Corruption is big business.

The World Bank estimates corruption to be at least a trillion dollar annual global business. But the price of corruption is rising for anyone ensnared in it.

Corruption distorts markets, disproportionately impacts the poor and generally has a corrosive effect on social cohesion.

Tolerance for corruption, domestic and foreign, is waning whilst the risk of detection by authorities and whistleblowers is increasing. So is the likelihood of prosecution in many countries, including Canada. This is especially true given the new amendments to the Corruption of Foreign Public Officials Act that we detailed in a previous post.

If a Canadian company is caught in a foreign corruption scandal and successfully prosecuted, possible sanctions include heavy fines, disqualification from public bids, loss in enterprise value, shareholder suits, senior management termination and incarceration.

Regulators, shareholders and boards now require corporations to take active measures to prevent and detect foreign corruption and, by extension, domestic corruption. It is no longer sufficient to adopt a code of ethics, dedicate a hot line and appoint a mid-level manager to promote ethical behaviour.

So what’s an ethical director and executive to do?

In the U.S., U.K., Germany and now Canada, regulators and law enforcement want proactive behaviour when it comes to corruption. Corporations must not only implement controls and programmes designed to deter, but they must also put substantial time and effort into detection.

Keep in mind that corporate effort must be risk adjusted. Corporations must put more time and effort with respect to jurisdictions and transactions that pose greater risk. A one-size-fits-all solution will not be satisfactory.

The litmus test for the design and enforcement of any programme is whether it will allow senior executives credibly to respond to the authorities when they ask, “How do you know that this transaction is corruption-free?”; or, more ominously, “How do you know that this is the only instance of bad behaviour?”