Memorandum submitted by Balfour Beatty
Balfour Beatty's position is set out in our
statement on "Ethical Policy". This states:
1. Balfour Beatty is committed to operating
all aspects of its business in an ethical manner.
2. This includes treating customers, suppliers
and others with whom we deal in a fair and honest way.
3. Employees are expressly instructed to
refrain from engaging in dishonest business practices and the
terms of our agreements with agents and representatives contain
similar prohibitions. Breach would be due cause for dismissal
of an employee, or termination of an agency agreement.
The Company's adherence to this policy—and
to policies in allied areas such as Human Rights, Health and Safety,
and Environmental matters—is today monitored by a "Business
Practices Committee", consisting of non-executive directors
and chaired by an independent non-executive director.
On a day-to-day operating basis, our normal
risk analysis procedure which is applied at the enquiry/tendering
stage of potential contracts would be expected to throw up any
potential problems in this area. Any doubtful cases are referred
to the Board.
Although we observe simple and straightforward
rules there are, however, issues which could give rise to difficulties
in practice, and we highlighted these to ECGD earlier this year
when they were drafting their policy on corrupt practices. These
include the following specific problems:
(a) Although (as shown above) our agreements
with agents prohibit them engaging in dishonest practices, and
we would terminate their contracts if they did so, in reality
it is not possible to control what an agent may do with legitimate
commission payments he receives, or indeed even to know what he
may do or has done.
(b) On major contracts, a company may be
a member of a consortium, joint venture, or partnership, consisting
of other companies, either international or local, but may well
not be the managing partner or the partner with prime responsibility
for the sales and commercial aspects of the contract. The managing
partner would normally take an earmarked part of the price to
cover his cost of handling these aspects. Similar considerations
to (a) above could therefore apply in this case also, notwithstanding
whatever the consortium's internal agreements may be.
(c) In some cases a company may find itself
as a sub-contract supplier on a major overseas project, where
the business relationship is solely with the main contractor rather
than with the ultimate client. In such cases it would be highly
unlikely that they were aware, or could be aware, of the nature
of commercial dealings between the main contractor and the client,
and whether or not these may have involved any impropriety.
(d) On a "de minimis" level there
can be problems with minor officials in some developing countries,
affecting many simple aspects of day-to-day life.
None of the above is intended to suggest that
"conscious disregard" or "deliberate ignorance"—phrases
taken from the US Foreign Corrupt Practices Act—are in any
way an acceptable excuse.
In practice, the main ways a company can project
itself—apart from having proper rules and procedures—is
by trying to select reputable people as agents or representatives;
only working with reputable partners in joint ventures; and viewing
with suspicion any demand by agents for levels of commission which
seem out of the ordinary in terms of the services required. In
addition there are parts of the world where business practices
are known to be such that attempting to do business there on an
honest basis is not possible, and sensible companies would accordingly
shun these markets.
The problems of corruption are unfortunately
not confined to the process of obtaining a contract. For example,
although a contract may be obtained in a perfectly legitimate
manner, difficulties can arise in execution. It has been known
in some countries for officials unjustifiably to withhold due
payments, or refuse to certify completion or specified performance,
or delay customs clearance and the like. This can pose a very
difficult practical dilemma for a contractor, and it should be
noted that the US Foreign Corrupt Practices Act permits, in such
circumstances, exceptions to its conditions prohibiting payments
to officials. Clearly there are other ways in which similar pressures,
akin and close to blackmail, can be exerted on a contractor.
At the start of this memorandum it is clearly
set out what this company's policy is, and how in practice we
monitor its observance. It is worth remarking, however, that there
is one moral dilemma which neither any company's ethical rules,
nor government legislation, nor indeed the search for an ethical
foreign policy can address, and that is what might be called relative
benefit or relative good. To illustrate it, if a poor country
desperately needs, say, a hospital or a clean water supply and
it is a corrupt country where such a project will only proceed
if corrupt payments are made, does the satisfaction of sitting
on the high moral ground and not participating, balance the misery
in humanitarian terms the inhabitants will continue to endure?
Finally, we would make two general points. Taking
a long term view, there is no doubt that over the past few decades
there has certainly been a marked improvement, taking developing
countries as a whole, in the number of countries where irregular
business practices occur and in their extent. Equally, observation
suggests that most companies from developing exporting countries
today take a much more robust view than was once the case. We
do not therefore believe the whole issue is today such a critical
one. Our opinion is that the most important reason for this improvement
has in practice been the far more competitive market conditions
which prevail today and as a result the tight margins on overseas
business give little room for corrupt officials to seek payments
or for weak minded companies to make them. It would be nice to
think, but a delusion to think, it was mainly due either to stricter
rules in exporting countries or to some sudden reduction in human
frailty.
Second, we take the view that there continues
to be a varying attitude held by different developed exporting
countries and their companies and authorities, towards the whole
subject of corrupt practices. It would be invidious to give names
and we would not do so, but this conclusion is simply based on
observation and experience. Certainly there are countries who,
in this respect and in other respects such as export finance,
take a more pragmatic and mercantilist view than the UK does,
towards doing business in developing countries regardless of what
international rules these exporting countries purport to support.
It therefore seems essential that if real progress
is to be made, it should be done by agreements on a multilateral
basis.
We hope this memorandum will be of some help
to the Select Committee, and that, at the least, it sheds some
light on the practical issues involved in an area which is more
complex than it may seem at first sight. We do not need to add
that what we have written is from the perspective of a contractor
who operates in many parts of the world.
Lord Weir, Chairman, Balfour Beatty
January 2001
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