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Defence Companies Anti-Corruption Index (DCI) 2019
Company Feedback, November 2018
AspartofthedevelopmentofthemethodologyforthenexteditionoftheDefenceCompaniesAnti-CorruptionIndex(DCI),companiesweregiventheopportunitytoprovidefeedbackonthedraftQuestionandModelAnswerdocument,inanyamountofdetail,from5thOctoberto2ndNovember2018.Duringthisperiod,theteamreceivedfeedbackfrom13defencecompaniesand3industryassociations,namelyAerospace, Defence, Security & Space (ADS), Defence Integrity Initiative (DII), and the International Forum onBusinessEthicalConduct(IFBEC).Thefollowingpagescontaintheentiretyofthisfeedbackintheformthatitwassubmitted,withcompanynamesanonymised.Duetothevolumeoffeedbackreceived,thisdocumenthasbeenbroadlydividedintotwoparts:generalcomments,dividedbybroadtheme,andquestion-specificcomments.
TableofContents
GeneralFeedback...................................................................................................................................................2
è NationalSecurity&Legality...................................................................................................................2
è CommercialConfidentiality....................................................................................................................3
è RelationswithSuppliers.........................................................................................................................4
è Investigations.........................................................................................................................................4
è PublicInformationOnly.........................................................................................................................5
è ScoringSystem.......................................................................................................................................7
è AssessmentTimelines............................................................................................................................7
è Other......................................................................................................................................................8
1.LeadershipandOrganisationalCulture...............................................................................................................9
2.InternalControls...............................................................................................................................................10
3.SupporttoEmployees.......................................................................................................................................11
4.ConflictofInterest............................................................................................................................................12
5.CustomerEngagement.....................................................................................................................................12
6.SupplyChainManagement...............................................................................................................................14
7.ThirdParties......................................................................................................................................................17
8.Offsets...............................................................................................................................................................19
9.HighRiskMarkets.............................................................................................................................................20
10.State-OwnedEnterprises................................................................................................................................21
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Defence Companies Anti-Corruption Index (DCI) 2019
General Feedback
è National Security & Legality FromDefenceIndustryInitiative:
• SomeDIImembersprovidehighlyconfidential,proprietary,andevenclassifiedproductsandservicestodefense customers. Others focus primarily on defense information technology. Still others principallyprovidehealthcareservicestomembersofthedefenseindustry.Eachofthesesub-industriesandothersinvolves its own array of legal and contractual privacy requirements, such as restrictions governingnational defense information, export controls, protected health information, employee data privacy,personal data privacy such as the EU’s General Data Protection Regulation (GDPR), and a host otherrestrictions. Given the multitude and breadth of these restrictions, different DII members may havedifferentcapacitiestoidentifypubliclyallaspectsoftheiranti-corruptionefforts.
• Thedraft questions and scoring criteria should beupdated to respect theprivacy of individuals in thedefense industryandcomplywithglobalprivacy laws.Severalmodelanswers require thedisclosureofnames,business relationships, thedurationsof theserelationships,ownershippercentages inholdings,allegations, internal investigations, and terminations of relationships based on investigations (question#1.2, 6.6, 6.7, 7.1.7, 7.1.6, 8.3, 8.4, 9.4, and9.5). The listed information couldbe legally protected forindividualsunderglobalprivacylaws.Thissameinformationcouldcontainnationaldefenseinformationandfallunderexportcontrolrequirements.
FromIFBEC:
• Inorder toscore favourablyontherevisedCompany Indexsurvey,companiesareexpectedtopubliclydisclosedetailedinformationthatcouldviolateexistingprivacy,publicprocurementandotherlaws,andbreach contractual obligations or fiduciary obligations to company shareholders. The proposed TICompany Index advocates for changes in public procurement policy it seeks to have adopted bygovernments, rather than evaluates internal measures companies have taken to meet existing legalrequirementsandpreventcorruptconduct.
• TI’s revised survey is not based on any existing framework of best practice guidance regarding anti-corruption programmes, such as those published by OECD and by various government enforcementbodies.
FromADS:
• We are equally concerned that what is being sought from companies could, in many instances be inbreachofthelawsandregulationswhichtheyarecommittedtouphold,suchastheEU’sGeneralDataProtection Regulations (https://eugdpr.org/), competition law, procurement rules and contractualcommitments. For instance, it is very common that the existence of a contract between parties isconfidentialtothepartiesinvolved.ThisistrueinthecommercialsphereasmuchasitisforGovernmentprocurement,andtherearemanyandverygoodreasonsforsuchconfidentiality,notleastinthecaseofdefence procurement, where publicity around defence equipment acquisitions may give valuableintelligence to a potential adversary. In those circumstances, a commercial entity cannot unilaterallymakethedecisiontopublishalistofsuchcontracts,justasitcannotprovidealistofitssupplierswhichmay provide similar highly damaging intelligence, as well as requiring the consent of each individualsupplierconcerned.
Fromacompany:
• Companies operating in the defence sector are generally prevented by governments from makingsupplierandcustomerinformationpublicforreasonsofnationalsecurity.Quiteoftenwhatwepurchaseorsupplyisnotgenericbutissubjecttoaclassifiedproductspecification.Inaddition,topublishdetailsofoursupplierscouldresultinthem,usorgovernmentsbeingsubjecttophysicalorcyber-attacktargetedtotheseareas.
• Thequestionsthatreferto informationthat industrywouldnotbeabletopublish inthe levelofdetailrequiredfornationalsecurityreasonsareprincipally6.6(doesthecompanydeclareandpublishdetailsof
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Defence Companies Anti-Corruption Index (DCI) 2019
all suppliers with which it has an active business relationship) and 8.4 (does the company publish fullprojectandvaluedetailsofall itsoffsetobligationsandcontracts). Inrespectof9.5(doesthecompanypublish a breakdown of its defence sales by customer),wherewe publish a breakdown of revenue bymajorcustomeronly.
• Competitionlaw–Companiesarepreventedfrompublishinginformationatcertainlevelsofgranularityfor reasons of competition and anti-trust law. To the extent the publicising of such information couldsignaltocompetitorsacompany’sstrategyinrespectofaparticularmarket,competitionlawislikelytopreventthemfromdoingso.
• The questions that require information that may not be eligible for publication for competition lawreasonsareprincipallyelementsof5.2.2(doesthecompanypublishdetailsoftheaimsandtopicsofitspublic policy development and lobbying, and the activities it carries out) and 6.6 (does the companydeclareandpublishdetailsofallsupplierswithwhichithasanactivebusinessrelationship).
Fromacompany:
• [red.]customersare largely foreignMoDsandarmedforcesandassuchthecustomersusually requirestrict confidentiality.We thereforebelieve that the commonpractice in thedefence sector is to avoiddetailedpublicdisclosureofrelationswithcustomers.Weknowthatthisisbestpracticeamongmany,ifnot all defence companies and believe that such practice does not reflect upon the transparency andintegrityofsuchcompanies,including[red.].Thiscommentisrelevantforthefollowingquestionsinyourquestionnaireandweproposethefollowingamendmentstothemodelanswers[seeresponsesto5.3.2,9.5,8.4]
Fromacompany:
• There are several questions asking companies to publicly disclose information and details that arecontractually, or as per applicable laws and regulations, considered as trade secrets or otherwiseconfidential(orprivate)information.
• Insomequestionsinformationisaskedfor,disclosureofwhichisrestrictedbygovernmentalcustomersand which is therefore not possible to publish. As one example, information about all defense salesvolumesbycountrymayinterferecertainconfidentialityobligationsthatcompaniesareboundby.
• Also,therearequestionsthatrequiredisclosureofpersonalinformation,disclosureofwhichwouldnotbecompliantwith theGDPR requirements, suchasname listsof seniorgovernmentofficials thathavebeenmet,namelistsofpartiesthathavereceivedgiftsorhospitalityofanykind,andnamelistsofthirdpartyrepresentatives.
Fromacompany:
• Manyoftheproposedquestionsseekdetailedinformationthatcannotbepublishedbecauseitislimitedby binding legal requirements and obligations such as security considerations, protected by contractterms, limitedbyprivacyconsiderations,ordenotedascompetitionsensitive.Additionally,manyoftheterms utilized are subject to a variety of interpretations by country, region, company, government, orindividualreader,creatinganinherentlackofconsistentinterpretationandapplicationofthequestionsto individual company scoring by TI-UK. Examples of proposed 2019 questions that illustrate thesedeficienciesinclude:5.2.3,5.2.4,5.3.2,6.6,7.1.6,8.3,8.4,9.5.
• Knowledgeablepartieswillrecognizetheineffectivenatureofsuchquestions,andwebelievetheDCIwillberenderedirrelevant.
Fromacompany:
• Thesurveyasksforinformationaboutalreadyestablishedcontractswhichcanbeconfidential.
è Commercial Confidential ity Fromacompany:
• Industry does not publish certain information about customer and supplier contractswhere there areconfidentiality obligations towards others or because the information is commercially sensitive.
