Twenty per cent of Canadian executives believe bribery and corruption are widespread in this country’s business dealings, according to a global fraud survey from Ernst & Young.
Fifty business leaders in Canada were polled as part of a larger global study that spanned 2,700 executives across 59 countries. Canada is not perceived as a corrupt place to do business on the global stage, said Mike Savage, head of Canadian fraud investigation and dispute services at E&Y. He was surprised to see the high number of executives who have witnessed a corrupt business practice, and described the results as “disturbing.”
The figures are likely “reflective of a new awareness of corruption,” said Sally Gomery, chair of the business ethics and anti-corruption team at Norton Rose Fullbright Canada.
She attributes increased knowledge in part to efforts at the federal and provincial levels to tighten up the rules related to collusive activity, and to prosecutions from the Corruption of Foreign Public Officials Act (CFPOA), which the RCMP is more actively enforcing. In 2013, changes to the CFPOA increased the maximum term of imprisonment to 14 years from five years for a convicted person. Testimonies and resignations in the Charbonneau Commission, a public inquiry into construction contracts awarded in Quebec, have kept the issue of corruption in the spotlight.
Still, Canada’s status as a maturing market may also expose it to risk.
“Canada is a reasonably developed market, so growth is going to be overseas. And often in those regions business practices are different and there is more pressure on operations that are trying to start up,” Mr. Savage said. “If you’re under pressure to get something going very quickly it can be easy to [find] that the ends justify the means.”
Engineering firms and the extractive industries in Canada are more susceptible to corruption because they interact with many levels of government in foreign countries, legal and consulting experts say.
For example, Montreal-based construction and engineering firm SNC-Lavalin Group Inc. faces allegations of corruption and bribery in Canada and around the world.
The scandal has hurt the company’s business and share price, even though none of the allegations have been proved in court. Last summer, the company encouraged employees to report bribes and fraud by promising staff members wouldn’t lose their jobs or face legal action as a result.
Oil and gas company Griffiths Energy International Inc. (now known as Caracal Energy Inc.) recently blew the whistle on its own internal bribery issue and accepted a nearly $10.4-million fine for charges under the CFPOA. The company’s agreed statement of facts says that it paid a bribe to the wife of Chad’s ambassador to Canada worth $2-million (U.S.).
The E&Y survey found 74 per cent of Canadian organizations have whistle-blowing hotlines in place – far less than the 96 per cent reported by U.S. respondents.
The RCMP wants more companies to come forward to identify corruption and bribery issues, but there’s little incentive for executives to do so, which is a “big missing piece” in the system, said Norm Keith, partner at Fasken Martineau DuMoulin LLP.
“There’s no sentencing guidelines issued by the federal government or the RCMP for giving credit for turning yourself in,” said Mr. Keith, who wrote a book on Canadian Anti-Corruption Law. He would like to see the RCMP and the department of justice develop a program to encourage self-reporting of these problems so that, under certain circumstances, companies could avoid prosecution.
This arrangement would mirror the U.S., where a company’s lawyers can talk to the Department of Justice about a deferred prosecution agreement where a company reveals the facts, shows what it has done to contain the problem and make sure it doesn’t happen again. For being transparent and showing good faith, many companies will get credit for that activity. “In Canada there’s no formal process to get credit for being, in effect, a good employer, corporation or executive who wants to do the right thing,” Mr. Keith said.
But the RCMP has increased the number of investigations and the extent of its outreach program in recent years to try to prevent instances of corruption, said Signi Schneider, vice president of corporate social responsibility at Export Development Canada.
But there’s more education to be done. “I get a sense based on conversations I’m having with companies that we’re just coming into our own awareness of unethical practices that are taking place,” she said. “We’re in the midst of a cultural change.”