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Increasing Corporate Accountability
Brazil’s ability to weather the recent financial crisis, combined with years of steady economic expansion and political restructuring has made it one of the most attractive countries in the world for business opportunities. It is the top recipient of foreign direct investment (FDI) in Latin America, and its domestic companies are also increasingly competing with US, European and Asian companies worldwide. But major studies show that corruption plagues the business environment and that Brazil loses between 1.3 to 2.3 percent of its GDP to corruption each year. For example, businesses bidding on government procurement contracts can encounter requests for bribes, and even adopt these practices in order to retain their competitive advantage in gaining access to profitable contracts. to the problem. Brazil has passed a mosaic of anti-corruption legislation, notable among which is the Access to Information law. Recently President Dilma Rousseff sanctioned another law that holds companies, not just individuals, liable for corruption at home and abroad. Under the new regulations, companies found guilty can be fined up to 20 percent of its gross revenues and banned from government contracts. Institute, a civil society organization (CSO) launched the Cadastro Empresa Pró-Ética or Pro-Ethics Company Registry in 2010. “By joining the registry, companies make a public and voluntary commitment to fight corruption, fraud and illicit practices in business transactions”, says Roberta Solis-Ribeiro at CGU. It is a testament to the fact that the costs of corruption are borne by the government, private sector, and citizens and can only be mitigated if all of these groups work together toward that goal. Foreign and domestic companies which are doing business in Brazil and want to join the Registry have to fill out a detailed questionnaire on six criteria shown in Box 1. A Steering Committee, which is made up of representatives from the government, private sector and civil society, approves the companies that meet the requirements to join the Registry. The Steering Committee is
Features of the Initiative In keeping with this spirit of transparency and accountability, Brazil became one of the founding members of OGP, and promoting corporate accountability is one of the more unique features in its Action Plan. To encourage the private sector to abide by business ethics, the Office of the Comptroller General (CGU) of Brazil, in partnership with the Ethos
Maximizing Opportunities But just as businesses can be a medium through which large-scale corruption occurs, they can also be catalysts for anti-corruption solutions. Companies that have a global presence are increasingly acknowledging the importance of complying with international anti-corruption and anti-bribery policies. This awareness is certainly not limited to the private sector. It has been spurred by a collective awareness across Brazilian society of the costs of corruption, which has compelled the government to pay heed
Evaluated Measures in the Pro-Ethics Company Registry
n Ethics and Conduct n Internal Controls n Relationship with the public sector (or private sector in the case of stateowned companies) n Training and Empowerment n Transparency n Collective Action
OGP Author: Munyema Hasan
| OCTOBER 2013
supported in this rigorous task by an Executive Board, which consists of civil servants from CGU. The companies that make it to the Registry are those that have proved the adoption of all 30 mandatory measures and 50 percent of the desirable measures listed under each criterion. They also have to have a clean status before tax authorities and not be in the Brazilian National Registry of Debarred and Suspended Companies. In the event that the application is rejected, companies get recommendations from the Committee to improve their compliance with measures, and can then re-apply. The textile company Dudalina for example, went through two rejections over the course of a year before finally being accepted into the Registry. Evaluations are repeated every two years for those that are already in the Registry.
Encouraging and promoting good corporate practices internally, and externalizing these practices to partners and investors allow the formation of a network that works to build a company committed to ethical values”
- Henri Penchas, CEO of Duratex, upon the company being listed in the Pro-Ethics Company Registry
By joining the registry, companies make a public and voluntary commitment to fight corruption, fraud and illicit practices in business transactions”
-Roberta Solis-Ribeiro CGU
Early Results Of more than 130 companies that have applied till now, 15 companies met the eligibility criteria and currently populate the Registry, shown in Box 2. The lion’s share is in the energy sector while the rest are in Banking or Industry. “It’s very
difficult to be part of the Registry. The visibility and credibility that come with it is a great incentive for companies to join”, says Caio Magri, Director of Public Policy at the Ethos Institute. The benefits of having an initiative of this kind accrue to both government and the private sector. This kind of project helps
Companies in the Pro-Ethics Registry
3M do Brasil AES Eletropaulo AES Sul AES Tiete Banco do Brasil Caixa Econômica Federal Celesc CPFL Energia Dudalina Duratex EDP Energias do Brasil Infraero Johnson Controls Building Efficiency Siemens Santander
to build the companies’ societal goodwill and in a proactive manner also lets current and potential business partners know that they will not partake in illicit activities. It also directly benefits the private companies by recognizing their efforts in creating an ethical environment in their internal controls, organizational culture and supply chain. For a country that will be hosting the 2014 World Cup and 2016 Summer Olympics, these measures build confidence in the governments seriousness to fight corruption and be an active part of the global business community.
OGP Author: Munyema Hasan
| OCTOBER 2013