Anti-corruption corporate white list: A further step towards the establishment of good corporate citizenship?

Acting as an international expert in the area of corruption and good governance for the Council of Europe – Directorate General Human Rights and Rule of Law, I have recently been given the honour of working within the project CLEP (Controlling corruption through Law Enforcement and Prevention), which aims at supporting the reform of the anti-corruption regulatory framework in the Republic of Moldova (the Republic of Moldova is ranked 117 out of 180 countries within the Transparency International Corruption Perceptions Index 2018).

In particular, through my contribution towards the preparation of a technical paper that will be formally presented in September to the national authorities, I advocated the adoption of two measures to innovate the Moldovan legal framework: the establishment of a public anti-corruption “white list” of virtuous companies; and the introduction of deferred prosecution agreements in the Moldovan jurisdiction.

The technical paper is planned to be officially published in Autumn 2019. In the meantime, I decided to write down some general reflections on the former proposal (establishment of an anti-corruption white list) that benefit from the research conducted for and the experience gained from such a stimulating Council of Europe’s mission.

First of all, it is necessary to briefly conceptualize the notion of “white list”. This concept is antithetical to the one of blacklisting (also known as debarment), which is commonly used in the public procurement process and consists of excluding the blacklisted party – permanently or for a given period of time – from the participation in the related public procedures.

On the contrary, an anti-corruption corporate white list may be defined as a roster including private-sector entities that meet the requirements for a series of anti-corruption criteria that go beyond the mere compliance with the mandatory anti-corruption regulations. In particular, to be included in a white list, companies should voluntarily commit to the establishment of corporate strategies and procedures aimed at effectively identifying and preventing potential corruption risks. Moreover, these firms should agree to be subject to an independent and external assessment of the effectiveness and correct implementation of such systems.

Historically, white lists of firms have been established in many countries and for different purposes. For instance, one of the first examples – within the private sector – was represented by the establishment in the United States, in the early 1930s, of the white list of candy firms which maintained voluntarily a few minimum standards in relation to the quality of the products used and employees’ wages. In 1932, 102 firms were included in this so-called “Candy White List.”

Pressure for the implementation of such rosters is currently increasing especially as a tool to fight financial crime. According to such a trend, the idea underlying this article is to evaluate the opportunity to use a white list as a tool to counter the perpetration of corrupt practices. In this context, the proposal relates to a white list established by the public administration in cooperation with the private sector rather than consisting of a purely self-regulatory solution.

Due to the fact that the inclusion of companies in a white list is inherently voluntary, such an instrument has a symbiotic relationship with the establishment of a series of incentives for the companies. Rewards play a fundamental role in the successful establishment of a white list in a given jurisdiction because they serve as a crucial stimulus for businesses to accept the costs for the implementation of the additional anti-corruption procedures.

As regards the potential advantages related to the introduction of a white list, they could be included in two categories. The first one concerns the advantages that affect the country system as a whole and, among them, it is possible to mention the following ones:

  • Due to the fact that other companies would naturally tend to follow the example of the white-listed competitors to gain the same level of enhanced reputation and take advantage of the incentives provided, the presence of the white list could inherently foster an anti-corruption culture both in the private and public sector.
  • The white list could naturally enhance the relationship between the white-listed companies and the public administration generating a higher level of trust between the public and private sector.
  • The white list could reassure international investors and donors making it easier to receive or compete for international funding opportunities.
  • The anti-corruption strategies implemented by the white-listed companies could naturally lead to less intense controls from the public authorities so to allow the government to save crucial resources that could be used in other ways.

The second category is related to the advantages that the white-listed companies could obtain besides the incentives formally awarded by the public administration. It follows a list of illustrative benefits that such firms could enjoy:

  • The public roster could inherently enhance the reputation of the white-listed companies, which would have the possibility to consolidate and expand their market shares generating increased customer loyalty.
  • The circumstance that the white-listed companies would be publicly recognized as firms adopting a corporate culture with a commitment to integrity would inherently help them to counter corrupt practices (e.g., discouraging low-level officials to ask for the payment of petty bribes).
  • The white-listed companies could use their status to find with less difficulty foreign business partners that would be reassured by their inclusion in the public roster.

