The Bribery Act and Its Relevancy to the Construction Industry - Coursework Example

The Bribery Act and its relevancy to the construction industry BY YOU YOUR SCHOOL INFO HERE HERE The Bribery Act and its relevancy to the construction industry Introduction Since receiving Royal Assent in 2010, the Bribery Act became completely enforceable under the law in July 2011. The Bribery Act is intended to be a more relevant and functional framework for combating bribery in both the public and private sectors. Up until 2011, the UK government had been eliciting justice under very old laws related to bribery and corruption, including The Prevention of Corruption Acts of 1889 through 1916. Since the days of these old acts, the structure of business and the prevalence of corruption and bribery required a new focus to ensure businesses and their stakeholders conduct practices in an equitable and honest manner. The Bribery Act was written with language to clearly outline what constitutes an offence related to bribery and to serve as a clear deterrent for utilising bribery for the promise of some advantage. The Bribery Act is highly relevant to the construction industry, in particular, as the complexity of inter-dependency between multiple domestic and foreign stakeholders provides an excellent incentive for engaging in bribery behaviours. This essay describes the fundamental elements of the Act and its relevancy and impact on the construction industry both negative and positive. An Analysis of the Bribery Act There are four main points to the Bribery Act. The Act spells out the offence of bribing another, which includes giving a financial reward to another for the pursuit of receipt of advantage or making promises of a similar exchange for the same purpose (legislation.gov.uk 2010). Concurrently, the law identifying bribery of another individual also allows for potential prosecution for a party who, if given or giving the advantage to another, realises that acceptance of this advantage would “constitute improper performance” of an activity (legislation.gov.uk 2010, p.3). The purpose of this Act was to repeal all other existing bribery laws (most of which were outdated and no longer relevant) while making it absolutely unambiguous about what constitutes bribery offences to avoid utilising language as a potential defence in the court system. The Bribery Act also spells out what constitutes an offence as it pertains to bribing a foreign official. The Bribery Act clearly defines what represents a foreign official, in this case including any foreign individual who maintains a legislative, judicial or administrative position outside of the UK. The Act also includes any individual that maintains a public service in national or local governments, within enterprises, or other public organisations such as the World Bank (Ministry of Justice 2010). By concisely defining who constitutes a foreign official, construction companies and many other UK industry leaders would be hard-pressed to attempt to utilise a plausible defence that the organisation or the individual did not fully understand their obligations related to working with foreign representatives. This particular policy within the Bribery Act could be quite difficult to prosecute and investigate, due to disparate laws residing in the UK and those of international governments. The Ministry of Justice (2010) points out the complexities of prosecutors establishing evidence that these alleged violations have occurred. Prosecutors must prove that an advantage occurred, a promise or tangible transaction has occurred, and also recognise the explanatory factors of local law in which the bribery occurred to determine whether prosecution would be in the public interest domestically and in the country where the activities occurred. Gaining support from foreign government could also be quite difficult especially if there are different culturally-driven beliefs about the morality or ethics of an alleged bribery action. Not all foreign cultures and government leaders maintain the same relative views on moral business and governmental behaviours. One of the most important elements of the Bribery Act is establishing an offence for the organization in which bribery has occurred for failing to prevent the activity (DLA Piper 2011). This is referred to as being strict liability and there is no defence for the organization even if it had no previous knowledge that briberies were occurring somewhere in the business model. The only reasonable defence against this policy in the Bribery Act is to show the courts and prosecutors that there was training and policies in place to prevent employees or executives from committing or accepting briberies (justice.gov.uk 2012). This will likely provide ample incentive for UK corporations and private businesses to establish an anti-bribery code of conduct to ensure that strict liability does not become a significant financial or reputational risk to an organization. Relevancy of Bribery Act to Construction Industry Having identified the most important elements of the Bribery Act 2010, the considerations to the construction industry can be explored. The renowned and full service law firm Charles Russell (2010) provides statistics from the 1997 UN World Development Report illustrating that approximately 15 percent of all companies operating in industrialised nations are forced to pay out bribes in order to gain business advantages. In Russia, sixty percent of all businesses engage in these processes regularly to gain business favour (Charles Russell 2010). Herein lays the difficulty with the new stringent restrictions placed on individuals and businesses as it relates to bribery in the construction industry. Many construction companies have subsidiaries or other operations in foreign nations and work regularly with foreign government and public officials to secure licensing, contracts, real estate procurement, and special projects for new facility development and construction. In countries where construction companies have partners hailing from such countries as Russia, the Bribery Act may not provide enough disincentive to avoid the temptation to commit bribery especially