recognition bribery valid for all industries and coverage Mission . To provide platform for top-level commitment from companies . Increasing membership . To support companies in developing and implementing anti-corruption programs . Actively providing anti- Members . Companies have to support PACI principles publicly corruption support to . Signed by . CEO has to sign principles as prerequisite for members over 140 Enforce- membership mostly ment multi- . External verification / certification process currently in national elaboration companies

Source: Internet, Interviews Page 71 The Bavarian construction industry has established an association with far-reaching enforcement mechanisms

Case example: Ethics management system of the Bavarian construction industry

. Initiated by Bavarian construction industry Main achievements History association in 1996 after a series of scandals related to corruption . German Rail accepts certification as proof of anti- corruption . Foster integrity in the construction sector Mission measures for . Preserve industry reputation qualification of . … bidders

. Concept is Members currently rolled out to whole . Members must have their compliance program audited Germany . 33 by external auditor construction Enforce- ment . Initiative companies . Members can be excluded if they do not receive or helped to of different loose certification restore size (as of reputation of 2002) industry

Source: Bavarian construction industry association Page 72 A successful coalition against corruption started in 2005 in Paraguay

Case example: Pacto Etico Commercial (PEC) Paraguay

. Founded in 2005 on initiative of the US ambassador Main achievements History and Paraguayan American Camber of Commerce . A leading ethics program in South America . 150 members signed the pact . Promote business principles based upon fulfillment of and there are current laws, ethics principles, quality management, currently 100 Mission honesty and transparency additional . Gather most important private business applicants representatives covering all sectors . The PEC seal is becoming a Members . Certification process for members branding tool . Members commit themselves to obey to the values in Paraguay, which is . Several Enforce- and rules labeled one of national and ment . Moral enforcement due to publicity the most multi- corrupt national . Random audits countries in companies . Trainings and workshops the world

Source: PEC website Page 73 Establishment of Pacto Etico Comercial in Paraguay gives a real life example of process 2.1

Pacto Etico Comercial (PEC) Paraguay (1/3)

April - October 2004

02.04. 24.05. June 04 16.06. 23.09.

. AmCham* . 'Good . A working group composed of . Decisions . Presentation of leadership met Governance AmCham, CAP and US made to Pacto Etico with DOC for Program' Embassy began a series of assign two Comercial to initial discussion launched by meetings to study the shape people to 1,300 of program of DOC of the program, the benefits study the companies Good . Top business to those who sign, etc. Panama and . 232 signed a Governance. leaders, . Idea developed of a large Nicaragua note promising . AmCham chambers public event to explain the ethics to participate in Directors agreed and program and its value, in documents the study and to cooperate with organizations hopes of attracting a large and elaboration of the Advertiser's attended number of individuals and formulate a an ethics pact. Chamber (CAP), groups from the private sector Paraguayan . By now the US. Embassy . Debate over the nature of model of a Executive and the DOC in relation with Government and basic ethics Committee was the program NGOs pact meeting weekly AmCham: American Chamber of Commerce DOC: US Department of Commerce Source: PEC Paraguay Page 74 Establishment of Pacto Etico Comercial in Paraguay gives a real life example of process 2.1

Pacto Etico Comercial (PEC) Paraguay (2/3)

October 2004 - August 2005

09.10. Oct 04 - Mar 05 June 05 13.07. 04.08.

. 100 people . The working . After various . Ethics Pact . Public sector invited to sign as attended a committee drafts were Signing Witnesses. President Duarte Saturday met regularly circulated by ceremony for Frutos and several ministers morning session every week e-mail, Ethics private sector, attended the event and signed to review the Pact was where over . Lawyers worked out a concept principles of the approved, 100 individual on how PEC could become a ethics pact and published, businesses civil association with legal status comment on the and signed, . Board of Directors needed to be draft. distributed agreeing to representative of the wide range . 10 individuals abide by of groups involved in the project, chosen to these ethical but not too big to be inefficient represent their principles . The result was a Board of group at future 11 members and two syndicates meetings

AmCham: American Chamber of Commerce DOC: US Department of Commerce Source: PEC Paraguay Page 75 Establishment of Pacto Etico Comercial in Paraguay gives a real life example of process 2.1

Pacto Etico Comercial (PEC) Paraguay (3/3)