Besides the advantages, the introduction of an anti-corruption white list may generate disadvantages that have to be identified and addressed in advance. As a matter of fact, there is no zero risk associated with the adoption of any new legal framework in a given jurisdiction. Over the course of this study I have identified three risks that could potentially be posed by the introduction of such legal instrument:

  • Collusion Risk: The white list could be illegally used as an instrument of cooperation or conspiracy between corrupt government authorities or politicians and aligned private sector players in order to deceive others firms and obtain an unfair competitive advantage over them.
  • Conflict of Interest Risk: Due to the fact that the companies that apply to be included in a white list should be subject to an external assessment of the adequacy of the anti-corruption strategies and policies they have implemented, an inherent conflict of interest could emerge where, for instance, those firms pay for such an assessment or where the interests of certain firms are aligned with the ones of some political groups.
  • Exploitation Risk: The absence of adequate resources, skills, or political willingness may negatively affect the effectiveness of the controls on the adequacy of the anti-corruption strategies and policies supposedly implemented by the white-listed companies. As a result, there is a risk that some companies could merely simulate through window-dressing operation compliance with the eligibility criteria and the implementation of an effective anti-corruption compliance program.

In conclusion, the adoption of a white list could surely contribute in a constructive way to the establishment of a positive cultural change in the corporate world. However, the introduction of such a system to publicly recognize good corporate citizens may generate significant disadvantages where the implementation and management of the white list are inappropriately conducted (i.e., assuring an adequate level of monitoring, transparency, accountability, and independence). Paradoxically, the countries that experience higher levels of corruption seem more vulnerable to such potential drawbacks even if they are the ones in greater need of such a solution. In any case, it is important to clarify that the introduction of a white list of virtuous companies in a given jurisdiction cannot be considered as a panacea for the problem of corruption. Rather, it may represent an additional legal instrument for countering, in conjunction with all the other forms of intervention (e.g., prevention and repression) such a pervasive criminal phenomenon.

4 thoughts on “Anti-corruption corporate white list: A further step towards the establishment of good corporate citizenship?

  1. Thank you for such a highly articulated and nicely presented opinion on anticorruption. It is true corruption has been a serious threat to the development of developing nations. Although, a corruption-free society is still a utopian concept beyond all intellectual outcomes but still with few options like ombudsman or special tribunal for corruption states are giving a change the scenario but it’s like juiceless fruit. This novel approach taken by the author with the articulation of the principle of white-listing could give a relief to fight against corruption.

    Geographical similar countries Nepal and Moldova amazingly, have similar problem with corruption as well. A quite innovative approach has been taken to tackle the same problem with means of social exclusion. This 16th century principle is practicable to today’s scenario as well. The only difference between the author’s theory and Nepal’s experience is in the scale of business, white-listing is for big houses or Corporation and social exclusion is for relatively small local level entities.

    Social exclusion as a deterrent theory of punishment to corruption would make people think about being isolated and sit aside alone with the punishment. Thus, the concerned institution could make the list of the white-listing companies and any corporation departed from the standard would be sanctioned with social exclusion. With this, in one way with the legal principle of white-listing state promotes the institution fulfilling its positive obligation and in other side, state with the execution excludes the corporation from further obligations (fulfills negative obligation) protecting the right of judicial mechanism.

    If we see from Bentham’s point of view(from pain and pleasure theory), any corporation or individual will think about the exclusion (as a punishment) in addition to the destruction of reputation, would calculate before getting engaged with any corruption acts. No one wants to lose in this competitive world and this execution mechanism could help to reduce the level of corruption if not corruption-free.

    I believe, adding a social exclusion to the principle of whitelisting as an execution part of it could be a great solution to the principle for its widespread application. After all, justice should be done effectively.

  2. Corruption is among the most emblematic descriptors of the 21st century. Unfortunately, such a phenomenon is the worm that eats the trunk internally or is engulfed in any eventual prosperity of a state, since corruption as a phenomenon only redistributes (and does not create) the values created within a society to the wealthy and the their district, sadly over the burden of the poorest who represent the majority.

