Remarks by Angel Gurría
9th Annual Conference: International Forum on Business Ethical Conduct
Wednesday, 14 November 2018 - Pullman Paris Tour Eiffel Hotel
Ladies and Gentlemen,
I am pleased to join you today at the 9th Annual Conference of the International Forum on Business Ethical Conduct for the Aerospace and Defence Industry (IFBEC). Each year the Forum helps us to promote integrity and to take the fight against corruption to the next level, an excellent example of business-driven collective action. I would like to thank the IFBEC, and in particular the Chair, Mr. Tom Schultz, and the Vice Chair, Mr. Dominique Lamoureux, for inviting me to this important discussion.
Corruption remains one of the most pressing challenges of our time. It promotes mistrust in governments, public institutions, banks, corporations, politicians, political parties, democracies, you name it. It corrodes our social fabric. To provide a stark example, a 2017 survey, highlights that only 15% of citizens felt the system was working for them, and 69% expressed concerns about ‘corruption’.
And the situation does not seem to have improved in recent years. In EY’s 2018 Global Fraud Survey, 38% of respondents stated that bribery and corrupt practices happen widely in business in their country – the same level as in 2012. In emerging countries, this figure jumps to 52%.
In our increasingly interconnected and complex world, tackling these challenges requires co-ordinated, multilateral solutions and standards. This is why the OECD is supporting governments and the business community to fight corruption, improve integrity and rebuild public trust. Let me share a few examples.
Firstly, the OECD is helping to combat bribery. Bribing is one of the principle decays of international business. Today, it is estimated that close to USD 1.5 trillion in bribes are paid every year by businesses and individuals . We are helping countries to eliminate this curse.
Thanks to the OECD Anti-Bribery Convention, which turned 20 last year, foreign bribery is today illegal in all OECD countries and in 8 additional non-OECD countries that are parties to the Convention, representing 70% of global exports.
Currently there are over 500 ongoing investigations into alleged acts of foreign bribery in 29 countries. In the US, for example, the aerospace / defence / security sector has been the third most sanctioned sector, with 14% of all sanctions.
The Convention also requires that companies promote the adoption of effective internal controls, ethics and compliance programmes or measures. Companies play a key role in preventing, detecting, and responding to corruption.
It is therefore paramount that companies go beyond check-the-box compliance and promote robust corporate compliance programmes. Ethical leadership is in high demand in business as it is in politics. That is why we have developed specific tools to help companies promote the prevention and detection of bribery and to uphold a tradition of business integrity. Among others, these include the OECD Good Practice Guidance on Internal Controls, Ethics, and Compliance and the new OECD Strategic Approach to Combating Corruption and Promoting Integrity which we launched earlier this year.
Secondly, the OECD we are also helping to improve corporate governance. This is particularly important in the prevention of corporate misconduct and in rebuilding trust in business. Sound corporate governance attacks the supply side of corruption by increasing transparency, limiting discretionary power and holding decision-makers accountable. In the past 10 years, banks have paid USD $321 billion in fines for an abundance of regulatory failings . This is just one example.
The OECD has partnered with the G20 to produce the revised and upgraded G20/OECD Principles on Corporate Governance, which provide globally-recognised standards on transparency, accountability and business integrity. We also oversee the world’s foremost standards for corporate governance targeted at State-Owned Enterprises (SOEs). And we are currently working on guidelines for countering corruption in the state-owned sector.
Today over 20% of the top global companies are SOEs, and they are increasingly active in the international marketplace. Since 2009, fully state-owned enterprises have, on average, accounted for over 10% of global cross-border mergers and acquisitions annually. Fighting corruption in SOEs has therefore become all the more important.
The OECD is also promoting responsible business conduct. Remember the song by U2 that say “with dreams come responsibility”? Well business projects are a type of dream that brings important responsibility. Compliance officials – especially those in high-risk sectors like aerospace and defence – need to balance a myriad of risks, with the daily pressures of meeting business objectives. These do not need to be competing goals or separate objectives.
The OECD Guidelines for Multinational Enterprises – which are now over 40 years old and regularly updated – were the first international corporate responsibility instrument to incorporate risk-based due diligence into major areas of business responsibility. This requirement is increasingly reflected in national legislation making it a legal obligation. In France, for example, large companies are now required to put in place a due diligence plan to address human rights risks in their activities and supply chains.
To help companies implement the Guidelines and apply due diligence, the OECD recently released a Guidance on Due Diligence for Responsible Business Conduct. Developed with the private sector, this Guidance can be used by all enterprises, large and small, covers every business sector, and is global in scope.
This also applies to the aerospace and defence industry. In fact, in September, a case by the Danish National Contact Point (NCP) concluded that the Danish Ministry of Defence had not correctly required one of its suppliers to apply due diligence in the building of an inspection vessel. The NCP, therefore, recommended that risk-based due diligence requirements should be part of the Ministry’s procurement contracts with suppliers.
And of course, the OECD is also helping to tackle tax evasion and avoidance. In June 2017, more than 70 countries and jurisdictions signed the OECD’s multilateral convention to Base Erosion and Profit Shifting (BEPS), which is tackling the gaps and mismatches in tax rules that allow profits to be shifted to low or no-tax locations. These practices are estimated to have cost our treasuries up to USD 240 billion per year.
We are also fighting tax evasion through the new global standards on Automatic Exchange of Information (AEOI). The work has borne significant results, in fact, up to EUR 85 billion have already been collected from taxpayers who now know that there is, quite literally, no place left to hide.
We are also helping countries to improve good governance in public procurement. A key part of this work is combatting collusion. Bid rigging can inflate public procurement costs by 20% or more, costing billions of dollars every year across the world. OECD guidance on fighting bid rigging in public procurement helps to make public procurement processes more competitive and less vulnerable to collusion, giving the public sector genuine opportunities to achieve value for money.
In fact, with political leadership, public procurement can help to streamline ethical business conduct in government suppliers, cascading down their whole supply chain. An increasing number of countries are now looking at making this a new reality in public contracts in a wide range of industries, including aerospace and defence.
And last but not least, the OECD is working to promote integrity. This is a principle focus of the Organisation. Our annual Integrity Forum brings together all stakeholders and takes stock of the challenges being faced in this area. In 2017, we adopted a Recommendation on Public Integrity focusing on three pillars: Having a system in place to reduce opportunities for corrupt behaviour; Changing a culture to make corruption unacceptable socially; and, Making people accountable for their actions.
We are also currently developing an Anti-Corruption & Integrity Hub to facilitate engagement with the global anti-corruption and integrity community. The Hub, once launched, will serve as a reference for all of the OECD’s work on anti-corruption and integrity and will serve as a virtual platform for the global anti-corruption and integrity community.
Ladies and Gentlemen,
Corruption is a moving target and the OECD remains committed to tackling it by working together with all stakeholders and ensuring that our different instruments remain up to speed to improve business conduct and practices.
We stand ready to work with you to improve business ethical conduct that effectively supports high-quality investment, financial stability, and a more inclusive and sustainable growth. Thank you.