“Your criminal actions raise serious questions as to whether you have the requisite personal integrity and business ethics to be a responsible Government contractor.”

That’s me.

I was debarred from being a U.S. government contractor, and based on my conduct and offense, it was an appropriate and fair decision. The process by which I was suspended and ultimately debarred was also fair and appropriate.

Furthermore, the protocol the government afforded me in terms of providing an opportunity to address the length of the debarment (it was reduced by one year, if my record remains clear) was quite reasonable and objective.

The unintended consequences of debarment

So, what does debarment have to do with trade? Well, I think everything.

Why should an organization or individual who has breached fair trade, either through bribery or export offenses, be entitled to continue to export without some sanction?

While there has been a recent increase in the discourse around debarment, including the recent changes in the Canadian Public Works and Government Services Canada (PWGSC) Integrity Framework, it remains an infrequent sanction tool.

In fact, according to the OECD Foreign Bribery Report, of the 427 cases from which the OECD used as its data set, only two resulted in debarment (of which this author is one). The OECD defines debarment as relating “to the additional non-automatic sanction of provisional exclusion from participation in national public procurement processes for a set period.”

So, why is debarment not being used as an instrument of sanction and deterrence?

As University of Virginia (disclosure, my Masters in Foreign Policy is from UVA) Professor Brandon Garrett states in Too Big to Jail, suspension and debarment “may result in what is effectively a death penalty for a company, and in many cases prosecutors and regulators are right to want to avoid such severe consequences for the entire company.”

Avoiding collateral damage

Agreed. For example, in my own case, would it have been responsible to have my former employer debarred, with potentially catastrophic economic consequences, for conduct attributable to me?

Clearly not, and as Professor Garrett states,

Prosecutors are absolutely right to try to avoid collateral consequences of a corporate conviction.

In his concluding chapter, Professor Garrett argues, “for corporate prosecutions to have real teeth, debarment and suspension should be exercised more clearly and forcefully, particularly for recidivists, to ensure that they implement meaningful compliance,” and he reminds us that prosecutors “can wield the most powerful tools.”

Thus, if the FCPA and other anti-bribery enforcement regimes are proving inadequate, even if essential, in terms of deterring foreign bribery, perhaps the “debarment” tool needs to be taken out of the shed.

Perhaps it should be utilized in a way which, while economically painful, is not catastrophic to the hard-working employees and foreign end-users who play a legitimate and lawful role in the value chain.

Here, I think Canada leads the way, and we will get back to the “why and how.”

Hitting where it hurts on the front lines

As to why I consider debarment to be a fair, appropriate and well calibrated sanction and deterrence tool, well, we need to take a deep dive into the front lines of international business. More specifically to hotels, conference center bars and restaurants where business teams congregate after corporate meetings.

It is in this environment, away from the ears of management, where business personnel are likely to exchange ‘war stories,’ and in this case, frustration with the interruption of business due to debarment.

While criminal and enforcement fines, even massive ones, have financial impact on earnings and balance sheets (but as we have seen, not necessarily to share values), they don’t automatically impact field personnel.

Debarment does, as it disrupts sales opportunities, income streams, revenue models, and finally, incentive compensation potential, to those who have international business development responsibility.

When business teams who have had their forecasts and plans interrupted due to debarment start pressuring peers not to engage in conduct which can “screw up the market,” the thinking might really start to shift.

Those internal pressures should not be underrated. If it is the business teams who are misbehaving, why not have the business teams feel the pain?

Even if the ones who are getting the brunt of the punishment are not the ones who committed the fraud, from my perspective, they will be sure to “share the pain and shame” with their cohorts in a way which just might change the “engage in or refrain from” corruption calculus to everyone’s long term benefit.

Now back to Canada.

The Canadian solution of remediation, rehabilitation and cooperation

As Kristine Robidoux, Partner, Gowling Lafleur Henderson LLP, stated in a recent blog article, entitled The New Canadian Integrity Regime: Compliance Carrots to Join the Sticks,

“The previous Integrity Framework had a number of controversial provisions that led to widespread criticism; in particular, suggestions that the Framework was so draconian, confusing and inflexible as to “drive underground” allegations of corporate wrongdoing, contrary to PWGSC’s stated objective of deterring such wrongdoing.”