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Defence Companies Anti-Corruption Index (DCI) 2019
Commercial confidentiality is essential because, amongst other things, it encourages competition andprotectsideas,knowhowandinventionsbyallowingpeopleandorganisationstohavetheconfidencetoinvestwhileknowingthatotherswillbepreventedfromstealingthoseideas.
• Thequestionsthatrefertoinformationthatcompaniesmaynotbefreetopublishindetailbecausetheinformationisconfidentialtothemorothersareprincipallyelementsof5.2.2(doesthecompanypublishdetailsof theaimsand topicsof itspublicpolicydevelopmentand lobbyingand theactivities it carriesout), 6.6 (does the company declare and publish details of all suppliers with which it has an activebusiness relationship), 7.1.6 (does the company declare and publish details of all agents and/or thirdpartiesused indefencecontracts),8.3 (does thecompanypublisha listanddetailsofalloffsetagents,brokersor consultancy firmsused indefence contracts),8.4 (does the companypublish fullprojectandvaluedetailsofallitsoffsetobligationsandcontracts)andcertainofthedetailrequiredin9.5(doesthecompanypublishabreakdownofitsdefencesalesbycustomer).
Fromacompany:
• Thequestions6.6,6.7,7.1.6,7.1.7,8.3,8.4requiresanexcessivelevelofconfidentialdata.Thiskindofinformationiscompanysensitiveonthegroundsofprotectingourcompetitivepositionandsocannotbepublished or disclosed without damaging the company. The information is available internally andreviewedregularly.Tofindtherightbalanceofdisclosure,wesuggesttorequireexclusivelydisclosureonthepolicy/processandonaggregateddata,adjustingthescoringmethodologyaccordingly.
Fromacompany:
• The proposed survey havewithin several areas a strong focus on transparency standards that are notappliedbythegovernmentswithwhomwedoourbusiness.Severaloftheserequestsfortransparencyareconfidentialareaswithinourcustomerscontractandaresubsequentlyinformationwecannotplacepubliclyonourwebsite.Thiswill, ifweunderstandyour survey right,giveusa lowscoreon the indexevenifwefollowtherelevantlawsandregulationsandhaveawellintegratedanti-corruptionprogram.
è Relations with Suppliers Fromacompany:
• [red.]contractswiththousandsofsuppliersandsubcontractorsofsmallscalewhichsupplyrawmaterialsandOTSitems,suchaselectronicpartsandassuchcannotbemonitoredandshouldnotbeexpectedtomaintaina comprehensivecomplianceprogram.However,at [red.],each supplierandsubcontractor isrequired to approve and declare within the general T&Cs to follow anti-corruption regulations andstandards.
• It isunlikely thatdefensecompanieswouldeffectivelyensurethatall suppliers followtherequirementstipulatedinthequestionnaire.
• Regardingthefrequencyofreview,webelieve,inaccordancewiththeDoJ&SECGuidanceof2012,thatitshouldberisk-based.Hence,frequencyshouldnotbetoospecific.
• The anti-corruption clause refers to the supplier's obligations to have, as a minimum, policies thatprohibitforeignanddomesticbribery,prohibitfacilitationpayments,aswellaspoliciesundertheglobalanti-corruption regulation. This comment is relevant for the following questions in your questionnaireandweproposethefollowingamendmentstheanswers[see6.2,6.6,7.1.6,8.3].
è Investigations Fromacompany:
• A public disclosure of investigations cannot be a general requirement, as at least in investigationsregardingmultiplejurisdictions.Privacylawsmaybebreachedbysuchpublicityandthismayberegardedbyauthoritiesasaninterferenceininvestigativeprocedures[see2.7,6.7,7.1.7]
Fromacompany:
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Defence Companies Anti-Corruption Index (DCI) 2019
• Thefollowingquestionshavethesamecriteriatoreceiveascoreof‘2’–2.7(arehigh-levelresultsfromincident investigations and disciplinary actions against company employees publicly reported), 6.7 (arehigh-level results from incident investigations and disciplinary actions against contracted supplierspublicly reported) and 7.1.7 (are high-level results from incident investigations and disciplinary actionsagainstthirdpartiesand/oragentscontractedtoactonbehalfofthecompanypubliclyreported).
• Many companies disclose this information in onemanner for anymisconduct investigations involvingemployees or contractors, so this is repeating the same question three times. Additionally, as statedabove,suppliersareatypeofthirdparties.Thistypeofrepetitionmaycauseslantedscoringbecauseofthesameissuebeingscoredmultipletimes.
FromDefenceIndustryInitiative:
• Finally,thepublicreleaseofallegationsandinvestigationsmaycreatetheperceptionofdefamation.Fromacompany:
• For questions 2.7, 6.7 and 7.1.7 we suggest the DCI align with the guidance issued by the GlobalReporting Initiative (GRI), theworld'smostwidelyused sustainability reporting framework,particularlyGRI Standard 205-1 "Operations assessed for risks related to corruption" andGRI Standard Disclosure205-3 "Confirmed incidentsof corruptionandactions taken." Furtherdetailson incident investigationsand/orassociateddisciplinaryinvestigationsisnot includedwithintheGRIStandards, implyingthatthisinformationmaynotbeconsideredmaterial.
Fromacompany:
• Whatdoyoumeanwithincidentinvestigationsinthequestion2.7?Internalinvestigationortrial?è Public Information Only FromDefenceIndustryInitiative:
• Theproposed2019methodology removes theoption for scoringnon-public information to incentivizepublicdisclosure.Underthis incentivesapproach,thescoresforcompaniesmaynotreflecttheiractualanti-corruption program because many of our members’ customers— Governments, Departments orMinistries of Defense, and military agencies worldwide — may frown upon or outright prohibit ourmembersfrompubliclydisclosingdetailsregardingtheirsupplier,customer,andthird-partyintermediaryrelationships.
• The 2019 methodology should be updated to adopt a hybrid public-private scoring, selecting certainquestions for public analysis but permitting confidential submissions for others. Under such amodel,TransparencyInternationalcouldfulfillitsintenttopromotepublicdisclosureformany,perhapsmost,ofthetopics,while retainingthe flexibility toevaluateconfidential information forquestions towhichDIImembersmay not be able to respond publicly. The resulting Indexwouldmore accurately reflect theanti-corruptionenvironmentinthedefenseindustry.
Fromacompany:
• Thesurveyshallbeconductedtoestablishananti-corruptionindex.Thesurveyandindexfrom2012and2015hasingeneralachievedagoodstandingbothwithinthecompaniesandgovernments.Ithasbeenusedinternallyinourcompanytodrivefurtherdevelopmentandunderstandingfortheimportantanti-corruption work.The draft survey for 2019 will solely be assessed by the external information givenpublicbythecompanies,andinouropinionseemstobedesignedrathertodrivereformswithregardtotransparency in thesector, thantogiveanassessmentof the individualcompany’squality for itsanti-corruptionprogram.
• Thelevelofdetailsinthedraftedsurveyseemstolackanchoringininternationalacceptedframeworksand principles for anti-corruption. The criterias seems to be solely defined by TI, and has not beenpredictableforthecompaniesinvolved.E.g.lastyearweconductedanexternalreviewaccordingtoISO37001ofouranti-corruptionprogramwithsatisfactoryoutcome.In2016weansweredadetailedsurveytoourprimaryowner[red.]aboutourworkrelatedtoanti-corruptionandbusinessconduct,alsowith
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Defence Companies Anti-Corruption Index (DCI) 2019
satisfactorilyoutcome.IftheTIsurveywillbeconductedasdrafted,weexpectaresultthatmightdifferquitesubstantialfromthesepreviousevaluations.Thepotentiallackofcomparabilitycanbeachallengetocommunicatebothinternallyandexternally.
• The information value; the web is a digital platform where a company gives information to allstakeholdersabouttheirbusiness.The levelofdetailsaccordingtothissurveywillbeformidableforacompany likeours –which give somepractical questions; e.g.wehavehundredsof suppliersin threedifferentBusinessAreaswithintheGroup[red.]andwecannotseethevalueof listingeachandeverysupplieronourweb-sites.
Fromacompany:
• We find it unfortunate that it will no longer be possible to provide internal documents for theassessment.Therearemanyrequirementswhicharefulfilledbyhavingstandardtemplatesforcontracts,includingtheminemployeecontractsorinternalpolicies,itemswhicharenotmeantforpublication.Soeffectively, the company hasmany of the requirements in place, but theywill still receive a negativescoringbasedonthefactthatitisnotpublished.Inthatsense,theTIIndexcanbeseenmoreasatooltoputpressureondefencecompanies toachievepolitical goals rather thananhonestassessmentof thestatusofcomplianceintheindustry.