when foreign partners openly and actively applaud these exchanges for mutual favours. Furthermore, in Asia, the amount of businesses that must engage in bribery to attain advantages or sustain foreign business operations is 40 percent (Charles Russell 2010). In 2008, Balfour Beatty was forced to pay settlement restitution in the amount of £2.25 million for what was referred to as irregular payments being made to officials in Egypt and two other bridge-building companies hailing from Asia. Though the UK Bribery Act is designed to offer a new jurisdiction to UK authorities to prosecute bribery occurring overseas, all of the aforementioned statistics on the commonality of bribery in foreign business casts serious light on the construction industry that must work with partners and representatives of government from all over the developed and developing world. Consider for a moment the renewable energy opportunities in the UK, which involves considerable talent and effort on behalf of construction industry representatives to ensure proper development and launch. Many construction companies that have been awarded contracts must wait for local city authorities and national government to handle territorial disputes arising during the project and manage new environmental policies that can delay project momentum. In an unethical situation, bribery could potentially reduce the elongated wait until all legal contracts and disputes have been handled to finally begin construction. Thus, the anti-bribery law now challenges the profit-building opportunities for construction companies engaged in building renewable energy sources as there is no longer an incentive, by any third party involved in handling legal scenarios, to attempt to expedite the project with mutual exchanges. Now that there is a consolidated law that targets offences for the individual and the organisation, it is likely that there could be considerable delays with certain construction projects involving multiple stakeholder groups that had once been effectively managed using small-scale bribery efforts. Now, the aforementioned is a highly unethical scenario, however based on the statistical data supplied by Charles Russell (2010), it is a very common practice in business, mostly internationally, to engage in bribery or receive such imbursements in exchange for favours and advantages. Therefore, there is one effort that companies can do to try to comply with the Bribery Act and also deter internal stakeholders from engaging in these practices. The Construction News Portal (2010) suggests that there must be a tone set directly at the top which is disseminated throughout the organisational culture associated with setting imperatives for compliance to the Act. Most respected models of management and governance recognise that establishing a reiteration of mission and vision are effective ways to get compliance, loyalty and interest in a new environment or policy (Fairholm 2009). By setting an executive level role modelling of desired behaviours, in this case anti-bribery stance, it is likely that lower-level stakeholders will begin to adopt this same philosophy especially when it is restated regularly in corporate communications describing ethics and moral business practices. Construction companies should then be assigning a bribery czar, much like a change champion, who will scan potential risk factors for bribery engagement and also take ownership for communications regarding compliance with the anti-bribery Act. Though it is too early into adoption of the law to determine whether this should be considered construction industry best practice, it does illustrate how the organization can remove its liabilities and also create a culture of ethics or morality to reduce risks of non-compliance with this new law. According to Farrell and Knight (2003, p.541) “trust is embedded and embodied in the regulations, policies and rules by which leaders seek to get accepted by others”. Now, this statement has serious implications for the construction industry. Being a project manager on a construction project, as one relevant example, involves maintaining a sense of social belonging between important team stakeholders in order to create a cohesive team of professionals. Trust is one of the most fundamental elements of gaining leadership authority and followership. It would be in the best interest of the company, with the new restrictions placed on business liability in bribery matters, to publicise its corporate social responsibility as it pertains to anti-bribery values and beliefs. By including this language in policies and illustrating to multiple stakeholders that the business is dedicated to training in this capacity, it could build trust with important construction industry partners that also maintain these same values on ethical business practices. Not all corporations and private businesses engage in these practices and the Bribery Act could provide a new template by which to strengthen relationships between important business-to-business markets necessary to sustain a construction project. It could have implications for establishing trust in supply chain management alliances or any number of important areas that require engagement with business buyers, sellers and consultants. It should be recognised, then, that not all elements of the Bribery Act should be considered negative, but should be considered an opportunity for improving brand image, relationship development with important actors in a project life cycle, and building a more efficient and dedicated organisational culture. According to Starnes, Truhon and McCarthy (2010) genuine and authentic relationships are forged over time, starting with reciprocal acts that benefit both or multiple party needs. The Bribery Act could be a very positive step in creating worthwhile and sustainable business connections that can endure over the long-term by establishing a set of shared values that provide mutual benefit leading to long-term trust in both organizations and their leadership. Taylor Wessing (2011), another respected UK law firm, reports that the Bribery Act could impose new internal obligations on the business in