As for what Canada did to balance the Regime, as Kristine states, “the Regime now provides for the period of contracting ineligibility to be reduced by up to five years if it can be demonstrated that the supplier has adequately addressed and remediated the causes of the misconduct and has cooperated with enforcement agencies in investigating and resolving the conduct at issue.”

Thus, in addition to the debarment sticks, Canada has introduced the carrots of remediation, rehabilitation and cooperation that can all be used to reduce the debarment period.

As Kristine adds, “it is clear that with the recent changes to the Integrity Regime, the Canadian government is attempting to foster an environment that will encourage cooperation, self-investigation and voluntary disclosure by using inducements to potentially shorten the debarment period.”

So, from my perspective as one who has been debarred, it is a fair and appropriate tool which has real impact on the front lines of business, which is where unethical export practices often occur.

While recognizing the potential disproportionate consequences which might result from its use, I think that Canada gets it right by incentivizing organizations via downward departures in the length of debarment, when they show responsible changes in behaviors, policies and compliance practices.

I hope that other countries will look at Canada’s approach and think about how this tool can have a dramatic impact on those who operate on the front lines of overseas business, as well as to the organizations that ultimately have responsibility to maintain ethical, lawful and compliant business practices.

Do you think Canada’s new anti-corruption measures are a step in the right direction?

The post How Canada’s leading the way to compliance with anti-corruption sticks and carrots appeared first on Trade Ready.

Big opportunities for exporters in Africa

There is no doubt that the continent of Africa is a land rich in opportunities for international businesses. With an abundance of natural resources, some of the world’s fastest growing economies, and booming demand for technological growth, it’s not hard to see why.

Yet it’s also plain why so many companies are hesitant to bring their business there. Africa is well-known for being as risky as it can be rewarding.

Corruption continues to be a rampant issue, on top of the risks associated with poverty and political instability. Yet, when New York Times Dealbook author Danny Hakim states that Africa is “a continent that foreign investors have long been wary of,” he then adds that “now that narrative is changing.”

What are the risks of doing business in Africa?

Anita Esslinger and Cara Dowling discuss the risks associated with doing business in Africa in their blog for Bryan Cave Attorneys as representative of markets “where corruption can be systemic and entrenched,” in part due to “dealing with governments or state owned or controlled entities, having regular contact with government officials, and depending on third parties.”

Exporters often come across a multitude of red flags spanning industries and African governments. But is that cause to abandon business development in Africa as impossible due to corporate ethics and anti-bribery regulation?

For companies of any size who are contemplating business investment in order to make major sales and earnings outside of traditional markets, Africa can look like an untapped treasure trove.

But business in Africa contains both tremendous upside and substantial risk.

Africa is very much a work in progress. We see signs, as demonstrated by the recent election in Nigeria, and calls for greater transparency throughout the continent. It’s clear that the citizenry is demanding more from its leaders, including greater access to education, goods and services, as well as work skills better suited to the demands of the growing global economy.

Western companies bring not only goods and services, they bring opportunity for local development. Thus, leaders are now left to choose between companies that want to “pay to play” which bring sub-standard product, versus those which bring long term opportunity but are not willing to “buy their way into the market.”

It looks like the awareness of those options among the local populous is causing a shift, even if we are not totally there yet.

Set the stage for business in Africa with thorough research

Sometimes the choice to invest needs to be carefully analyzed before committing resources, personnel or otherwise, to a country. Africa is in no way a homogeneous continent, and there are still some countries where corruption risk and opportunity are in plentiful supply.

I have seen this all too often, as business leaders who sit in their home-offices don’t understand the cultural and business nuances that distinguish one country from the next, not only in Africa, but on most continents.

Pay a visit to Africa, and one will quickly realize that Cairo, Lagos and Johannesburg might as well be on different continents. The cultural and societal differences could not be more pronounced. Treat them as “one continent, one market” and you are doomed to fail from the start.