• Thisisalsoparticularlysupportedbythefactthatinquestion7.1.1thecompanycanonlygetamaximumscoreifitdoesnotuseagents.Itmayonlybecost-efficientforlargemultinationalgroupsofcompanies(suchase.g.Siemens,Novartis,RocheandmaybeABB)tobeartheoverheadthatisrequiredtosupportown sales organisations in the relevant target markets. For the major part of companies that areconductinginternationalbusinessthisisingeneralnotthecase,sothattheinvolvementofthirdpartiesas sale-intermediaries is without alternative. Moreover, in many jurisdictions, the inclusion of localagentsisde-factomandatoryinthecontractingofdefencebusinessandinordertoscorethemaximumacompanywouldhavetoeffectivelystopdoingbusinessinthosecountries.SuchappearancesareneitherintheinterestofTInorthecompaniesassessed,asitmaywelldevaluethesignificanceoftheindex.
Fromacompany
• Furthermore,with respect to some of the questions,more clarification and detailed criteriawould beneeded: as one example, thequestion considering suppliers. Companies commonly have thousandsofsuppliers,thusthelisttobepublishedwouldneedtobenarroweddowntomaterialandcriticalsupplierstohavetruerelevance.
• Ageneralconcernisalsothatforacompanythatconsidersitnottobepossibletopublishsomeoftheinformationrequestedfor(foroneormorereasonsexplainedhere)theassessmentwouldnotbevalidevenifthatcompanywouldhaveaneffectiveanti-corruptionprograminplace.
Fromacompany:
• Ingeneral,wenotethatthechangesfromthepreviousquestionsandmodelanswersarenumerousbothintermsofdepthandnumberofareascovered:toprovideawellthoughtanswer inpublicdocumentsavailableonourwebsitewouldbechallenging,giventherelativelyshortnoticebeforetheexaminationperiod(February2019).
• Moreover, ourmost relevant documents to update our stakeholders on the status of the company in2018 (financial statements, sustainability and corporate governance reports) will be published wellbeyond that period, as formost publicly listed companies; thiswill result in the information for [red.]beingmostlybasedonpublicinformationrelatingto2017.
Fromacompany:
• Thedecisiontoconsideronlypubliclyavailableinformationinthe2019survey(andnotallowacompanyto provide TI with supplementary information as in the past) will result in only a partial picture of acompany’sactualcomplianceprogram.Forexample,while[red.]toplevelpoliciesarepubliclyavailable,many of the specific details of our compliance activities are covered in internal company policies andprocedures, which we are willing to provide to TI and others who have a specific reason to know.However,wedonotbelievethatitisappropriatetomakesuchdetailspartofthepublicdomain.
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Defence Companies Anti-Corruption Index (DCI) 2019
è Scoring System FromDefenceIndustryInitiative:
• Thedraftquestionsandscoringcriteriarepeatedlymeasureandscorethesameinformationandmustbeupdatedtoensureanaccuratemethodologyandafairevaluationwithoutdisproportionatescoringthatcould benefit some companies over others. As an illustration, question #2.7 requests incident anddisciplinaryrecordsingeneralwhilequestion#6.7and7.1.7scorethesameinformationwithanarrowedfocuson suppliers and third-party agents. Similarly, question#1.2 requires aprohibitionon facilitationpaymentsforcompanies.Thenthecompany’ssamestanceistestedthreemoretimesregardingwhetherthisrequirementisflowedtosuppliersandtojointventures(question#6.2,7.1.1,7.2.2).Asingle,well-crafted question should replace duplicative questions to increase accurate measurements oftransparencyandfairnessoftheevaluationforselectedcompanies.
• Transparent Scoring Bands – The percentage scales for calculating scoring bands should be releasedbefore the 2019 assessment. Currently, the draft 2019 questions, scoring criteria, and associatedcommunicationsdonot includeanypercentagesfortheA-through-Fbands.The2015methodologydidincludethepercentagescalesbutdidnotreleasehoworwhythesescalesweredetermined.Thereleaseof the 2019 scales and their development are important for selected companies to understand theupcomingevaluation.
Fromacompany:
• Additionally,usageofthe“N/A”markingbyaresearcherinthequestionnaire,incertainquestions,wouldautomaticallymeanalowerfinalscorewhichcannotbetheintendedoutcomeofthismarkingasitwouldgiveamisleadingvaluation/indexofthatcompany’santi-corruptionprogramandthusalsoamisleadingperceptionoftheprofessionalismofthatcompanyingeneral.
Fromacompany:
• If a company answers "N/A" to a certainquestion, howdoes that calculate into the total credit?Howdoes answering "N/A" differ from "obtaining 0 (point)" for a certain question from the credit earningpointofview?
• Itseemsthatinthepast,theoutcomeoftheassessmentcameoutintheformof"A,B,C,andD."HowdoyoudivideintoA,B,C,andD?Willitbethesamefor2019assessment?
• Doesamethodthecompanytakesforpublishingcompliancerelated information(the informationthatwill be subject toassessment)matter in theassessment? Inotherwords,doeshow the information ispresented in thewebsitematter from the credit-earning point of view? For example, a companymaycompile all the compliance related information into a single file and provide a link in thewebsite, orotherwise,acompanymaydispersecompliancerelatedinformationintoawidearrayofsectionsinthewebsite.
• Doyouprovidethecompanywiththefirst(draft)outcomeoftheassessmentsothatthecompanycanhaveanopportunitytosupplementorcorrectanyinformationthatwasnotedintheoutcome?
è Assessment Timelines FromDefenceIndustryInitiative:
• The2019assessmentperiodshouldstart inMayor Junetoallowfortheevaluationofstatementsanddisclosures in 2018 annual and sustainability reports. The proposed assessment period, starting inFebruary2019,willoccurtooearlytoevaluatemanyoftheDIImembers’2018reportsthataretypicallyreleasedbetweenFebruaryandMay.The laterassessmentperiodwillallow forselectedcompanies torelease information related to the new questions and result in a more accurate Index that does notunfairlyscorecompanieswithlaterreportingcycles.
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Defence Companies Anti-Corruption Index (DCI) 2019
Fromacompany:• AlotoftheinformationrequiredfortheassessmentwillbepartofourGroupAnnualReport2018,this
willnotbepublisheduntilmid-March2019,so if it’spossibletoconducttheassessmentof [red.]afterthisdate,themostup-to-dateinformationcanbeused.
• Intermsof lookingatpublic informatione.g.Annualreport,willtherebeacut-offofbackwardlookinginformation;will anythingpublicbetween2015andwhen theassessment isundertakenbe taken intoaccount?
Fromacompany:
• You have mentioned that you intend to start this process in February. Many of the larger, listedcompaniesinthissectorhaveaDecemberyearendandwillbepublishingthistypeofinformationalongwith their annual accounts inApril. For such companieswe recommend that you start theassessmentprocessattheendofApril.
Fromacompany:
• Regardless of content,wewould suggest the timing of the assessment be set forMay or later.Manycompanies, including [red.], will publish their 2018 Annual Reports and Sustainability Reports fromFebruary through April. An assessment period that begins after thesemonths would result in scoringbased on the latest company information, and companies would have an opportunity to adjust theirplannedreportingtoincludeadditionalinformationtobeconsideredintheassessment.
Fromacompany:
• Regarding the timeline for the assessment, please note that [red.] usually publishes the full yearreporting documents by mid-March, including the Annual Financial Report and the Sustainability andInnovation Report. As you will review the company’s website, including any available reports, forevidenceofrobustanti-corruptionsystems,aswellasanyfunctioninghyperlinkstootherrelevantonlinematerials,weinviteyoutostarttheassessmentbymid-Aprilinordertohaveacompleteandaccessiblesetofupdateddocumentsandfullaccountability(boththeReportsareassuredbyexternalauditors).
è Other Fromacompany:
• Assurancelevels–wewillonlypublishinformationandstatementsoverwhichwehaveaveryhighlevelofassurance.Weareconcernedthatothercompanieswithlowerstandardsofgovernancemaybewillingtomake thesepublic statementswith lower levelsofassurance thanwe,andothercompanies likeus,require.
FromDefenceIndustryInitiative:
• A balance amongst transparency, privacy, and other obligations can be found through severalalternatives. The questions could bemodified to ask for information that is already released throughexistinglegallyrequireddisclosures.Forexample,theU.S.DepartmentofCommerce’sBureauofIndustryand Security requires the publication of offset agreements and releases key measures as publicinformation. The questions could be modified to require only the disclosure of information fromconsenting individuals and recognize the potential for individuals to request the erasure of theirinformation at any time. Lastly thequestions could request anonymized information. If theseor otheralternativesdonotstrikeasufficientbalance,thenthesequestionsshouldberemovedtoerronthesideofprivacyandcompliancewithgloballaws.
• TheValueofControls–Thedraft2019questionsshouldrecognizeandvaluedifferenttypesofeffectiveriskmitigation.Severaldraftquestionsonlyallowa top score foronekindofmitigation,aprohibition,anddoesnotequallyvalueothereffectivecontrols.Forexample,unlikequestion#A24inthe2015Indexthatallowedfortheprohibitionorregulationofpoliticalcontributions,the2019version(question#5.1.1)prohibits the use of all political contributions. The risk of political contributions can be effectivelymitigated through robust procedural, process, training, and monitoring controls. Similarly, question
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Defence Companies Anti-Corruption Index (DCI) 2019
#7.1.3requirestheprohibitionofengagingwiththirdpartyagentsthatwerefoundtohavehigh-riskflagsduringduediligence.High-risk indicatorswithrespecttootherthird-partyagentsmaybeappropriatelymitigatedthroughscopeofwork,training,contractual,andmonitoringcontrols.
