The reputations of Canadian companies operating abroad are under serious attack. The attention of governments and the global private sector is being drawn to recent headlines such as "SNC bribery probe widens to Algeria," "Bangladesh government accuses SNC exec of bribery," "Griffiths Energy guilty of Chad bribery," "Niko Resources pleads guilty to bribery charge," "Forced labour alleged in Canadian-Eritrean mine project" and "Claims of sexual abuses in Tanzania blow to Barrick Gold."
It is often said that reputations of individuals hard won over many years can be lost overnight. The same can equally be true, not only of individual companies, but also of entire sectors of a nation's economy, if the bad apples' actions in the sector taint the entire barrel.
The bad past and continuing behaviour of some companies could be affecting the reputation some of the most important parts of the Canadian economy. These include the infrastructure, mining and energy sectors. The headlines described above often trigger calls from activists and political parties to toughen up legislation that can curtail illegal or improper actions by Canadian corporations operating abroad. In the case of corruption, that is occurring with the recent Bill S-14 amendments to the formerly little-used Corruption of Foreign Public Officials Act. The hope is that additions of penalties for false accounts that hide bribery, along with the extension of the law to extra-territorial violations backed with stiff penalties of up to 14 years in jail, will reduce the number of bribery headlines.
It is also refreshing that the new CEO and leadership of Griffiths Energy owned up to bribery that had taken place in the past. However, in an increasingly fierce competitive global market, some corporate officials even in the most reputable corporations will be tempted to resort to corrupt activities. Some will try to justify this illegal activity as merely leveling the playing field with foreign competitors who engage in bribery with impunity – some with the complicity of their governments.
As regards allegations of human-rights abuses involving Canadian companies abroad, the challenge is greater. There are challenges in determining the correct facts and how best to deter future bad behaviour. Social activists have called for extra-territorial laws similar to the strengthened bribery law. Using the U.S. Alien Tort Claims Act as an example, they have called for withdrawal of governmental assistance when it is associated with proven bad behaviour. This was the goal of the failed Bill C-300 in 2010.
In support of the attempt in Bill C-300 to legislate environmental and human-rights guidelines for corporate accountability, activists produced hundreds of testimonials and letters, from foreign NGOs and local communities around the world, alleging that major human rights violations were being committed by Canadian extractive companies.
The Harper Conservatives have signaled that they have no intention of supporting such legislation as long as they are in government.
The individuals who should be most concerned about this gaping hole in Canada's corporate reputation abroad should be the leaders of the "best-of-breed" corporations in the infrastructure, mining and energy sectors. Engineering-firm officials must be acutely aware of the expanding number of allegations directed at SNC-Lavalin. Likewise, even the world's biggest mining company, Barrick Gold, is realizing that being big does not make one immune from searing attacks on its reputation from allegations of human-rights abuses and serious crimes in Tanzania and Papua New Guinea.
In the absence of agreement in Canada on effective laws and policies, the interim solution lies with the boards of directors of these companies. They must become engaged in the most stringent supervision of the management of their companies -- either by themselves with the help of trusted advisors whose first duty is to the reputation, accountability and social impact of the company. If they fail in these duties, there should be collective responsibility from the top and board resignations en masse.
Errol P. Mendes teaches, writes and consults in the area of corporate integrity and accountability and was an advisor to the United Nations Global Compact that promotes best practices and accountability of the global private sector in the areas of environment, human rights, labour rights and anti-corruption.