Strengthen your business against corruption risks

Not every multinational has the financial resources to commit to the long term development needed to resist short term corrupt demands, as cash flows may dictate a faster return on investment.

Thus, when considering business strategy, organizations need to account for time lines, and realize the demands for bribes, especially small bribes, in the context of local procurement process, might abound.

To resist them, a long-term strategic plan, with incentives for front-line teams to match, need to be considered. If shorter return on investment is required, some parts of Africa should be avoided, so as not to be put in a position of greater risk once resources have been committed.

All too often multinationals commit resources in a country, and then start to see a proliferation of corrupt demands once a project is underway.

That has been my experience in many of these regions, and when that occurs, bribery becomes indexed to “not losing an existing gain” as opposed to winning a new opportunity.

How can you avoid this risk-reward scenario?

Get to know the market, through public reports and due diligence before putting your teams in harms way in such regions. The data is out there and quite accessible, so think about your appetite for long term return as opposed to short term gain, before committing and inserting a business team into such a country.

Be up front with local partners right from the start

So, with all of the risks especially third party exposure, is success possible? How can businesses remain compliant and successful when the requests for bribes are so ubiquitous?

Making the effort to engage with local companies as part of an effort to merge core values with local needs brings the opportunity for business development to each region. It gives businesses an opportunity to be up front about ethical business and messages, so there is no confusion once a project begins that bribery will not be a part of the process.

When local partners know that up front, there is less opportunity for risk later in the sales process.

Ok, so how?

Corruption thrives in an environment where there is a lack of manpower, skills, working systems and other serious governance challenges.

Indeed, in my experience, where I saw corruption (for the most part), I observed poorly trained procurement personnel who were tasked with executing procurement regulations that were deliberately confusing, include the requests for bribes into the procurement process.

Start by showing your commitment

Jonathan Berman, author of Success in Africa, points to companies like GE as examples who enjoyed success without compromising on their values. Jay Ireland, President and CEO, GE Africa, remarks,

“if you can be seen as a company engaged in the country’s long-term development, and explain the benefits you and your team bring to support that development, it shows real commitment. Most importantly, it shows that you’re here to stay.”

Sounds nice, but what does that mean in terms of business practice?

GE takes that process of engagement one step further by focusing their messaging not only on product benefits but on employment, economic development and building skills. And that goes beyond just its own workforce to benefit the national economy as a whole.

The takeaway is that participating in corruption just perpetuates it, but there is another way.

GE has found success in Africa by staying persistently and resiliently engaged in a way that, in the end, helps to create a better customer.

In Africa, partnerships mean collaboration

Perhaps Emerging Capital Partners (ECP) founder Tom Gibian best summarizes the potential of Africa,

You look at the numbers, you run through your analysis, and you simply conclude that Africa over time rewards honesty and punishes corruption.

And, as he adds, “maybe not in every single transaction, but over time.” Or, as Jeff Immelt, CEO of GE states: “If you want to be a good global company you have to know how to make money in a country for a country. If you don’t understand that, you’re never going to win.”

And your company doesn’t need to be as large as GE to play by the same rules.

Maybe we should look at his model of success and reflection that “Being in Africa doesn’t make us better in Africa. It makes us better everywhere.”

I think that statement is really worth elevating as it demonstrates that organizations can achieve business success in regions which have integrity issues by taking a long-term view of resource commitment, investment and return. When this occurs, not only is success well rewarded, it results in local development, power of example, and most importantly, sustainability.

Everyone in the organization, even those who are not part of the overseas team, can look with pride upon how strategy trumped corruption by a long-term business model and steady execution.

I have been in organizations where those pictures of front-line personnel shaking hands with local partners, in some of the least developed parts of the world, as frontier markets, hang proudly on the walls in the C-Suite.

Why not give it a try?

Would you consider doing business in Africa? If you have, what was the recipe for your success?

The post How to succeed in Africa by choosing partnership over corruption appeared first on Trade Ready.