August 2005 - December 2006

October 05 July - August 06 27. - 29.11

. Statutes completed and a Train the Trainer Program . Participants of the three-week Train the Constitutive Assembly . Three week intensive Trainer course in Washington, D.C., gave called for Dec. 13, 2005. business ethics training training courses to the first twenty . At the Assembly, the program for two participants companies of the PEC. statutes were approved from each Department of . Training centered on how to build internal and legal steps begun to Commerce program ethics programs and policies. register PEC as a legal country. . Civil servants from the Ministry of Industry entity, capable of receiving . Conducted with business and Commerce and the Public Contracting donations and ethics experts and US Office in the Ministry of Finance attended as independent of AmCham company representatives in special invitees. and CAP in leadership Washington, D.C. and . The objective is to train the 80 plus Atlanta, Georgia companies who submitted their financial records for certification within the last year, by September 2007

AmCham: American Chamber of Commerce DOC: US Department of Commerce Source: PEC Paraguay Page 76 CBLF provides platform to discuss topics related to anti-corruption – however, there are no shared principles and enforcement to date

Case example: China Business Leaders Forum

. Launched in 2005 by the International Business Main achievements History Leaders Forum (IBLF) in partnership with the Renmin University of China . Funding . Provides a regular quarterly Forum for Chinese and ensured to foreign business leaders to discuss the improvement establish Mission of business standards both in China and internationally permanent . Initially funded by the UK Foreign & Commonwealth office Office, BP, Shell, BHP Billiton, Siemens and GSK . Several . Being developed into the China Centre for events and International Business Standards discussion round held Members . No enforcement on topics . GSK Enforce- . Program with 3 key components: related to ment . Shell . Knowledge exchange anti- . Siemens . Research & Information corruption . Training

Source: CBLF website, interview with Siemens representative Page 77 "Transparency pacts“ inColombiaarea formof principle-based initiative witha focus on continuous projects

Case example: "Transparency Pacts" on local and municipal level in Colombia

Initiative Discussion 1 2 Create a 3 4 5 Follow up 6 established by a on the Signing follow up and Dissemination mayor or transparency ceremony committee evaluation of results governor pact

Local Administrations The Private Sector Sign Sign . Mayors / governors Local . Presidents of local chambers of commerce . Individuals representing local Procurement government offices (transport, Benefits: sales, etc.) Transparency . Government commitment to be Benefits: Pact transparent in awarding . Increase in credibility and trust contracts

. Support from the Presidential W . Greater prospects for fair i

Anti-Corruption program t competition n e s

Implementation Challenges: s . Frequent changes in responsible Lessons learned: government personnel National Government . Project should be continuous rather . Limited genuine interest from local than a one time event governments . Vice-President of Colombia . Significant resources are needed to . Lack of objectivity in evaluation ensure implementation . Lack of resources for evaluation . Director of the Presidential . Greater involvement of civil . Unstable security situation Anti-Corruption Program society needed . Insufficient civil society commitment Source: Confecamaras, CIPE Page 78 A pact for integrity and against corruption (Empresa Limpa) was initiated in Brazil to fight against illegal practices in business

Business Pact for Integrity and Against Corruption

Key Facts Mechanism Benefits

Organization: Mission: Key achievements: Ethos Institute; Eniethos, Patri,  fighting against illegal business . Good practices of business United Nations; United Nations practices, especially those ethics are widespread in Office on Drugs and Crime – involving public agent Brazilian business; UNODC; Brazilian Committee of relationships the Global Compact. . More then 400 members; Location: Objective: . To disseminate good practices Sao Paulo, Brazil . Sufficient success of media of business ethics that can campaigns. eradicate corruption.

Enforcement: . Members have to support Members: the written principles publicly; > 400 . Members have to implement internal rules that clearly prohibit any form of bribery.

Source: http://www.empresalimpa.org.br Page 79 Example from the Philippines shows how a specific anti-corruption initiative evolved from existing organizations

Coalition against corruption within the network of other organizations, Philippines

. Association of >20,000 private businesses in the Philippines d a o r B s c i . Non-profit, private association of p o

t 450 businesses in the Philippines

f

o . Dedicated to addressing economic

e n and social policy issues which affect p y o l

i www.mbc.com.ph l o t 1981 1954 a

c the development of the Philippines p c u

i Financial support S r f i r c o

e . Non-governmental organization, c Membership

- Coalition against p i t

S supports (among others) activities

n corruption

a related to anti-corruption 2004 www.asiafoundation.org Business only Reflecting various groups of society . Coalition of private sector, NGOs Scope of participants / members Coalition against and the church corruption . Mission is to initiate and support 2004 Year of foundation anti-corruption projects www.tag.org.ph