Fromacompany:
• Generally,manyofthequestionsaretoostrict,usingwordssuchas“all”and“atleast”andthereforenotallowingariskbasedapproach.Resourcesarelimited–especially insmallercompaniessuchas[red.]–andusingthemforprocessesthatposenoorlittlerisk,wouldclearlybedetrimentaltoourcomplianceefforts.Complianceworkinpracticeisintheessenceallaboutanefficientallocationofscarceresources.Inconsequence,itiscommonlyrecognized(seee.g.theFCPA-guidancematerialoftheUSDOJ)thattherearenoone-size-fits-allsolutionsforcompliancemanagementsystems,butthatasystemisadequate,ifitmeetsthespecific,risk-basedrequirementsofanindividualcompany.
• WefearthatTImaybyimposingsuchstrictandoftennotrealisticstandardsthatcontravenerisk-basedapproaches,createtheperceptionamongrelevantbusinessleaderstobeignoringtheactualconditionsinthegivenbusinessenvironments.ThisbearsthesignificantriskthatthestandardsofassessmentofTImaymoreandmorebeperceivedas “coming from the ivory tower”. SuchperceptionamongbusinessleaderswouldseverelydecreasethelevelofacceptanceforthemuchappreciatedandvaluableworkofTI and impede themissionsof integrity a lotof internal complianceofficersofdefence companies arecurrentlyleading.
• Also, compliance and integrity are not only limited to anti-corruption aspects, there are other risk-categories,inparticularanti-trustlaw.Infact,someofthepublicationrequirementsTIhassetupinthe2019 edition cannot be fulfilled without potentially violating anti-trust law. We are certain that thiscannotbeintheinterestofTIandweaskyoutoproperlyreviewthesetopics–aspointedoutindetailbelow –with the appropriate anti-trust authorities (in particular theDG Competition of the EuropeanCommissionandtheAntitrustDivisionoftheUSDOJ).
1. Leadership and Organisational Culture 1.3 Does the board or a dedicated board committee provide oversight of the company’s anti-bribery andcorruptionprogramme?1.4 Is responsibility for implementingandmanaging the company’s anti-bribery and corruptionprogrammeultimatelyassignedtoaseniorexecutive,anddoesheorshehaveadirectreportinglinetotheboardorboardcommitteeprovidingoversightofthecompany’sprogramme?
Fromacompany:• Withregardtospecificquestions,webelievethattheapproachofquestions1.3and1.4shouldbemore
flexible in light of the Italian legislative framework. Italian law provides for an independent body (theOversightBoard–OrganismodiVigilanza)thathasaleadingroleinoverseeingthecompany’sapproachtoanticorruptionandreportsdirectlytotheBoardofDirectors.Inaddition,ItaliancorporategovernancerulesprovideguidanceforBoardCommittees,suchasourSustainabilityCommitteeandRisks&ControlCommittee.
• Consequently,inouropinion,theprovisionofbothadedicatedAntiBribery/CorruptionCommitteeandaSeniorExecutiveinchargeforimplementingandmanagingthecompany'santibriberyandanticorruptionprogrammeshouldnotbethesolepossiblesolution.This isparticularly truewhere,as inourcase, theOversight Board is a collegial body composed of two external members supported by an internalexecutiveinchargeforimplementingthedirectivesofsuchBoardwithintheorganization.
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Defence Companies Anti-Corruption Index (DCI) 2019
2. Internal Controls 2.1 Isthedesignandimplementationoftheanti-briberyandcorruptionprogrammetailoredtothecompanybasedonanassessmentofthecorruptionandbriberyrisksitfaces?
Fromacompany:• Riskassessmentsareoftendonebythe localordivisionalcomplianceofficer initiallyandthenupdated
continuously as a result of the compliance officer’s daily business. This is not necessarily specificallyreviewedbythemanagementandtheboard,unlessithasmajorimplicationsorintheframeofregularreportings to the management or the board. Not having a formal process for such a continuousassessmentandmanagement/boardreviewshouldnotbeconstruedagainstacompany.
2.4 Does the company have a system for tracking, investigating and responding to bribery and corruptionallegationsorincidents,includingthosereportedthroughwhistleblowingchannels?
Fromacompany:• What are TI’s expectations with regard to an independent team? Only large multinational groups of
companies have the resources and the number of cases to support separate investigation teams. Inpractice many companies will conduct their investigations either with or without external supportthroughtheircomplianceand/orauditteams.Ifthatissufficient,thenthisshouldbewordedaccordingly.If not, then we believe the question is only fair and balanced towards large multinational groups ofcompaniesandshouldbeamendedaccordingly.
2.5Doesthecompanyhaveappropriatearrangementsinplacetoensurethequalityofinvestigations?
Fromacompany: • Answerfor0markingcriteria,seemstobewrong,andlookslikeitwascopiedfromtheabovequestion.
Fromacompany:• SeecommenttoQ2.4.Furthermore,whatwouldbethebenefitofacompanystatingthattheirstaff is
properlyqualifiedand/ortrainedtoperformtheirtask?Itshouldbeassumedthattheyare,andifthey’renot,suchastatementwouldn’tchangethat.Also,havinganinvestigationprocessreviewedonatleastanannualbasismayonlyberealisticforlargemultinationalgroupsofcompaniesasonlytheymayhavetheresourcesforitandtheamountofcasesthatwouldrequiresuchinvestment.
• Moreover, the fact is ignored here that each case may be subject to a differentiated approach. Inaddition, such processes are much less subject to changes in the regulatory environment than otherelementsofacompliancemanagementsystem,suchase.g. inthefieldofanti-discriminationanddata-privacy.Againa risk-basedapproach foranefficientallocationof scarce compliance resources isbeingcontravenedbythisstandard.Reviewingeachandeveryprocessandpolicyonanat leastannualbasisregardlessoftheobjectivelygivenrisk-levelissimplynotpossibleinpractice.
2.6Doesthecompany'sinvestigativeprocedureincludeacommitmenttoreportmaterialfindingstotheboardandanycriminalconducttotherelevantauthorities?
Fromacompany: • IsthisforAnti-BriberyandCorruption(ABC)only,ifsoshouldthisbeincludedinthemarkingcriteria?
2.7 Are high-level results from incident investigations and disciplinary actions against company employeespubliclyreported?
FromIFBEC:• At question 2.7 the survey prescribes an arbitrary level of detail for publication of investigations and
disciplinaryactionsforincidentsofmisconductinordertoreceiveafavourablescore.Fromacompany:
• “The company publishes is committed to report to relevant authorities, upon request, high-level datafrom ethical or bribery and corruption-related incident investigations that includes at aminimum: the
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Defence Companies Anti-Corruption Index (DCI) 2019
number of reports received, including the number received through whistleblowing channels, thenumberofinvestigationslaunched,andthenumberofterminationsasaresultofinvestigationfindings.”
Fromacompany: • CouldyouclarifywhetherthedetailspublishedhavetobeABConly,aswedosharethetotalcontacts
andotherkeydataaroundourEthicsLine(Speakupservice)but itcontainsarangeoftopicsfromourCode. Also we’re not sure of the value of detailing investigations launched; our suggestion would bedetailing‘substantiationrate’ofinvestigationsconducted.
Fromacompany:• Thefollowingquestionshavethesamecriteriatoreceiveascoreof‘2’–2.7,6.7and7.1.7.• Many companies disclose this information in onemanner for anymisconduct investigations involving
employees or contractors, so this is repeating the same question three times. Additionally, as statedabove,suppliersareatypeofthirdparties.Thistypeofrepetitionmaycauseslantedscoringbecauseofthesameissuebeingscoredmultipletimes.
3. Support to Employees
3.1 Does thecompanyprovidebasic trainingon itsanti-briberyandcorruptionprogrammetoallemployeesacrossalldivisionsandgeographies,andinallappropriatelanguages?
Fromacompany:• Should this include ‘ethics and compliance programme’ within the wording as usually when inserting
materialsintoothertrainingsit’snotjustABCfocused. 3.2Doesthecompanyprovidetailoredtrainingonitsanti-briberyandcorruptionprogrammeforatleastthefollowing categories of employees: a) Employees in high risk positions, b) Board members, c) Middlemanagement
Fromacompany:• Asstatedinthepreliminaryremarks,therearemanycomplianceriskcategoriestocoverandwhileAnti-
Corruptionisveryimportant, it isbynomeanstheonlyone.Thereforerenewingatailor-madetrainingevery year is not realistic. TI should at least consider initiativeswhere compliance topics are regularlyinstitutionalisedaspartofmanagementmeetings,eveniftheyarenotformaltrainings.
3.3Doesthecompanymeasureandreviewtheeffectivenessofitsanti-briberyandcorruptioncommunicationsandtrainingprogramme?
