Probe of GSK has foreign firms in China worried

Risk consultancy says clients fear attention from Beijing will feed back into US and UK dragnet

PUBLISHED : Wednesday, 11 September, 2013, 12:00am
UPDATED : Wednesday, 11 September, 2013, 5:23am

The continuing investigation of British drug giant GlaxoSmithKline (GSK) and China National Petroleum Corp (CNPC) along with its subsidiary PetroChina has added to worries that companies in China lack adequate protection against corruption investigations, says British risk consultancy Control Risks.

Companies operating in China had always feared being investigated under the US Foreign Corrupt Practices Act (FCPA) or Britain's Bribery Act, said Ben Wootliff, the Hong Kong head of Control Risks.

"What's new is companies now see the Chinese authorities are willing to act against multinationals and local companies over corruption in their home territory, as demonstrated with GSK and PetroChina.

"The new fear is the Chinese authorities have a greater willingness to investigate corruption, which will feed back into the FCPA and possibly the UK Bribery Act, which will expand the corruption investigation across the border beyond China," he said.

"We've seen a strong increase in companies asking us for anti-corruption management in China, prompted by the investigations of GSK and PetroChina. We've been extremely busy, talking all day to companies about China corruption."

A Control Risks report based on a survey of senior executives of 316 companies around the world, including 109 companies in Asia-Pacific, found 35 per cent of the companies do not have formal policy statements forbidding bribes. Companies operating in China accounted for the fourth-largest number of respondents in the report.

"It was apparent that international companies have disturbing gaps when it comes to dealing with the dangers of bribery and corruption," the report said. "Without exception, all companies should have a formal anti-bribery policy statement."

"Companies are surprisingly ill prepared for corruption risks. That's shocking," Wootliff said.

Of those surveyed, 13 organisations thought there was a 90 to 100 per cent chance their company would be required to investigate a suspected violation of anti-bribery laws in the next two years. A further 60 organisations, or 19 per cent, thought there was a 60 to 90 per cent chance of this happening.

Control Risks asked the companies if they would be worried about potential risks of corruption if they found out their joint venture partner was related to the prime minister of a country. Only about a quarter said that would cause them to break the deal, while the majority thought the risks were insignificant.

"This raised alarm bells. It would be wrong to be complacent," wrote Control Risks. "Is there a possibility the joint venture partner is being paid as a proxy bribe to the prime minister? What happens if the government changes?"

In the survey, 91 per cent of respondents said they had no specialised anti-corruption training for employees in high-risk areas. Almost three-quarters had no anti-corruption training programmes at all.

Only 40 per cent of the firms polled had whistle-blowing hotlines where employees could make confidential reports on concerns relating to corruption.