How to conduct business ethically

Special advisor to the CEO of Odebrecht S.A., coordinator of the Compliance Committee, B.Sc. in Civil Engineering from UFMG and MBA from IMD

by André Amaro

Following the advances in legislation in Brazil and around the world and the extra push from the corruption investigations in the country, Brazilian companies have definitively added to their list of priorities the implementation and enhancement of compliance programs, which is the name given to the system, actions, attitudes and posture that guide or even force companies to act always ethically. The challenge is to move from paper to practice with measures that have a real impact on day-to-day business routines.

Compliance in the world economy received its first impetus in the 1970s. After the discovery of bribes paid by major U.S. corporations, the Foreign Corrupt Practices Act (FCPA) was created to establish sanctions on companies and executives caught practicing corruption outside the United States. The act also required companies to improve their internal controls.

In the 1990s, the United States Sentencing Commission (USSC) established guidelines for implementing compliance and ethics programs in the private sector. In the following decade, the Sarbanes-Oxley Act established broad transparency measures for companies and audit firms, particularly public corporations. Meanwhile, anti-corruption efforts gained global status in the international conventions of the United Nations, OAS and OECD. In Brazil, this process led to the enactment of the Anticorruption Law of 2013, which references an integrity program for companies, which was later detailed in its regulatory order.

More recently, leniency agreements signed by the Federal Prosecution Office (MPF) with companies investigated for corruption also established requirements for implementing compliance programs based on international references. This rapidly mounting interest in the issue is clearly demonstrated by, for instance, companies’ recent efforts to obtain the Pro-Ethics integrity seal granted by the Ministry of Transparency. This year, 171 companies complied with the evaluation requirements, more than twice as many as in 2016. Most are large companies.

Investigations such as Operation Car Wash, however, have shown that adopting a good set of standards, even if based on best international standards, is not enough. The challenge is to ensure in practice that the company will conduct its businesses ethically. The first step towards this goal is the commitment of its leaders, the so-called “tone from the top.” A good compliance system should reflect the business strategy, based on a decision that has been discussed and approved by the company’s board. The role of the compliance department is, above all, educational, since the real ethical dilemmas will be faced directly by those conducting the business activities.

The compliance system should be implemented supported by permanent planning and evaluation, always following the most efficient models. Concrete measures adopted and informed over time are the best way to achieve credibility before both employees and external stakeholders. They show that the company is truly serious, and not just full of good intentions.

Practical actions must involve the entire supply chain. Companies must require suppliers, for example, to adopt the same ethical rules, by espousing the benefits to all agents with whom the company interacts. Another way of demonstrating leadership’s conviction is through engagement in collective actions. By actively participating in initiatives and non-governmental organizations that promote ethical business conduct, companies convey a strong sign of their commitment and help to encourage good practices in their industries.

Absolute transparency and an adequate level of accountability of the measures adopted will enable society to monitor the program’s progress and even demand improvements. The company must be willing to listen, dialogue and discuss the topic with all stakeholders. This also is a way to raise awareness among the public on the need for government officials at all levels to adopt similar systems of guidance, control and monitoring.

Companies are doing their part, reinforcing their compliance systems and transforming themselves to act always ethically, with integrity and transparency. It is our role to keep an eye on them at all times. The delays and risks are in the public sector, which is currently very slow in making changes, if not ignoring them. Public pressure and the consequences of the recent investigations and court sentences will certainly help change this scenario.