Fromacompany:• Oursuggestionwouldbetoinclude‘ethicsandcomplianceprogramme’ratherthanfocuspurelyonABC
e.g.staffsurveyaskbroaderquestionsaboutanE&Cprogrammeforexample‘isitsafetospeakup’. Fromacompany:
• The effectiveness can be measured by the number of inquiries and reports to compliance. After aneffectivetrainingprogram,thesenumbersregularlyspike.Also,personalfeedbackisessentialafterafaceto facetrainingsession.Furthermore, thereareemployeesurveys,which insmallercompaniesarenotconductedonayearlybasis.Nothavingaformalisedpublishedprocessandanannualreviewprocessofthisprocessshouldnotbeconsideredanegativepointforsuchcompanies.
3.4Doesthecompanyensurethatitsemployeeincentiveschemesarealignedwithanddonotinadvertentlyundermineitsanti-briberyandcorruptioncommitment?
FromIFBEC:• Atquestion3.4,TIprescribesanincentivecompensationschemeratherthanevaluates.
Fromacompany:• Oursuggestion is thequestionshouldcoverwider than justABC,andbeabout focussing incentiveson
the‘how’notjust‘what’theyachieve.Fromacompany:
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Defence Companies Anti-Corruption Index (DCI) 2019
• Inmachinery,electricalandmetal industriesofSwitzerland(the industrysectordefencecompaniesareincluded)employeesarenotreceivingtheirsalarybasedonapercentageofacustomercontract.Makingsuchastatementpubliclywouldbequiteunusualand for thepublicbegs thequestion if thecompanymakingsuchastatementhassomethingtohide.NotmakingsuchastatementshouldnotbeconsideredtothedetrimentofSwisscompanies.
3.5 Does the companyexplicitly commit toandassure itself that itwill supportandprotectemployeeswhorefusetoactunethically,evenwhenitmightresultinalossofbusiness?
Fromacompany:• Thequestionsasksaboutethics,but in themarking criteria statesABC,our suggestion for consistency
thisshouldbeethics.3.6 Does the companyhaveanexplicit policyofnon-retaliationagainstwhistleblowersandemployeeswhoreportbriberyandcorruptionincidents?
Fromacompany:• ClarityonwhetherthisquestionhastobeexplicittoABCasourretaliationcoversanytopicwithinour
Code,whichincludesABCandmanyothertopics?3.7Doesthecompanyprovidemultiplewhistleblowingandadvicechannelsforusebyall(e.g.employeesandexternalparties),anddotheyallowforconfidentialand,whereverpossible,anonymousreporting?
Fromacompany:• Clarityonwhatismeantbyexternalbodieswouldbehelpful.
4. Conflict of Interest
4.2Arethereproceduresinplacetoidentify,declareandmanageconflictsofinterest,whichareoverseenbyabodyorindividualultimatelyaccountablefortheappropriatemanagementandhandlingofconflictofinterestcases?
Fromacompany:• Adedicatedregistryisnotcompulsory.Thereareothermeanspossible,especiallyforsmallercompanies.
Thismayincludestoringtheapprovalemailsonacentralserveraccessiblebycomplianceandavailablefor review to auditors and government upon request. Not having a dedicated registry should not beconsideredtothedetrimentofacompany.
• A list of criteria can by the nature of it only be a list of examples. Each case has to be reviewed andconsidered individually. Not having an exhaustive list of criteria should not be considered to thedetrimentofacompany.
5. Customer Engagement
OverallSectionFeedback:
FromIFBEC:• In section5of theproposedsurvey, therearea seriesofquestions thatwould imposeTI standardsof
publicationthatarenoindicationofthestrengthorweaknessofananti-corruptionprogramandconflictinanumberofinstanceswithlegitimaterestrictionsrequiredbygovernmentcustomers.
Fromacompany:• Webelievethatinsection5youhaveseveralquestionsthatwouldimposeTIstandardsofpublications
butwhich isnotnecessarya requirementbyournationalcustomersor inmost jurisdictions (i.e.5.2.3,5.2.4.)As farasweknowwearenotundertheobligationtohaveTIstandardsofpublication.Wealsowonderhowthesestandardsofpublicationcanbean indicationof thestrengthofouranti-corruptionprogram.
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Defence Companies Anti-Corruption Index (DCI) 2019
5.1.1Doesthecompanyhaveaclearlydefinedpolicyand/orprocedurecoveringpoliticalcontributions?
Fromacompany:• Asa governmentownedcompany, [red.]hasa clearly statedpolicy thatwedonotdonate topolitical
parties.Hence,no furtherrulesandproceduresarerequiredtosupport thissimplerule thatallowsnoexceptions.Hence,thismustbeconsideredsufficientforascoringof2andthemodelanswershouldbespecifiedaccordingly.
5.1.2Doesthecompanypublishdetailsofallpoliticalcontributionsmadebythecompanyanditssubsidiaries,orastatementthatithasmadenosuchcontribution?
Fromacompany:• The questions should be marked not applicable for companies that explicitly prohibit political
contributionswithoutexceptions.5.1.3 Does the company have a clearly defined policy and/or procedure covering charitable donations andsponsorships,anddoesitpublishdetailsofallsuchdonationsmadebythecompanyanditssubsidiaries?
FromIFBEC:• Therearelegitimaterestrictionsrequiredbygovernmentcustomers–5.1.3whereTIwillscorebasedon
whetheracompanypublishesallcharitabledonationsandsponsorships(assumetheymeangovernmentrestrictionsindifferentjurisdictions?)
Fromacompany:• Ourunderstandingoftheratingsysteminthisquestionisthatifyoudonotpublishthedetailsbuthavea
policyyoustillgetzeropoints.Wethinkthis istooharsh.Acompanywithadedicatedpolicyshouldatleastgetonepoint.
5.2.3Doesthecompanypublishfulldetailsofitslobbyistsandgloballobbyingexpenditure?
FromIFBEC:• Therearelegitimaterestrictionsrequiredbygovernmentcustomers–e.g.5.2.3whereTIwillscorebased
on publication of “full details of its lobbyists and global expenditures”, whereas companies typicallyprovidelobbyingrelatedinformationbasedonlawsandregulationswheretheyoperate,notonanewly-devisedTI-imposedstandardofdetail.
Fromacompany:• The question 5.2.3 requires an on/off approach on lobbying that is not consistent with international
companiesoperatingindifferentgeographies.WesuggesttorevisethescoringmethodologytakingintoconsiderationcompliancewithandrequirementofNational lawsandregulations,applicablewherethecompanyoperates;
5.2.4 Does the company commit to responding openly about details of meetings with senior governmentrepresentativestorelevantauthoritieswhenrequested?
FromIFBEC:• Therearelegitimaterestrictionsrequiredbygovernmentcustomers–e.g.5.2.4wouldrequirecompanies
todiscloseeverymeetingwithseniorgovernmentofficials. If lawfulauthorities request informationonsuchmeetings, companies necessarily comply, but TI will score based onwhether prescribed detailedmeetinglistsarecompiled,whethersoughtbyauthoritiesornot.
5.3.1Doesthecompanyhaveapolicyand/orprocedureongiftsandhospitalitytoensuretheyarebonafidetopreventundueinfluenceorothercorruption?
Fromacompany:
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Defence Companies Anti-Corruption Index (DCI) 2019
• Adedicatedregistryisnotcompulsory.Thereareothermeanspossible,especiallyforsmallercompanies.Thismayincludestoringtheapprovalemailsonacentralserveraccessiblebycomplianceandavailablefor review to auditors and government upon request. Not having a dedicated registry should not beconsideredtothedetrimentofacompany.
FromIFBEC:• Therearelegitimaterestrictionsrequiredbygovernmentcustomers–e.g.5.3.1willhaveTIscorebased
onwhether gifts and hospitality are recorded in some central register, which is not required inmostjurisdictions.
5.3.2Doesthecompanydiscloseitsgiftsandhospitalityregistertotherelevantgovernmentsinalljurisdictionsinwhichitoperates?
Fromacompany:• Comment: The authorities in Israel andmany other countries do not maintain a register of gifts and
hospitality.Therefore,weproposethatthedisclosureshouldbeuponrequestasfollows:• Thecompanyexplicitlystatescommitstothatitsharesitsgiftsandhospitalityregisterwithuponrequest
ofallrelevantgovernmentsinthejurisdictionsin-whichitoperates,i.e.anygovernmentswithwhichthecompany(throughitsemployees,subsidiariesoranyotherentitiesworkingonbehalfofthecompany'sinterests)hasabusinessrelationship.
Fromacompany:• Itshouldbeclarifiedthatitissufficienttomakethisavailableuponrequest.
6. Supply Chain Management
OverallSectionFeedback:
Fromacompany:• Webelievequestion6.1to6.5isrelevantriskassessmentforoursupplychainmanagement.
Fromacompany:• Supplychainand thirdparties shouldnotbeseparated into twocategoriesbecausesuppliersare third
parties,e.g.,ourthirdpartiesarepubliclydefinedassuppliers,subcontractors,agents,teamingpartners,etc.We essentially get asked the same questions twice for suppliers,when no one issue should carrydoubleweight.
