Pass or Fail? Grades Are Out & Defense Contractors Are Failing Their Midterms

Compliance touches all industries and with it is the increasing necessity to do business properly. We see that more industries that are impacted by issues, such as corruption and bribery, are required to take major steps in order to be ahead of any possible risk. Looking at the top industries that are impacted by these issues, such as construction, finance, and technology, we see how much of an emphasis has been put on corruption compliance, especially if these companies within these industries are looking to do business in countries where corruption are hot button issues. Defense contracting is another area that has been affected heavily by corruption and bribery compliance, and has made major strides in making sure they comply with the rules and regulations set fourth by the government they conduct business with. Although steps are moving in the right direction, many experts say the expectation and improvements for many defense contractors, to improve their compliance programs, have failed. According to an article written by Stella Dawson of Thompson and Reuters, two thirds of the worlds top defense contractors would receive a “fail grade” for compliance in the anti corruption space.

“Two thirds of the world's major defence companies get a "fail grade" for combating corruption in their business operations, despite improvements in industry practices in the past three years, an anti-corruption group said on Monday. In its survey of 163 companies, Transparency International UK found that 107 showed limited, or no evidence of ethics and anti-corruption programmes.”

Companies that received top grades were all based here in the United States, while most received unsatisfactory scores according to Transparency International. Fifty-seven companies out of the 163 received an F grade, which means this particular industry needs to become more focused on creating better compliance programs.

All industries have a certain level of risk that need to be addressed and while the defense industry is growing, their compliance responsibility seems not to be. Perhaps these industries are following a separate standard then other publicly traded companies since their involvement is primarily with government agencies. We honestly don’t know, but whatever the case may be, defense companies need to start increasing their efforts on anti-corruption and anti-bribery. As countries and governments begin to adopt established compliance initiatives like the Foreign Corrupt Practices Act and the UK Bribery Act, having recourses that can be used to identify the key areas is an essential part of creating an effective plan. Here you can find a comprehensive resource that gathers information from FCPA, UK Bribery Act, and the Brazilian Clean Companies Act.