Confusion About Anti-Corruption Law Leads Companies To Abandon Expansion Initiatives, Dow Jones Survey Finds

Today is the U.N.’s International Anti-Corruption Day, but a worldwide survey of company executives suggests that anti-corruption efforts may be having an unintended effect. The survey, by Dow Jones, found that more than half of companies were delaying or abandoning key business initiatives as executives struggled to both interpret applicable anti-corruption regulations and collect the information they need to confidently assess corruption risk. 

According to the Dow Jones State of Anti-Corruption Compliance Survey, which included responses from 182 company executives worldwide, 51 percent of companies delayed key business plans such as new business partnerships and entry into new or developing markets and another 14 percent abandoned them completely because of legal questions arising from anti-corruption regulations. In addition, 59 percent delayed and 11 percent abandoned key initiatives because they could not get the information they needed to adequately assess the corruption risk.
 
Fear of breaking anti-corruption regulations played a key role in company executives’ decision to enter or expand in emerging markets – or not. Forty percent of respondents interested in entering emerging markets cited fear of running afoul of anti-corruption regulations as a significant influencer in their decision not to enter an emerging market while 32 percent said it had played a minor role. Of those companies looking to expand their existing presence in emerging markets, 35 percent cited fear of breaking anti-corruption regulations as a significant factor in their decision not to expand and 37 percent said it had a minor role in their decision.
 
Another interesting result from the survey: 34 percent of respondents believed they lost business to a competitor that acted unethically. Of those who lost business to an unethical competitor, two-thirds believed the competitor broke anti-corruption laws and one-third said the competing business was not bound by anti-corruption laws.
 
The majority of respondents (54 percent) stated that businesses should always report suspected bribery by a competitor to the appropriate authorities while 40 percent believed reports should be made under certain circumstances and six percent felt competitors should never file reports.
 
Company executives said their compliance departments regularly performed anti-corruption due diligence on senior level employees (80 percent) and M&A targets (89 percent). Companies were less likely to consistently evaluate external corruption risks. According to respondents, 71 percent regularly performed due diligence on third party agents, 69 percent on customers, 68 percent on sales agents, 66 percent on business partners, and 57 percent on suppliers.
 
Finally, more than one-third of survey respondents (41 percent) were not confident that their company’s anti-corruption due diligence process enabled them to make well-informed decisions based on accurate and complete information. A large proportion of executives felt time and costs greatly limited their due diligence process. Fifty-nine percent felt constrained by costs and 56 percent felt limited by the amount of time it takes to perform due diligence. Lack of access to subscription databases containing well-structured information often not available on the free web was also a concern for 43 percent of respondents.