Select Committee on International Development Minutes of Evidence

Memorandum submitted by Unilever plc


  Unilever welcomes the opportunity to submit evidence to the Select Committee on International Development as part of its inquiry into corruption.

  Unilever's approach to eradicating corruption, as far as is humanly possible, from its business dealings and those of its business partners, is set out below. But the Committee may find it helpful to bear one important consideration in mind.

  Unilever does not typically require government licenses to operate our businesses, nor are we involved in competing for large state contracts or major infrastructure projects.


  The Committee may find it helpful to have sight of basic facts about Unilever:

    —  the principal areas of our business are in branded and packaged foods, and home care and personal care products;

    —  among our brands are Blue Band margarine, Magnum ice-cream, Lipton tea, Omo detergent, Organics shampoo, and Calvin Klein fragrances;

    —  Unilever is one of the most international companies in the world with operations in more than 90 countries and sales in over 60 more;

    —  we employ some 265,000 people from more than 100 nationalities;

    —  about 50 per cent of our sales are made in Europe, over 20 per cent in North America, and the remainder in the rest of the world;

    —  we are a company with Anglo-Dutch origins and with two parent companies: Unilever NV in Rotterdam and Unilever plc in London, which operate as a single entity;

    —  strategic leadership is provided by a seven-person Executive Committee, headed by the Chairmen of Unilever NV and Unilever plc; and

    —  Unilever is divided into a number of Business Groups, each headed a President who is accountable for all operational companies within the Group.


  Unilever is therefore a company of great diversity, both in its products and employees, and in the geographical range of its operations. It is however important to note that the company's Code of Business Principles and ethical standards apply to all employees in whatever country they are working.

  Unilever's Code has existed in varying forms for many years In its current form it dates from 1995, but a revision of the Code is currently in progress. A full copy of the Code is attached[2], but the Committee might like to note in particular the following:

    "Obeying the Law

    Unilever employees are required to comply with the law and regulations of the countries in which they operate."


    Unilever does not give or receive bribes in order to retain or bestow business or financial advantages. Unilever employees are directed that any demand for or offer of such a bribe must be immediately rejected."


    It is the responsibility of the Board of Unilever to ensure that the principles embodied in this Code are communicated to, understood and observed by all employees. An independent Internal Audit function supports the Board in monitoring compliance with the Code."

  The Code also specifies that Unilever will promote its principles when engaged in joint ventures, and that compliance with the principles will significantly influence entering into or continuing with a joint venture.


  Introducing a code is of course only part of the solution to problems of corruption. What matters is how the Code is communicated, monitored, and how breaches are detected and dealt with.

  The Code itself is issued to all full-time employees of Unilever as part of their terms and conditions of service. The basic principle that the Code applies to all employees is clear.

  Supporting guidance is available on Unilever's internal website. We currently plan to bring together and expand this material in an accessible written form which translates the basic principles of our business conduct into clear guidelines for behaviour.

  We attach great importance to systems which identify and report on breaches of the Code, whether for bribery or for other matters. The Code itself makes clear that employees will not under any circumstances be penalised for reporting suspected breaches of the Code to senior management or the Board. Moreover, management is immune from criticism if decisions taken on the basis of the principles result in a loss of business. Our aim is to achieve a culture of transparency in which employees are comfortable with the idea that they take responsibility for applying the principles to their own behaviour and the actions of colleagues.

  There are regular management systems in place to ensure that breaches of the Code are uncovered and reported to the appropriate level within the organisation. The company secretaries are responsible for Unilever's Operating Framework for Business Groups, which covers Unilever's governance structures and operations from the boardroom to the supermarket. The operating framework requires breaches of the Code to be reported by Unilever companies immediately they are discovered.

  In addition, once each year all Business Group Presidents and Operating Company Chairmen are required to signify to the corporate centre that their operations have been compliant with the Code in the previous 12 months. These "positive assurances" require operating companies to conduct their own scrutiny of their operations. Subsequently, positive assurances may be the subject of independent audit carried out by the Internal Audit function, and deficiencies reported to the Board's Audit Committee.

  Internal Audit also reports to the Board through the Audit Committee every six months on the progress of cases of suspected breach of the Code and the outcome of completed investigations.

  Our policy is that any employee who has been proven to have received or offered bribes is dismissed.