Source: Internet research, CIPE Page 80 Programa Probidad Colombia is another example of anti-corruption initiative that was launched by existing organizations

Programa Probidad, Colombia

. Initiative of Confecamaras d Programa a . Objective: Create business o Probidad r

B community that commits itself to s

c fight corruption, create ethical culture i

p and strengthen competitiveness o t

f o

Initiate Alliance

e n p y o l i

l . Has initiated program o t a c p c u

i "Combat Corruption" S r f i r c o e c

- Programa p i t

S Probidad n a 1999 . Association of Colombian Chambers Business only Reflecting various of Commerce groups of society Scope of participants / members

1999 Year of foundation

Source: Internet research, CIPE Page 81 Confecamaras is an example where a Collective Action is focused on changes in the legal system of a country

Collective Action related to the procurement law reform in Colombia

Why to reform? Key engaged parties . High levels of corruption . Colombian Confederation of Chambers of Commerce . Public pressures for greater transparency in government . Political Science Institute . Outdated legal mechanisms . Business associations . Inefficient use of public resources . National Congress and various contracting agencies

Lessons learned Key steps . Provided opportunities for the business . Need for on-going follow up on draft Observatory community and civil society to comment laws with various stakeholders on the draft law . Government willingness to accept for the reform . Provided key information on challenges to feedback helps, but if it’s absent – of the implementation of the draft law to the still advocate for change National Congress . Establish open channels of procurement law . Generated alternative propositions communication to engage broader public . Oversight of the process of procurement . Plan sufficient resources to study the law reform, follow up on key changes impact of the new law (on national and local levels) . Remember, you can’t satisfy all members Benefits for engaged parties of legislature, there will be disagreements . Introduction of more transparent procurement practices . Consensus and leadership among . Greater competition among companies business groups help move this . Increased involvement of international participants in procurement process forward . Greater assurances for the public and evaluation of investments

Source: Confecamaras, CIPE Page 82 Transparency International Integrity Pact (IP) examples

BERLIN ECUADOR DEFENCE SECTOR

. TI IP from project . TI IP contract from . TI IP template "Berlin airport" project "Hydroelectric . Specifically designed power plant", Ecuador . Seen as best practice for contracts in the (English translation) example defense industry . No "External monitor" . Available in German only . Detailed description of Arbitration Tribunal

Integrity Pact Berlin IP Ecuador Integrity Pact airport Hydroelectric template defence industry

Contact TI for details related to integrity pacts

Source: Internet, Interviews

Page 83 Various case stories are available to get more vivid impressions from real-life examples case stories Mexico suburban train Colombia Procurement Russian Business Latvia national library Reform Associations .Integrity Pact application .Report by CIPE .Report by CIPE .Integrity Pact application .Report by customer and .Report by Transparency external party International

Mexico_report_by_ Mexico_report_by_ ministry social_witness Latvia_library_repo rt_by_TI

Bulgarian Coalition Chambers of Commerce Exposing Corruption in combating corruption Serbia

.Report by CIPE .Report by CIPE .Report by CIPE

Source: Internet, Interviews

Page 84 Several elements in a country’s legal environment promote transparency, integrity, accountability and efficiency

Additional Positive elements contributing to a transparent legal system considerations The following elements in the legal and governance structure of a country support . Appropriate procurement transparency, accountability, and efficiency in public procurement and general laws – emphasizing commerce: transparency, integrity . An independent judiciary that can resist improper political influence through accountability and checks and balances. efficiency - may not be . Impartial, consistent enforcement of the rights and obligations of all firms. present . Procurement laws may be . ‘Sunshine’ laws that require the government to publish all laws and regulations present “on paper” but and inform the public of any proposed changes. viable supporting . Clear laws and regulations that limit officials’ discretionary power. institutions are missing . Regulations that prevent monopoly power and facilitate the formation and . Procurement laws may be operation of private businesses. present, as are the . Administrative and judicial efficiency – because inefficiency creates incentives supporting institutions, but to bribe and opportunities to conceal corruption. public officials do not enforce the laws and are . Rules regarding conflict of interest for the public sector. not held accountable . Respect for due process - firms should not be excluded from participating in procurement without a fair hearing based on clear criteria. Refer to slides 62 - 64 for country specific analyses . Alternative dispute resolution is an option - if used, decisions should be binding.

