On the eve of this year’s International Anti-Corruption Day, the UK Government published its long-awaited Anti-Corruption Strategy.

Governments are not going to solve the problem of corruption by themselves. They will need the support of all sectors of the economy, including the private sector and, by extension, accountants who work within it. That was the primary message of an ICAEW roundtable held on 9 December to mark International Anti-Corruption Day.

In the opening stages of a packed programme, delegates heard that the private sector has a huge incentive to take part in the fight. Aggregated research from the past 30 years provides an overwhelming consensus that corruption is bad for business.

As well as slowing growth and reducing productivity through resulting inefficiencies, it spawns significantly higher costs. Asking prices of bribes are typically extortionate, leading to much lower profitability on tainted contracts. 

In the first of two slippery slopes outlined at the event, delegates learned that bribes end up sealing over each other in layers, creating a Pandora’s box effect. As such, bribery represents misdirected energy in a business. If a company is dwelling on how to engineer and sustain cover-ups, it is not thinking properly about how to be competitive.

Internal umpire

Two speakers with backgrounds in sustainable development explained how detrimental corruption is to their cause. In the absence of tough countermeasures, resources meant for sustainable development projects can be misallocated, financial statements around those efforts lose all credibility and assurances provided to stakeholders are compromised.

For one of those speakers, market forces against corruption must be so strong and precisely targeted that, whenever a company is mulling whether or not to pay a bribe, the decision is easy: it will see that the negatives are just too strong. That underscores the “absolutely vital” need for collective action.

A senior ethicist highlighted the importance of employees having an ‘internal umpire’ to test any risk-sensitive choice on ethical grounds, for example: Is this the right thing to do? Who could it harm? Is it legal? And even if it is legal, is it right?

While compliance with the law is necessary, it is not always enough. For this speaker, ‘tone from the top’ is a meaningless phrase, used as a substitute for proper action, and the whole concept of whistleblowing must be replaced with a far more confident corporate attitude towards ethics that would eliminate the need to blow the whistle in the first place.

Those thoughts led neatly to an economist’s emphatic call for UK and European corporates to help set up business associations in the developing world that would take a stand against corruption. In the economist’s view, no entity is better placed to understand the root causes of overpricing in the private sector – or spot the telltale signs of a corrupt contract – than another business in the same field.

Again with an eye on detecting corruption, a leading public policy academic explored the role of technology, highlighting the success of Brazil’s ‘Rosie the Robot’ initiative for tracking the spending of public officials, and the failure of a Dutch algorithm for spotting benefits fraud. While results have so far been mixed, this speaker said, digitalisation in the anti-corruption drive is here to stay.

Restoring values

Drawing closer to the sorts of dilemmas that accountants may face, a former litigator outlined recent research from the Taskforce on Business Ethics and the Legal Profession on the crucial topic of client representation.

During the project, the taskforce adopted a shorthand: “When is a matter lawful, but too awful?” In other words, while you would be on the right side of the law to act for a certain client, the broader, ethical context around the case would make it inappropriate to accept the mandate. In its report, the taskforce urged the legal profession to apply ethical decision-making as standard when evaluating whether or not to take on clients.

Going straight to the heart of accountancy, a regulatory lawyer who advises professional services firms set out the event’s second slippery slope: an accountant’s fall from grace.

In this all too plausible parable, delegates were invited to walk the path of a young, ambitious accountant who is steeped in ethics and enjoys a fruitful early career in practice, before moving on to a coveted, in-house role in industry. There, the accountant is subsumed into a culture where profit trumps everything. They feel they have no choice but to tweak accounts in ways that recognise revenue earlier or later than it should be. Over time, those practices become more and more extreme – but the accountant is working 14-hour days, has a big mortgage to pay, is mentally unwell and can’t get out of the trap.

To prevent such grim scenarios, the lawyer said, there should be a clear link at board level between remuneration and safe ethical practices. In addition, recruitment and induction procedures should be honed to ensure that ethics are paramount in corporates’ DNA.

As part of a discussion on the role of accountants, another delegate highlighted the help that professionals can seek from internal audit, if faced with pressures to act unethically. As an independent function that performs health checks on a business’s operations, internal audit is well placed to provide advice and support.

In a closing group discussion, two delegates highlighted the potential of behavioural science and touched on the concept of motivated reasoning: the multiple psychological factors that steer people into unethical conduct. With its focus on positive and negative human impulses, behavioural science could hold the key to restoring ethical values and fending off corruption in the corporate world.