6.1Doesthecompanyexplicitlyrequiretheinvolvementofitsprocurementdepartmentintheestablishmentofallnewsupplierrelationships,andoversightofitssupplierbase?
Fromacompany:• Conducting such audits on an annual basis may be realistic only for large multinational groups of
companies.Therearemanyprocessestobereviewed.Therequirementshouldratherbethatcompaniesconductsuchauditsregularlyaccordingtotheirspecificcompliance-riskexposures.
Fromacompany:• In6.1,itisstatedthat"thecompanyrequirestheinvolvementofitsprocurementdepartmentinsupplier
relationships."Couldyouclarifytheintentofthisquestion?Wewouldliketoknowwhatthecaseswouldbewhen the procurement department is not involved, andwhat the risks arewhen the procurementdepartmentisnotinvolved.
6.2Doesthecompanyensurethatallofitscontractedsuppliershaveanadequatestandardofanti-briberyandcorruptionpoliciesandproceduresinplace?
FromIFBEC:• Therearelegitimaterestrictionsrequiredbygovernmentcustomers–e.g.6.2wouldrequirecompanies
to ensure all of its suppliers have adequate anti-corruption procedures in place and, if they do not,requirethesuppliertoadopt itsproceduresorotherwiseconductanassessmentofthesupplier’santi-corruptionprogramandimposemeasuresintothesupplier’scomplianceprogram.
Fromacompany:
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Defence Companies Anti-Corruption Index (DCI) 2019
• There is evidence that the company ensures that all of its contracted suppliers whom interacts withgovernmentofficialsonitsbehalfhaveadequateanti-briberyandcorruptionpoliciesandproceduresinplace. It isexplicitlystatedthatallsupplierswhichinteractwithgovernmentofficialsonitsbehalfmusthave,atleast,policiesthatprohibitforeignanddomesticbribery,prohibitfacilitationpayments,aswellaspoliciesandprocedurestoaddressconflictsofinterest,giftsandhospitality,andwhistleblowing.Thecompanyensuresthisbyeitherrequiringthatallsuppliersadoptandfollowitsownanti-briberypoliciesand procedures, or by assessing suppliers' anti-bribery and corruption programme and ensuringadditionalmeasuresareimplementedwheregapsareidentified.Thecompanyregularlyassuresitselfofthiseithereverytwoyearsonanappropriateperiodicbasis,orwhenthereisasignificantchangeinthebusinessrelationship.
Fromacompany:• Doingthisforallsuppliersisoverlyburdensomeforsmallercompanies.Itshouldberephrasedtoarisk-
based approach and include suppliers which are material for the business, i.e. not those for officesupplies, toiletpaperandnutsandbolts,but those thatarematerial for theproductsor service tobedelivered. It should also allow for a simplified process where suppliers are major and well-knowncompanieswithknownexistingcomplianceprograms,suchasABB,Siemens,GeneralDynamics,orthatare highly ranked on TI’s Defence Companies index. After all, this is part of what the index is for, toestablishalevel-playingfieldoftrusteddefencecompanies.
6.3Doesthecompanyinsistthatitssuppliersrequireallsub-contractorstohaveformalandpubliclydeclaredanti-corruptionprogrammesinplacethatadheretominimumstandardsestablishedbythemaincontractor?
Fromacompany:• Thecompanyinsiststhatitshighrisksub-contractorshaveformallyandpubliclydeclaredtheadoptionof
anti-corruption programmes in place and that the substance of its anti-corruption and briberyprogrammeandstandardsareincludedinsubcontractsthroughoutthesupplychain.
Fromacompany:• ThisisnotrealisticwheresuppliersareSMEs,oftensmalllocalcompaniesdoingspecialisedworkwith1-
10employees.Again,ariskbasedapproachshouldbeallowedhere.SeealsocommentstoQ6.2.6.4 Does the company conduct risk-based anti-bribery and corruption due diligence when engaging or re-engagingwithitssuppliers?
Fromacompany:• Seecommentsto6.2and6.3.
6.6 Does the company declare and publish details of all suppliers with which it has an active businessrelationship?
FromADS:• Asanexample,amongstmanyothers,6.6asksifthecompaniespublishdetailsofALLoftheirsuppliers.
Thecompanieswe representoftenhavemany thousandsof suppliersprovidingallmannerof suppliesfrom direct equipment forming part of the products they produce, to stationery, cleaning, travel andcateringproviderswhosupporttheiroperations.Giventhevolumeofcontractstheymanage,evenifasamatter of commercial confidentiality or national security they were able to provide the sought-afterinformation, the logistical difficulties of ensuring the list of suppliers is up-to- date would bemonumental,letalonethequestionofwhetherTIwouldhaveanypracticalwayofassessingorverifyingitsaccuracy.
FromIFBEC:• Therearelegitimaterestrictionsimposedbygovernmentcustomers–e.g.6.6wouldrequirecompanies
topublishalistofallitssuppliersandtheproducts/servicestheyprovide.Fromacompany:
• Comment:ThisquestioncannotbeappliedandisnotfeasibleduetolargenumberofsuppliersandNDAsthatrequiresconfidentiality.Therefore,werecommendremovingthisquestion.
Fromacompany:
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Defence Companies Anti-Corruption Index (DCI) 2019
• Inquestion6.6,youask ifwedeclareandpublishdetailsofall supplierswithwhichwehaveanactivebusiness relationship.Againwehave toaskhowthis canbeaproofof strength toouranti-corruptionprogram,andremindyouthatthisisnotarequirementbyournationalauthoritiesnorourcustomers?
Fromacompany:• ForcertainindustrieslikeourEPCM[Engineering,Procurement,ConstructionandMaintenance]industry,
publishing details about our suppliers would cripple our business because it comes down to the verysuppliersandcontractorsweuse.Thereisnoaddedcomplianceandethicsvalueonthis.
Fromacompany:• The publication of exhaustive and detailed lists of suppliers will in many cases violate confidentiality
clauses in the supplyagreements. Furthermore, this is against thebusiness interestsof the companiesand-mostimportantly-aviolationofanti-trustlaw.“Fulldetailsofallsuppliers”aretobequalifiedasmarket relevant information. If all competitors that are active on a given product and geographicalmarket would make such market relevant information public, competition would be significantlyrestricted.Pleaserefertothedecisionpracticeofanti-trustauthoritiesincaseofprice-signalling.Ausefuloverview can be found here: https://www.bakermckenzie.com/en/insight/publications/2017/01/price-signalling-andglobal-antitrust-enforcement
• This inherent conflict between (fully legitimate) transparency requirements and antitrust complianceshouldreallyhavebeendiscussedindetailwiththeappropriateantitrustauthorities(inparticulartheDGCompetitionoftheEuropeanCommissionandtheAntitrustDivisionoftheUSDOJ).
• Since such an alignment is not possible until February 2019, this question will have to be deletedcompletely.
Fromacompany:• In 6.6, it is stated that "the company publishes full details of all suppliers used in the conduct of
business."Webelievethattheinformationaboutthesuppliersacompanyusescangenerallybetreatedastradesecretofacompany.Ifthisinformationisdisclosed,thisinformationcanbelikelyexploitedbythecompetitors.Weunderstandthatdisclosingthiskindofinformationcanincreasethetransparencyofacompany,butsuchbenefitcanbeoutweighedbythedisadvantagesthatmayresultfromthedisclosureoftradesecretofacompany.WewouldliketoknowhowTIviewsthisissue.
Fromacompany:• Thequestions6.6,6.7,7.1.6,7.1.7,8.3,8.4requiresanexcessivelevelofconfidentialdata.Thiskindof
informationiscompanysensitiveonthegroundsofprotectingourcompetitivepositionandsocannotbepublishedordisclosedwithoutdamagingthecompany.Theinformationisavailableinternallyandreviewedregularly.Tofindtherightbalanceofdisclosure,wesuggesttorequireexclusivelydisclosureonthepolicy/processandonaggregateddata,adjustingthescoringmethodologyaccordingly.
Fromacompany• Furthermore,with respect to some of the questions,more clarification and detailed criteriawould be
needed: as one example, thequestion considering suppliers. Companies commonly have thousandsofsuppliers,thusthelisttobepublishedwouldneedtobenarroweddowntomaterialandcriticalsupplierstohavetruerelevance.
Fromacompany• In relation to the supply chain (6.6), we would like to highlight that the supplier base represents an
importantfactorofcompetitiveadvantage intheshipbuilding industryand inourproductionmodel. Inadditionoursuppliers,whichincludemanythousandplayers,arethecommonbaseforalltypesofshipsweproduce (naval vessels represent less than30%ofourbusiness). Inviewof these facts,webelievethat the publication of the list of suppliers could hardly be considered as a step forward in ouranticorruptionapproach.