Page 85 Guide was created by Working Group with participants from different sectors and regions

Core members of Working Group

The World Bank Institute (WBI) is the capacity building arm of the World Bank Group. Combining participatory Action-oriented learning, technical assistance, and the power of data, WBI, in collaboration with other units in the World Bank Group, supports countries in improving governance and controlling corruption. With regards to the private sector, WBI facilitates the growing www.worldbank.org/wbi efforts of companies and business associations to integrate anti- corruption measures into their corporate governance and strategy, and engage more actively in the fight against corruption both as advocates for good governance and through Collective approaches.

TheLaunched Center in for 2000, International the UN Global Private Compact Enterprise brings is a business non-profit affiliatetogether of with the UN U.S. agencies, Chamber labor, of Commerce civil society and and one governments of the four cotore institutesadvance ten of the universal National principles Endowment in the for areas Democracy. of human CIPE rights, has labor, supportedenvironment more and than anti- 1,000corruption. local initiativesThrough the in over power 100 of developi collectiveng countries,action, the involving Global Compact the private seeks sector to mainstream in policy advocacy these ten and www.cipe.orgwww.unglobalcompact.org institutionalprinciples in reform, business improving activities governance, around the world and building and to catalyze understandingactions in support of market of broader-based UN democratic goals. With systems. over 3,600 CIPE provides managementparticipating companies assistance, and practical hundreds experience, of other andstakeholders financial from supportmore than to local20 countries, organizations it is the to world strengthen’s largest their voluntary capacity corporate to implementcitizenship democraticinitiative. and economic reforms.

Page 86 Guide was created by Working Group with participants from different sectors and regions

Core members of Working Group

The Center for International Private Enterprise is a non-profit affiliate of the U.S. Chamber of Commerce and one of the four core institutes of the National Endowment for Democracy. CIPE has supported more than 1,000 local initiatives in over 100 developing countries, involving the private sector in policy advocacy and institutional reform, improving www.cipe.org governance, and building understanding of market-based democratic systems. CIPE provides management assistance, practical experience, and financial support to local organizations to strengthen their capacity to implement democratic and economic reforms.

TI-USA is the U.S. chapter of Transparency International (TI), the global [Changes to be civilThe society Center organization for International working Private to combat Enterprise corruption is a non and-profit increase made to reflect TI – accountabilityaffiliate of the in governmentU.S. Chamber and of international Commerce and business. one of theWith four national core Berlin participation] chaptersinstitutes in more of the than National 90 countries, Endowment TI is for widely Democracy. recognized CIPE for hasits uniquesupported global more reach, than high 1,000-level local engagement initiatives with in over policymakers 100 developi andng the countries, involving the private sector in policy advocacy and private sector, practical tools and surveys, and extensive experience www.www.cipe.org transparency-usa.org/ andinstitutional credibilityin reform, combating improving corruption governance, and promoting and building transparency.understandingTI of-USA market priorities-based include democratic advancing systems. major CIPE international provides conventionsmanagement against assistance, bribery and practical corruption, experience, mobilizing and financial development assistancesupport to organizations local organizations to mainstream to strengthen anti-corruption their capacity initiatives, to and strengtheningimplement democratic anti-corruption and standards economicand reforms. practices in business.

Page 87 Guide was created by Working Group with participants from different sectors and regions

Core members of Working Group

Global Advice Network is an international consultancy based in Copenhagen, Denmark. Global Advice Network is specialized in advising on environmental and corruption issues. Global Advice Network is the initiator and developer of the www.globaladvice.dk www.Business-Anti-Corruption.com portal, a web-based tool which combines in depth country analysis with generic tools for due diligence and integrity systems.

Grant Thornton International Ltd (Grant Thornton International) strives to speak out on issues that matter to business and which are in the wider public interest and to be a bold and positive leader in its chosen markets and within the global accounting profession. Grant Thornton International is one of the world's leading organisations of independently owned and managed accounting and consulting www.grantthornton.com firms. These firms provide assurance, tax and specialist advisory services to privately held businesses and public interest entities. Grant Thornton International and the member firms are not a worldwide partnership. Services are delivered independently by the member firms.

Page 88 Guide was elaborated by Working Group with participants from different sectors and regions

Core members of Working Group

Siemens AG is a global powerhouse in electronics and electrical engineering, operating in the industry, energy and healthcare sectors. The company has around 400,000 employees working to develop and manufacture products, design and install complex systems and projects, and tailor a wide range of www.siemens.com solutions for individual requirements. For over 160 years, Siemens has stood for technical achievements, innovation, quality, reliability and internationality. In fiscal 2007, Siemens had revenue of €72.4 billion and income from continuing operations of €3.9 billion (IFRS).

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