The CFO Dilemma: Should You Bribe to Survive?

by Cesar Bacani, 13 June 2012

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topics:
Risk Management

tags:
China Criminal Law UK Bribery Act US Foreign Corrupt Practices Act

CFOs should be aware of risks from third-party agents or business partners. More than 90% of reported FCPA cases involved third-party intermediaries, Ernst & Young points out. Yet only 10% of CFOs globally know that the company is liable for the action of its third-party agents, with 39% saying both the company and the third party are liable while 15% said the third party alone is liable.

Directors should be appropriately sceptical. “Developing channels of communication with contacts across the finance function and other executives within the business will help boards ensure that they a full and accurate picture,” Ernst & Young counsels.

Training on ABAC policies should be continued. Ernst & Young notes that as many as 42% of respondents say they have not received training on ABAC policies. “Without adequately trained employees, the ability of companies to identify issues or robustly investigate and act on allegations is also likely to be diminished,” the report warns.

More to Come

Will the current crackdown on bribery and corruption peter out? It does not look like it. Indeed, the US Dodd-Frank Act, which creates new financial incentives for people who provide original information on corporate misconduct leading to a successful enforcement action, appears to be adding fuel to the fire.

“According to prosecutors, the Act has markedly increased both the quantity and quality of whistleblower claims,” reports Ernst & Young. It asked survey respondents whether they support similar compensation schemes for whistleblowing being established in their country. Seven out of ten CFOs and other executives in China, Hong Kong, Indonesia, Malaysia, Singapore and Vietnam said yes.

All this threatens to continue keeping some of Asia’s CFOs in the horns of a dilemma. Should they bribe to survive? On balance, the answer is probably no, particularly since the bosses and boards in headquarters are increasingly under pressure to say no as well.

But the journey from ‘maybe’ to ‘never’ in Asia could take some more twists and turns, as the findings of this Ernst & Young survey indicate. In the meantime, finance chiefs should not be surprised when they are asked to justify the company’s mooncake gift-giving.

About the Author

Cesar Bacani is Editor-in-Chief of CFO Innovation.

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