A universal rejection of backhanders

World Finance speaks to Graham Baxter, who sits on the board of trustees of Transparency International UK, on how common backhanders are in business today

February 19, 2015

Backhanders and bribes – we all know they go on but we don’t expect them to happen with multi-million pound western companies. So when suggestions in the news arose that British staple Rolls Royce was accused in a reported Petrobras multi-billion kickback scheme, light was shone on how transparent respected companies really are.

World Finance: Well Graham: Rolls Royce has denied wrongdoing; so how likely would you say it is that Rolls Royce was actually involved? And if not involved, where did the story come from?
Graham Baxter: It’s been reported that the accusation comes from some papers filed in court in Brazil, in connection with the Petrobras scandal. But I’m afraid I don’t know any more than that.

World Finance: What sort of impact will this have on Rolls Royce in terms of reputation – even if they do turn out to be innocent?
Graham Baxter: When any company faces an accusation around bribery and corruption, it is a bad thing.

At this stage of course, there is absolutely no evidence to work with, so we don’t know the facts around this particular case.

I do notice however that it was reported recently that Rolls Royce, as a result of whistleblower action, has put its name forward for similar accusations in – I think – China and Indonesia.

Now that is a good and a bad thing. Of course, it’s terrible if such things occurred; but it’s good that they have a whistleblower system, and that that whistleblower system has been honoured. I think that’s an important step in getting a company on the right road towards anti-corruption measures.

World Finance: Well looking at the wider issue of backhanders and bribery now; how common are they in the west; and do authorities turn a blind eye, or is there heavy policing of this sort of thing?
Graham Baxter: Since the UK Bribery Act came into force a couple of years ago, the situation here for companies has got a lot stricter. I think we have one of the toughest regimes in the world now; even more tough than the Foreign Corrupt Practices Act, which has been in force in the US for several years.

In the UK, the UK Bribery Act has made a significant difference to the way that companies are required to comply with the law. It has resulted in much tougher compliance procedures within companies, and I’m quite sure that Rolls Royce will be no exception to that.

World Finance: What sort of companies are usually involved? I mean, in reality, everyone does it to a certain extent, don’t they?
Graham Baxter: I don’t think they do, Jenny, no. I think that for the large multinational companies, their reputations are so much on the line, public scrutiny is so intense, and the law is enforced, that it’s simply not worth their while; even if it was within the company’s ethics to do such a thing.

I think the real challenge applies to smaller companies, where they haven’t got the resources available to have compliance officers and compliance procedures. And where they are faced with very serious temptation when operating in some countries outside of the west, where corruption is frankly the norm.

It’s very tough for them to say ‘no.’ Whereas for a large company, that is what is expected, and that is largely what is done.

World Finance: But really, backhanders could be seen as a victimless crime. Is this the case?
Graham Baxter: I don’t think so at all. I think the victims of backhanders are the inefficiency that is created within the country where this occurs, which results in economic inefficiency and lower development progress than could otherwise be achieved.

No: I think the system pays for backhanders, because it siphons off economic growth from the system.

World Finance: Are our attitudes towards backhanders culturally variant?
Graham Baxter: I think there is a universal rejection of backhanders. It may be that they become commonplace in certain societies, because law is not enforced, and it becomes the norm. But I don’t think it makes them any more acceptable.

I simply don’t accept that business, responsible business, requires backhanders to operate efficiently. In fact, I would argue quite the reverse. Backhanders, as I’ve said, siphon off economic growth and efficiency.