    There is not a single state in the world that does not face any form of corruption at a certain dose, given the fact that over 6 billion people worldwide live in countries that have serious problems with corruption (Transparency International, 2015). Therefore, of the great importance and the negative impact that this phenomenon has on the society, I would like to thank you for the interesting and insightful article, to a future led by fairness and justice. Based on the author’s articulation, I strongly believe that White-listing would undoubtedly have a positive impact on the fight against corruption.

    When someone talks of corruption, unfortunately we only have in mind terms like ‘theft’, ‘money laundering’ or other similar forms of corruption. I fully believe that if we limit corruption only to these forms of its occurrence, then we cannot find a solution to corruption because we have not yet properly defined it as a problem. This phenomenon in our society is at the heart of many processes, ranging from minor cases, for example in Albanian schools, parents “corrupt” their children’s teachers (buying them expensive gifts), so that the teacher could advantage their child, up to the level of abuse of public money at national level.

    Although de jure there are a number of laws that define sanctions for corruption or many other violations, it seems that in a country with high corruption like my country Albania, it is more than obvious that the “Rules are made to be broken”, in particular by those who compiled them. Or perhaps, these regulations are precisely so burdened with legislation that make them unaffordable for the low capacity of the justice system in Albania. On the other hand, it is exactly that weak justice system that is one of the causes that leaves so much space for corruption. Consequently, if no one reported the case, wouldn’t a corrupted act be repeated?! A gap in prevention of the corruption is the lack of a mechanism in a regulation that would act as an incentive against corruption, or as an inhibition of it and White-listing could be the choice.

    On one hand, there are many institutions that fight corruption, and the main challenge remains uniting efforts to combat it. I think that the inter-institutional cooperation in fighting corruption should be strengthened at the institutional level, so as not to break the link in the anti-corruption cycle. The capacity of the justice system to fight corruption also needs to be increased, especially the need for an internal control mechanism that should be independent.

    A whitelist, on the other hand, as a list of entities that, for one reason or another, are considered acceptable or trustworthy would be a positive development and the strategy itself is very ambitious as I think it will lower consistently and sustainably corruption, enhancing the integrity of institutions and promoting good governance and transparency. What I would add as part of Whitelist are the involvement of reliable and non-partial (in politics), people of civil society that would act as monitors, providers of Whitelist anti-corruption policies, and as a strong voice of society as after all society is the one who is more affected by corruption. Along with these measures, also more power should be given to institutions that prevent or combat corruption.

    However, I think Whitelist’s policies should be implemented correctly and effectively in order to bring the needed positive change in the corruption, in the countries where it will be applied. As a result, the government must make efforts, with the support of the international community, to get engaged to actively fight corruption. Nonetheless, even if corruption cannot be completely eradicated, I strongly believe that the legitimacy of Whitelist, with the involvement of reliable and non-party representatives of society, will significantly reduce the level of corruption.

  3. I agree with the author’s opinion and I reinforce that corruption is a complex global phenomenon that that harms the development of the countries. The price that countries pay to end corruption is relatively high and the few resources available in some countries are spent on enforcement measures, such as government enforcement agencies. In fact, it is increasingly evident that the economic costs of corruption are enormous and directly affect the economic development of countries that suffer from it.

  4. Curruption is a crime that is very detrimental to state finances, many countries have become bankrupt as a result of this crime. The biggest perpetrators of this crime are companies both on a large scale and on a small scale that collaborate with the boricracy.
    In Indonesia, the classification of companies that are on the White List is very unlikely to be applied. Large companies that manage state finances are dominated by ownership by public officials and leaders of political parties. So that in its implementation state finances are managed by conglomerates affiliated with the bureaucracy. So it is not possible to apply the White List of Companies, because if it is applied indirectly it will give rise to a new form of corruption, namely corruption in the management of white list companies.
    Apart from private companies, state-owned companies are heavily involved in corruption crimes. State-owned companies that manage important sectors in their business become bureaucratic officials along with employees in political positions.
    A very surprising example is theaction window dressing taken by Garuda Indonesia in preparing its 2019 annual report, the real thing about Garuda Indonesia is that state-owned airlines are also involved in corrupt practices, but to date no legal action has been taken by law enforcement officials. Looking at the political power map in Indonesia it appears full of political interests in any public sector, including law enforcement and anti-corruption.

    Master of Law Student, Faculty of Law, Islamic University of Indonesia

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