Defence companies are upping their fight against corruption

New study by Transparency International finds defence companies are investing in ethics and anti-corruption programmes

London, 10 June 2013 – Companies in the defence sector are raising the bar on anti-corruption practices according to a new report by Transparency International UK’s Defence and Security Programme. This includes companies from the largest arms exporting nations, such as USA, Germany, France, and the UK—who between them are responsible for over 90 per cent of the arms sales around the world.

Since the release of the Defence Companies Anti-Corruption Index (CI) last October—which analysed what the 129 biggest defence companies around the world do to prevent corruption and showed that two-thirds of them need to improve — at least 1/3 of them are taking steps to build up their anti-corruption systems.

“Raising the bar”, a spin-off report from the CI, identifies and discusses the seven topic areas that most strongly distinguish the better companies with respect to their anti-corruption practices.

“It is not difficult for companies to improve standards. Whilst many defence companies need to improve, there are also plentiful examples of good practice from other companies that they can copy or adapt. This report publicises 104 such examples of good practice, providing a wealth of information for self-improvement”, explains Mark Pyman, director of Transparency International UK’s Defence and Security Programme and one of the authors of the study.

In a sector characterised by high-value contracts and secrecy, recent anti-corruption legislation like the UK Bribery Act and stronger enforcement of the US Foreign Corrupt Practices Act (FCPA) are making the defence industry increasingly aware that their corruption risk is high. “A scandal can wipe away years of hard work building a reputation. This can be prevented by improving anti-corruption standards. Publicising examples of good practice is a smart way to spread knowledge and raise these standards inside and outside this industry. Defence companies could become role models for anti-corruption practice,” explains Pyman.

Open companies help governments, investors, and citizens

The study finds public reporting of the company’s ethics and anti-corruption systems is one of the areas which characterises the better performers. Being open about what they have in place to prevent corruption not only benefits companies. It also allows governments, investors, and the public to assess potential risks when putting defence contracts to tender. Corruption in the process can lead to waste of taxpayer money which could’ve been better spent

The report also shows companies themselves acknowledge that broadly disclosing what they do on the anti-corruption front is a signal that their commitment is serious. Yet, more than half the companies assessed in the CI fail to publicly disclose evidence of their ethics and anti-corruption systems.

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Notes to editors

1. In Part I of the Raising the Bar report, Transparency International’s Defence team identified the seven areas from the Defence Companies Anti-Corruption Index (CI) which distinguish the better performers amongst the 129 companies assessed. These are as follows:
   a) Public reporting of ethics and anti-corruption systems b) Company leadership speaking up against corruption
   c) Board assurance on the effectiveness of the programme d) Corruption risk assessment
   e) Managing corruption risk in third parties f) Anti-corruption training
   g) Whistle-blowing follow-up

2. The Defence Companies Anti-Corruption Index (CI) released last October banded companies on the level of public evidence of the anti-corruption systems they have in place:
   Band A (83.3-100%): Extensive Band B (66.7-83.2%): Good Band C (50.0-66.6%): Moderate
   Band D (33.3-49.9%): Limited Band E (16.7-33.2%): Very Limited Band F (0-16.6%): Little or none

The CI assessed companies on their publicly available data through 34 questions covering what Transparency International considers to be the basic systems and processes needed to prevent corruption. The questionnaire was divided into five pillars: 1) leadership, governance, and organisation; 2) risk assessment; 3) company codes and policies; 4) training; and 5) personnel and helplines. Companies were also invited to comment and provide further evidence of capabilities from internal sources. For the 34 companies that provided internal information, the defence team reviewed and discussed the documents with them. TI’s defence team then used this information to show the positive impact it would make on the overall banding results. Once all assessments were completed, they went through an internal and external peer review with five peer reviewers. The companies received a copy of the finalised assessment, and they were also all given an opportunity to make any further statement they may wish to.

3. Transparency International UK’s Defence and Security Programme helps to build integrity and reduce corruption in defence and security establishments worldwide through supporting counter corruption reform in nations, raising integrity in arms transfers, and influencing policy in defence and security. To achieve this, the programme works with governments, defence companies, multilateral organisations and civil society. The programme is led by Transparency International UK (TI-UK) on behalf of the TI movement. For more information about the programme please visit www.ti-defence.org.

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