relation to control and evaluation systems as a means of auditing readiness and compliance to this new Act. Construction companies that have established the appropriate policies or codes of conduct aligned with anti-bribery compliance and values will now need to develop a system of measurement (metrics) to determine whether human capital is acting appropriately and whether policies are enforceable and realistic for the organisational model. This could be costly in terms of labour and in terms of the economics necessary to develop evaluation models and ensure a system of controls as it relates to human behaviour in the organisation. Many construction companies, dependent on size, are engaged in strategic alliances and other joint ventures that involve diverse representatives of government, business, engineering and technology. If businesses want to establish similar metrics to measure the compliance and values of many different partners, the burden on the organisational model could be significant. However, since liability for this UK-based construction company is a powerful consideration, ensuring that joint venture and allied partners are performing ethically and morally as aligned with anti-bribery laws is absolutely necessary. The construction industry, to set up a metrics system of control and evaluation, might have to create new job descriptions to appoint an internal stakeholder to manage only anti-bribery compliance internally and externally. To reduce liability, construction companies that are involved in important alliances and joint ventures should also establish contractual agreements that provide more unilateral controls to the UK business partner. Giving the UK company more control over auditing processes and compliance measures, as only two examples, would reduce some of the risk associated with non-compliance and would also provide adequate defence opportunities in the event that an internal stakeholder is charged with engaging in bribery activities. Unilateral control, rather than bilateral control, especially in joint ventures where shared economic resources are being utilised by both partners, would ensure that payments are being made appropriately and to the right payees. Joint venture partners that are non-compliant with the Bribery Act policies and decide to enact their own improper bribery payments, impose considerable risks on the joint venture partner that is maintaining this new subsidiary or operation in joint ownership. The opportunities for building unilateral control systems are a potential advantage of the Bribery Act and its importance for today’s construction businesses. Conclusion It is clear that the Bribery Act 2010 provides an excellent and enforceable template by which to recognise when crimes have occurred and to deter its behaviour. From identifying the potentially guilty parties associated with giving and receipt of bribes ensures that the language does not conflict the prosecution process when individuals try to circumvent punishment by declaring the law incomprehensible. The slow pace by which the Bribery Act was developed and finally implemented ensured that the language utilised was appropriate to superimpose modern law over very old common law that was not largely relevant to today’s UK society. The research indicated many positive and negative outcomes and implications for the construction industry, including liability reduction, establishment of new evaluation and control systems, and also the positive engagement of business-to-business stakeholders and organizations sharing common ethical and moral values. It is clear that the UK Bribery Act 2010 is revolutionary in preventing bribery and corruption and could be an opportunity for improving business standing with important external stakeholders by reinforcing and helping to publicise corporate social responsibility values important for many in domestic and foreign societies. The Bribery Act 2010 is constructed with the appropriate policies to ensure proper knowledge and dissemination, to ensure a framework for prosecution, and also outlining the potential punishments associated with each type of crime listed in the Act’s language. References Charles Russell. (2010). The Bribery Act: The implications for the construction and engineering industry. [online] Available at: http://www.charlesrussell.co.uk/userfiles/file/pdf/Construction%20%26%20Engineering/Seminar_paper_-_Bribery_Act.pdf (accessed 7 February 2013). DLA Piper. (2011). Impact of the Bribery Act 2010 on the Construction Industry: A consideration of the key issues. [online] Available at: http://www.dlapiper.com/files/Publication/9ae54fd3-e09a-4dbf-98bb-9016ef2ae7fd/Presentation/PublicationAttachment/95cea2d8-af5e-4150-8759-92bbd2dd0ce4/Impact_of_Bribery_Act_on_construction_industry.pdf (accessed 7 February 2013). Fairholm, M. (2009). Leadership and Organizational Strategy, The Public Sector Innovation Journal, 14(1), pp.26-27. Farrell, H. and Knight, J. (2003). Trust, institutions and institutional change: Industrial districts and the social capital hypothesis, Politics & Society, 31(4), pp.537-566. Justice.gov.uk. (2012). Bribery Act 2010 Guidance. Ministry of Justice. [online] Available at: http://www.justice.gov.uk/legislation/bribery (accessed 8 February 2013). Legislation.gov.uk. (2010). Bribery Act 2010 Chapter 23, Ministry of Justice. [online] Available at: http://www.legislation.gov.uk/ukpga/2010/23/pdfs/ukpga_20100023_en.pdf (accessed 8 February 2013). Ministry of Justice. (2010). The Bribery Act 2010 – Guidance. [online] Available at: http://www.justice.gov.uk/downloads/legislation/bribery-act-2010-guidance.pdf (accessed 8 February 2013). Starnes, B.J., Truhon, S.A. and McCarthy, V. (2010). A primer on organisational trust, ASQ Human Development and Leadership. [online] Available at: http://rube.asq.org/hdl/2010/06/a-primer-on-organizational-trust.pdf (accessed 8 February 2013). Taylor Wessing. (2011). What does the Bribery Act 2010 mean for the construction sector? [online] Available at: http://www.taylorwessing.com/news-insights/details/what-does-the-bribery-act-2010-mean-for-the-construction-sector-2011-05-11.html (accessed 8 February 2013). Read More