6.7 Are high-level results from incident investigations and disciplinary actions against contracted supplierspubliclyreported?Fromacompany:
• Thecompanypublishesiscommittedtoreporttorelevantauthorities,uponrequest,high-leveldatafromethicalorbriberyandcorruption-related incidents relating to its immediatesuppliers that include,ataminimum: the number of investigations launched and the number of terminations as a result ofinvestigationfindings.
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Defence Companies Anti-Corruption Index (DCI) 2019
Fromacompany:• Thequestions6.6,6.7,7.1.6,7.1.7,8.3,8.4requiresanexcessivelevelofconfidentialdata.Thiskindof
informationiscompanysensitiveonthegroundsofprotectingourcompetitivepositionandsocannotbepublished or disclosed without damaging the company. The information is available internally andreviewedregularly.Tofindtherightbalanceofdisclosure,wesuggesttorequireexclusivelydisclosureonthepolicy/processandonaggregateddata,adjustingthescoringmethodologyaccordingly.
7. Third Parties
OverallSectionFeedback:
Fromacompany:• Supplychainand thirdparties shouldnotbeseparated into twocategoriesbecausesuppliersare third
parties,e.g.,ourthirdpartiesarepubliclydefinedassuppliers,subcontractors,agents,teamingpartners,etc.We essentially get asked the same questions twice for suppliers,when no one issue should carrydoubleweight.
Overall7.1(Agents)SectionFeedback:
Fromacompany:• Thissectionseemstobeconfused.Ontheonehandacompanycouldbepunishedinthemarkingcriteria
of7.1.1forthemereuseofagentsevenifwellmanaged,butontheotheracompanywhomakesnouseofagentswillmissadisproportionatenumberofpointsfornothavinganypoliciesetc.
7.1.1Doesthecompanyhaveaclearpolicyontheuseofagents?
Fromacompany:• This impliesthatacompanythatengagesanadviserinanycontextwillonlybeabletoscoreamaximum
ofhalfmarks.Thisignoresthestandardssetdowninanti-briberyandcorruptionlegislationwhichallowfortheuseofentitiessuchasadvisersprovidedthatadequateriskassessment,monitoringandcontrolsare put in place. This question seems to contradict the questions to follow which deal with howcompaniesmanagetheirrelationshipswiththeiradvisers.
Fromacompany:• Inordertomeetthecriteriaforascoreof‘2’,acompanymustexplicitlystatethatitdoesnotuseagents
toconductbusiness.Thisisnotpossibleforcompaniesdoingbusinessincertainpartsoftheworldthatrequirealocalagent.Wehavedeliberatelydecidednottootherwiseusesalesagentstoavoidassociatedcorruption risks but theway thequestions is phrased this importantmitigation strategywould not beenough.Themodelansweristoostringent.
Fromacompany:• Agents are used where a company does not have the resources or local knowledge or where it is
mandatory toworkwith local companiesdue topublicbiddingprocedures. Inorder for a company toscorethemaximumpoints,theywouldhavetoeffectivelyabandonbusinessincertaincountries.Whilethismaybeaproperdecisioninsomecountries,therearecertainlypossibilitiestoconductbusinesswithagents in aproperway–asdemonstratedonadailybasisbymany companies throughout theworld.Obviously,acompanywithsuchaclearstatementshouldgetthemaximumpoints.Butacompanywithanadequateprocedureinplaceshould,too.
• PleasereconsiderthishighlypoliticalstanceofTI.Again:thisbearsthesignificantriskthatthestandardsofassessmentofTImaybeperceivedas“comingfromtheivorytower”.
7.1.2 Does the company conduct risk-basedanti-bribery and corruption due diligencewhen engaging or re-engagingitsthirdpartiesand/oragents?
Fromacompany:• Inouropinion,[red.]effectivelyfulfilstheserequirements,eventhoughnotallofitispubliclyavailable.
However,ourreviewsareconductedatleasteverythreeyears.Pleasereconsidertherigorous“atleast2years”as it is asarbitraryas threeor fouryears.Again, thisapproachclearly contravenesa risk-based
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Defence Companies Anti-Corruption Index (DCI) 2019
approach.Anagentine.g.Denmarkmayonlyhavetobereviewedafterfouryears,whereasanagentine.g.Nigeriamayhavetobeputonawatch-listtobesubjecttoongoingmonitoring.
7.1.3 Doesthecompanycommittonotengagingorterminating itsengagementwithagents,wheretheduediligenceidentifiesahighriskofcorruption?
Fromacompany:• The highest scoring section requires that agents are not engaged where any of the three specified
circumstancesapply.Weagreethatthecircumstancesare indicatorsofpotentialcorruptionandwouldbe high hurdles to overcome, however the question does not allow for any possibility of mitigationdependingonthespecificsofthecontext.
7.1.6 Does the company declare and publish details of all agents and/or third parties used in defencecontracts?
FromIFBEC:• There are legitimate restrictions imposed by government customers – e.g. 7.1.6 will score based on
publishinglistsofallthirdpartyrepresentativesutilized,whichhasnolegalbasisanddoesnotprovideabasisforconcludingwhetherananti-corruptionprogrammeisstrongornot.
Fromacompany:• Comment:Thisquestioncannotbeappliedand isnot feasibleduetoNDAsthat requireconfidentiality
andareusedasacommonpractice.Therefore,werecommendremovingthisquestion.Fromacompany:
• Webelieve it ismorecriticalthatthecompanydeclaretotherelevantnationalauthorities inaspecificcountrywhotheyuseasagentand/orthirdpartiesforaspecificcontract. Thiswillassuretransparencybetweentheindustryandtherelevantnationalauthorities.
Fromacompany:• [red.]thirdpartycontractsusuallyincludeconfidentialityclauseswhichoblige[red.]tokeeppartiesand
thecontentoftheagreementsconfidential.Furthermore,therecouldbenaturalpersonsinvolvedwhichmeansthatwehavetorespectcertaindataprotectionrequirements,especiallyunderthenewregimeoftheGDPR.
Fromacompany• Again, this may violate confidentiality clauses in the relevant agreements, be against the business
interestsof the companiesand -most importantly - a violationof antitrust law. “Full detailsof agentsand/or thirdparties”are tobequalifiedasmarket relevant information.Please see comment toQ6.6.Thisquestionwillhavetobedeletedcompletely.
Fromacompany:• In7.1.6,itisstatedthat"thecompanypublishesafullanddetailedlistofallagentsand/orthirdparties
usedinrelationtoeachdefensecontract."AswehaveindicatedinourcommentsregardingSection6.6,thismayalsobetreatedastradesecretofacompany.HowdoesTIviewthisissue?
Fromacompany:• Thequestions6.6,6.7,7.1.6,7.1.7,8.3,8.4requiresanexcessivelevelofconfidentialdata.Thiskindof
informationiscompanysensitiveonthegroundsofprotectingourcompetitivepositionandsocannotbepublished or disclosed without damaging the company. The information is available internally andreviewedregularly.Tofindtherightbalanceofdisclosure,wesuggesttorequireexclusivelydisclosureonthepolicy/processandonaggregateddata,adjustingthescoringmethodologyaccordingly.
7.1.7 Arehigh-level results from incident investigationsanddisciplinaryactionsagainst thirdpartiesand/oragentscontractedtoactonbehalfofthecompanypubliclyreported?
FromIFBEC:• Therearelegitimaterestrictionsimposedbygovernmentcustomers–e.g.7.1.7willhaveTIscorebased
onwhether a companypublishes investigations and actions against third party representatives,wherelegalanddataprotectionrequirementsmayprohibitit.
Fromacompany:
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Defence Companies Anti-Corruption Index (DCI) 2019
• Thecompanypublishesiscommittedtoreporttorelevantauthorities,uponrequest,uponrequest,thehigh-levelresultsonallethicalandcorruptionorbriberyrelatedincidentsthatinclude,ataminimum:thenumberofinvestigationslaunched;andthenumberofterminationsasaresultofinvestigationfindings.
Fromacompany:
• Webelievethisinformationcanbeprohibitedbybothlegaland/ordataprivacyrequirementsinseveralcountries(GDPR).
Fromacompany:• Resultsof internalandexternal investigationsaretreatedhighlyconfidential.Anypublicationofresults
anddisciplinaryactionscouldcausedataprotectionconcernsorevenresultinaviolationofpersonalityrightsofindividuals.
Fromacompany:• Thequestions6.6,6.7,7.1.6,7.1.7,8.3,8.4requiresanexcessivelevelofconfidentialdata.Thiskindof
informationiscompanysensitiveonthegroundsofprotectingourcompetitivepositionandsocannotbepublished or disclosed without damaging the company. The information is available internally andreviewedregularly.Tofindtherightbalanceofdisclosure,wesuggesttorequireexclusivelydisclosureonthepolicy/processandonaggregateddata,adjustingthescoringmethodologyaccordingly.
7.2.3 Doesthecompanycommit to takeanactiverole inpreventingbriberyandcorruption inallof its jointventures?
Fromacompany:• Itmustbemadeclearthatbest-effortsmustsufficeconsideringtheobjectivelygivenlevelofcontrolover
theJVundertheapplicablecorporatelaws.
