24/12/2015 - Ersin NAZALI

“Clean Company Act” which is legislated by Brazil in 2014 stipulates that the state does not need an evidence to impose a company to a maximum 26 million dollars fine if any company is acting in an effort for corruption. Named above act also states that, entire employees of the company shall be held responsible for the companies unlawful acts.

All countries started a war against bribery and corruption long time ago.  A major step to legalize this war was the U.S.A’s “Foreign Corrupt Practices Act”. In 2010, a long time after the first step United Kingdom enact the “Bribery Act”. Later on, China and the other European countries enact similar legislations like mentioned above but, Brazil’s “Clean Company Act” shined and took front pages among all thanks to its extended and strict scope.

The reason why the act is so called “the most strict” one is as follows:

-              Act, holds the companies responsible for the transactions of all employees

-              In the calculation process of the fine, not only the income from illegal act but the whole gaining of the company are taken into consideration.

-              No exception is allowed for any payments including the ones named as “facilitator payments” instead of “bribery”

-              Companies cannot use the defense of “having inadequate procedures” to justify their unlawful transactions.

-              Act holds companies responsible without question for establishing adequate procedures.

In the core of those acts Countries aim and try to avoid bribery and corruption, which is stipulated (now much more detailed) in Turkish Criminal Law. While trying to accomplish this goal, sometimes countries try to guide the companies but sometimes they try to establish strict fines to deter them.  Yet, at the end of the day, whole world aims to have clean act, clean companies, clean income and clean society. 

So what should be done to be a “clean” company? Even though none of the codes refer a full methodology, when we examine the practice and market dynamics together, we can deduce some main methods as mentioned below.

1)       Ethics of Top Management: For employees, the attitudes of managers they report and top management set an example. In this respect, the first step to reach to a “clean company” is to work with managers those acting clean. Also those managers shall support these ethics of being “clean”; they shall be absolutely sure that in managing decisions they follow these ethics and they impose fines to those who do not follow those ethics.

2)       Risk Management:  Companies should evaluate potential abuses, corruption and bribery risks in operations and then form an appropriate control mechanism with respect to those evaluations. While, for companies, the risks vary according to their market, geographical location and regulations which are applied to them, the control mechanisms also vary due to company’s culture management and desire to take risk.

3)       Compatibility Policies: The most important and first step of compatibility policies is Company Ethic Rules. Even if there are variable ways to form company ethic rules, the most functioning way is to create an outline by company’s management and include employees to forming process. The only way to make these rules to serve the purpose is integrating the rules to employees’ daily work routine and decision-making process. Creating exceptions in application of the rules will cause in the eyes of employees lack of respect and importance. Rules also must be supported in the training sessions and adequately flexible to adapt modern conditions.

4)       Observation, Test and Control: After detecting the risk and constituting some control mechanisms, a new sustainable and life-long process shall start. In this process, control mechanisms, policies and procedures must be observed closely and constantly. As a result of observation, any detected disrupter must be removedchanged and records and transactions should stand as an example for testing further control mechanisms.

5)       Due Diligence: As well as companies’ own practices, the practices of other companies which they do business together, has deep significance. A clean company should expect the similar clean practices and standards also from its suppliers, consultants, distributors and vendors. Working with a brokerconsultant known to be engaging in corruptions will affect company’s reputation either.

6)       Notice Mechanisms: A clean company should have channels to be notified by its own employeesparties doing business together when they detect a negative act of the company. The first ones to notice corruption is usually the ones who works with the responsible. Even the damage which arises from abuse and corruption can be avoided with least harm if an anonymous channel is established.

To sum up, both in Turkey and also in other states, not only the issue that how much a company generates profit; but also the issues how that company generates and also shares that profit have became much more important Even though our regulations are not as strict as other countries, the companies which will take necessary actions before things get more complicated and the cost of getting involved with corruption does not overcome cost of being compatible, will be the winners