Lessons From Avon's China Bribery Scandal

by Cesar Bacani, 11 May 2011

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topics:
Risk Management

tags:
bribery corruption FCPA UK Bribery Act

Under the FCPA, “routine governmental action” does not include any decision by a foreign official to award new business or to continue business with a particular party.

Case Studies

In “The Bribery Act 2010 – Guidance” issued by the UK Ministry of Justice in advance of the UK Bribery Act coming into force, some important points were made in hypothetical case studies to help companies navigate bribery waters. They include:

Communicate the company’s commitment to transparency and zero tolerance of bribery in pursuit of business objectives to employees, consultants and external contacts, such as sectoral bodies and local chambers of commerce. If the company operates in a foreign country through an agent company, the company’s policy of not making facility payments must also be made clear.

Ensure that the executives and employees of an agent company are trained on the provisions of the Bribery Act and local laws

Draw up key points guidance on preventing bribery for sales staff and others involved in bidding for business and when engaging consultants

Provide a confidential means for staff and external business contacts to air any suspicions of the use of bribery on the company’s behalf

Identify someone of a suitable level of seniority to be a point person for queries and issues relating to bribery risks

“Combating the risks of bribery is largely about common sense, not burdensome procedures,” Kenneth Clarke, the UK’s Secretary of State for Justice wrote in the preface to the guidance. “Rest assured – no one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Grand Prix.”

The key determinant is proportionality. Flying a Chinese official first-class to London for Wimbledon matches and giving him the chance to visit his son who is studying in a British university on a scholarship provided by the company will probably count as bribery by “a reasonable person in the U.K.” – which is one test the law sets out in determining whether or not bribery has occurred.

As the U.S. and UK continue their crusade against corruption in business, it's a lesson Avon and other companies should continue to learn.

About the Author

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

Thank you for the great

Submitted by waseem jutt on 13 May 2013 - 5:15pm

Thank you for the great article I did enjoyed reading it, I will be sure to bookmark your blog and definitely will come back from again. I want to encourage that you continue your great job, have a good day parttimejoblist.com

I am sure the investigation

Submitted by susanbask on 19 April 2013 - 3:23am

I am sure the investigation will prove if Avon company is involved in disclosure violations or abuse of control. I have been using their products for a lot of years and they never disappointed me, on their blog I found useful tips for your hair and they were very effective.

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