Companies & Industries

Corporate crime and redemption: How companies can bounce back

On the path to good citizenry

(Photo: Dave Delay/Flickr RM)

(Photo: Dave Delay/Flickr RM)

When it comes to white collar crime, Canada has enjoyed a less-than-stellar reputation for prosecuting those involved in financial schemes and corporate corruption. As recently as September, our own Minister of Finance, Jim Flaherty, admitted to our struggles in dealing with securities crimes.

But there are some signs that efforts to combat corporate corruption seem to be ramping up in Canada. Aside from the arrest of former SNC Lavalin CEO Pierre Duhaime in early 2012 (and the subsequent arrests of other SNC executives), the RCMP unveiled its new National Division this past June, which will, among other responsibilities, oversee corruption involving Canadian companies and individuals both domestically and abroad. The first trial involving a charge under the Canadian Corruption of Foreign Public Officials Act was concluded this past summer, and resulted in a conviction.

Flaherty has also been pushing for a single, national securities regulator.

The regulatory updates on the horizon will certainly play a role in changing the way financial crimes are handled in Canada, but what is to be done about the way companies approach ethics and compliance within their own corporate cultures?

This past Wednesday, Ryerson University’s Jim Pattison Ethical Leadership Program held an interactive session to discuss this very issue (Canadian Business acted as a sponsor). Speakers included Hentie Dirker, Regional Compliance Officer for Siemens (which dealt with its own widely-publicized bribery scandal just a few years ago), as well as representatives from the World Bank and the RCMP’s new National Division.

After news broke in November 2006 that Siemens had been involved in a global corruption scandal, involving thousands of acts of bribery in several different countries by hundreds of employees, the company had its work cut out for it in complying with securities investigations, and paying hefty fines (about $2.5 billion in total).

But as Dirker pointed out in his presentation Wednesday, the more difficult task was in changing Siemens’ corporate culture. After the scandal reached headlines, over 500 senior execs were replaced at Siemens between 2006 and 2008, as the company underwent a complete restructuring to emphasize ethical behaviour and regulatory compliance. Now equipped with whistleblower hotlines, a streamlined company hierarchy, and strict rules for expenses and contracts, Siemens now boasts one of the cleanest reputations among multinational corporations. What could have been a scandal with enough power to shut down the company, actually became one of the best things to ever happen to it.

It’s a particularly useful case study for Canadian corporations to take note of. (In fact, Dirker said that Siemens has approached SNC Lavalin in the past with offers to share its “best practices” compliance advice). SNC has replaced executives and offered amnesty to employees willing to come forward with corruption information. But their reputation is still in need of repair, and as a firm known for consulting, its future reputation will be paramount to the company’s success, Dirker said, and a change in corporate culture will be just as vital as regulatory compliance.

If Wednesday’s session at Ryerson is anything to go by, corporate ethics will be an increasingly popular topic of discussion in Canada in the near future. During his address, the RCMP National Division’s assistant commissioner, Gilles Michaud, hinted that investigations into other corporate cases are ongoing. Perhaps we might see more examples akin to SNC Lavalin becoming public knowledge in the near future.

More importantly, Michaud stated that the RCMP “cannot do this on [its] own”—Canadian companies should continue seeking out opportunities to compete, but in ways that comply with legislation.

The best way to do this? Encourage a corporate culture that emphasizes Canadian ethical standards—regulatory compliance will naturally follow.