8. Offsets OverallSectionFeedback:
Fromacompany:• Severalofthesequestionsmaybesensitiveforcompetitiverisksandnationalsecuritysinceweareonly
intomilitaryoffsetdiscussions.8.2Doesthecompanyconductrisk-basedanti-briberyandcorruptionduediligenceonallaspectsofitsoffsetobligations,whichincludesanassessmentofthelegitimatebusinessrationalefortheinvestment?
FromIFBEC:• Thereare legitimate restrictions imposedbygovernment customers–e.g. 8.2will be scoredbasedon
publishing details of all offset obligations and contracts, which relates to no legal requirements andprovidesnobasisforassessment.
Fromacompany:• Regarding8.2,intheoffsetcontractasourcompanyknowsofit,theprocuring(purchasing)government
usuallydesignatesorselectstheoffsetbeneficiarycompanies in itssolediscretionand justnotifiesthecompanyofthecompaniesselected.Therefore,thepractice,asweknowofit,seemsthatitispracticallyvery difficult to challenge or raise objection to the companies selected as offset beneficiary by thepurchasing government. But this question seems to require the company to performduediligence onthoseselectedcompaniesandraiseobjectionifthereseemsnoreasonablegroundforselection.Areweunderstandingthisquestioncorrectly?
8.3 Does the company publish a list and details of all offset agents, brokers or consultancy firms used indefencecontracts?
Fromacompany:• Comment:Thisquestioncannotbeappliedand isnot feasibleduetoNDAsthat requireconfidentiality
andareusedasacommonpractice.Therefore,werecommendremovingthisquestion.Fromacompany:
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Defence Companies Anti-Corruption Index (DCI) 2019
• As mentioned above [7.1.7], [red.] third party contracts usually include confidentiality clauses whichoblige[red.]toholdthepartiesandthecontentoftheagreementsconfidential.Further,theremaywellbenaturalpersonsinvolvedwhichcouldleadtodataprotectionconcerns.
• Also, thequestiondoesnotprovide for thepossibility thatacompany in factdoesnothaveanyoffsetagentseventhoughitisnotexplicitlyruledoutbyitspolicy.
Fromacompany:• PleaseseecommenttoQ7.1.6–thismayviolateconfidentialityclauses intherelevantagreements,
beagainstthebusinessinterestsofthecompaniesand-mostimportantly-aviolationofantitrustlaw.
Fromacompany:• Thequestions6.6,6.7,7.1.6,7.1.7,8.3,8.4requiresanexcessivelevelofconfidentialdata.Thiskindof
informationiscompanysensitiveonthegroundsofprotectingourcompetitivepositionandsocannotbepublished or disclosed without damaging the company. The information is available internally andreviewedregularly.Tofindtherightbalanceofdisclosure,wesuggesttorequireexclusivelydisclosureonthepolicy/processandonaggregateddata,adjustingthescoringmethodologyaccordingly.
8.4Doesthecompanypublishfullprojectandvaluedetailsofallitsoffsetobligationsandcontracts?
Fromacompany:• Comment: This question cannot be applied to Defence companies, based on the comment above on
question9.5.Thedetailsandvaluesofoffsetcontractsareanintegralpartofthemaincontractwiththeend-customers.Therefore,werecommendremovingthisquestion.
Fromacompany:• With regard to the publication of project value details and contracts in the offset business we see –
besidesconfidentialityobligationsimposedbythecustomers–alsoantitrustconcernsasthepublicationofsuchdatacouldcreateahightransparencyinthemarketwhichcouldbyauthoritiesberegardedasthebasisforanticompetitivecoordinationofmarketparticipants.
Fromacompany:• Again, this may violate confidentiality clauses in the relevant agreements, be against the business
interests of the companies and -most importantly - a violation of antitrust law. “Full details of offsetobligations” are to be qualified as market relevant information. Please see comment to Q. 6.6. Thisquestionwillhavetobedeletedcompletely.
Fromacompany:• In 8.4, in point 2 answer, it is stated that "the amount of multipliers awarded by the contracting
customers." Since the offset practicemay differ from county to county, we are not familiar with thisconcept.CouldyouelaborateonthisandgiveussometypicaloffsetschemeexampleTIhasinmind?
Fromacompany:• Thequestions6.6,6.7,7.1.6,7.1.7,8.3,8.4requiresanexcessivelevelofconfidentialdata.Thiskindof
informationiscompanysensitiveonthegroundsofprotectingourcompetitivepositionandsocannotbepublished or disclosed without damaging the company. The information is available internally andreviewedregularly.Tofindtherightbalanceofdisclosure,wesuggesttorequireexclusivelydisclosureonthepolicy/processandonaggregateddata,adjustingthescoringmethodologyaccordingly.
9. High Risk Markets
9.3Doesthecompanydisclosethepercentagesowned,countriesofincorporationandcountriesofoperationforeachofitsfullyconsolidatedsubsidiariesandnon-fullyconsolidatedholdings(associates,jointventuresandotherrelatedentities)?
Fromacompany:• Wedonotseethedifferencebetween9.2and9.3,pleasedelete.Mostoftheinformationrequiredinthe
questionof9.3isalreadyconsideredinthemodelanswerof9.2.Fromacompany:
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Defence Companies Anti-Corruption Index (DCI) 2019
• Thequestion9.3shouldlimitthedisclosuretothepercentagesownedandthecountriesofincorporationfor each of its fully consolidated subsidiaries and non-fully consolidated holdings (associates, jointventuresandotherrelatedentities).
9.5Doesthecompanypublishabreakdownofitsdefencesalesbycustomer?
FromIFBEC:• Thereare legitimaterestrictions imposedbygovernmentcustomers–e.g.9.5wouldrequirepublishing
allsalestodefencecustomersandidentifyingsalesbycountry,wheremaintainingconfidentialitymaybearequirementofthesaleandprovidesnoinformationonwhichtoevaluateacompany’santi-corruptionprogramme.
Fromacompany:• Comment:ThisQuestionisnotapplicabletothemajorityofdefencecompaniesthatarecommitted(by
contractaswellasbyLawinmanyjurisdictions)tokeepcustomers’confidentialityandsecrecy.This,webelieve, is the common best practice between Defense companies and end-customers (armed forces,ministriesofdefenseandhomelandsecurity).Therefore,werecommendremovingthisquestion.
Fromacompany:• Question9.5willbeimpossibletoanswerforacompanylike[red.]whooftenhaveonesaleofadefense
product to one national authority in one country. We will not be able to disclose publicly suchinformationduetonationalsecurityandconfidentialityclausesinsomegovernmentalcontracts.Wedonotseehowonecanevaluatethequalityofouranti-corruptionprogrambasedonthedisclosureofsuchinformation.
Fromacompany:• Thepublicationofdefencesalesbycustomerwouldinterferewithconfidentialityrequirements.Further,
anincreaseofmarkettransparencycouldleadtoantitrustrisksasdescribedabove.Fromacompany:
• Again, this may violate confidentiality clauses in the relevant agreements, be against the businessinterestsofthecompaniesand-mostimportantly-aviolationofantitrustlaw.“Breakdownsofsalesbycustomer”aretobequalifiedasmarketrelevant information.PleaseseecommenttoQ.6.6.Sincethiswouldrestrictdown-streamcompetition,theviolationmayevenbemoresevere.Thisquestionwillhavetobedeletedcompletely.
Fromacompany:• Thequestion9.5recognizesthatdefencesalescanbeconfidentialbut identifyingthecountryorentity
violates the confidentiality requirements as well (for military clients, identifying the country could bebasicallythesameofidentifyingtheentity).Inaddition,therequestdoesnottakeintoaccountthatformany defence contracts, only the prime contractors are able and authorized to disclose the final endusers.Consideringthis,wesuggesttolimitthedisclosuretothedefenceandcivilsales’breakdown.
10. State-Owned Enterprises
10.1DoestheSOEpublishabreakdownofitsshareholdervotingrights?
Fromacompany:• DoyouconsiderNationalcorporategovernancerulesforlistedcompanieswhenassessingquestion
10.1?Differentregulationssetdifferentthresholds forrequiringdisclosureof theholdingsholdbyshareholders?
10.2AretheSOE'scommercialandpublicpolicyobjectivespubliclyavailable?
Fromacompany:• What are the expectations of TI as to the level of detail? Usually commercial and public policy
objectives are based on amid- to long term time frame. E.g. the owner of [red.] has an “ownerstrategy” that is updated every 4 years. Please note that it is the [red.] that defines the owner
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strategy! Updates should not be required annually, but “regularly”, i.e. if it is clear from suchdocumentsthattheyareuptodate,thismustberatedasa2.
Fromacompany:• Doesquestion10.2refertotheCompanyByLaws?
10.3IstheSOEopenandtransparentaboutthenominationprocess,appointmentandcompositionofitsboardmembers?
Fromacompany:• Do youmean theBoard of ourmother company (which is nominated by the state owner) or the
Boardsinallourdaughtercompanies(whichisnominatedbytheHoldingcompany)?