  Our commitment to eradicating bribery and corruption is firm. We do however recognise that in some circumstances facilitating payments may be necessary. Facilitating payments are small-scale payments made to local officials in connection with approving documentation, achieving customs clearance etc. They are distinguishable from bribery by the fact that they are normally publicly known, and form part of typical custom and practice in a locality. They also represent payment for the proper function of the official concerned, rather than giving Unilever an advantage over its competitors.

  Only in these circumstances are facilitating payments permitted under the approval of the relevant Operating Company Chairman, and if new payments are required, authorisation must be given by the appropriate central management.


  Unilever recognises that putting our own house in order is not sufficient. As a multi-national business we have a responsibility to work with government and civil society to improve standards of conduct generally.

  It is also in our own self-interest to promote a climate of transparency and probity in countries in which we operate: otherwise, our high standards may enable rival companies to profit via corruption at our expense.

  We have therefore been proactive in working with a variety of organisations, especially the International Chamber of Commerce (ICC) and the OECD in their anti-corruption initiatives.

    —  We encouraged the ICC to update and revise its Rules of Conduct on Extortion and Bribery in International Business Transactions in 1996. Following the revision, there was extensive follow-up activity aimed at encouraging companies to take appropriate measures and enhance their effectiveness in fighting corruption and extortion. These Rules cover both private and public corruption.

    —  We have worked closely with the OECD through its Business and Industry Advisory Committee (BIAC) to provide input to the preparation of the Convention on Combating Bribery of Foreign Public Officials. BIAC set up a working party under the leadership of a senior Unilever executive to ensure that the business community was fully involved in the preparation of the Convention. As the Committee will know, the Convention came into force in 1998, and has been ratified by the UK government.

    —  The OECD Guidelines for Multi-National Enterprises (which are not binding, but have a significant influence on the sector) were revised in 2000. Unilever chaired the business delegation involved in the revision which resulted in the addition of a chapter on corruption which closely follows the arguments set out in the ICC Rules and the OECD Convention itself.

  There are in addition related programmes of work involving The World Bank, the IMF, the Organisation of American States, and the EU, but Unilever is not directly involved in these. We are however a signatory to the UN Global Compact which contains a stipulation against corruption, and for which monitoring mechanisms are under discussion with our support.

  The Committee may find it helpful to have our assessment of the success of these initiatives. In our view, the programme of work undertaken by the OECD has been the most comprehensive and effective, but we are concerned about the difficulties involved in securing a level playing field. This requires much detailed work within OECD and a strong commitment of the parties to the Convention to overcome national barriers to effective international judicial cooperation. BIAC is closely involved and we support this work.

  At the same time national business federations should actively engage themselves in educating their memberships and explain the consequences of the Convention. This should be done in close cooperation with their respective governments, as is for example the case in the Netherlands, alongside national chapters of ICC as there is a close link with the ICC Rules on Combating Corruption and Extortion.

  Apart from the highly detailed and legal work in making the Convention really effective, business has emphasized the need for an effective attack on extortion and the solicitation of bribes. The preamble to the Convention recognizes this as a problem but does not include any provisions to deal with it. Although combating extortion is a highly sensitive political issue, it constitutes in many cases the other side of the coin in cases of corruption. Work on this is in progress in consultation with BIAC but progress is slow, given the problems involved. We would welcome a more concerted approach to the issue by governments.

  Another important element of the OECD Convention is the issue of facilitating payments. The OECD Convention recognizes that facilitating payments are not equivalent to bribery. The same approach is taken in the Council of Europe's Convention against corruption, which is currently going through a lengthy ratification process. There is a clear difference of approach between US and European companies in this area, and Unilever's policy is set out in the previous section.

  Furthermore, the issue of private corruption merits closer attention. The Council of Europe Convention simply covers all forms of corruption, the OECD one covers only public sector corruption while the OECD Guidelines again cover both. This shows the inconsistencies which can easily develop between different instruments and blur transparency. The issue of private corruption in itself is still under-researched - ICC is doing good work but this progresses slowly, given the legal difficulties. OECD has the ambition to cover also private corruption but should do so only in close consultation with business, if the issue would lend itself to be covered by a convention, which most specialists doubt.

  There is a risk here of 'code fatigue' as governments, multinational organisations, and NGOs produce separate initiatives designed to tackle the same series of problems. For that reason we would not support the idea of a single over-arching global code on corruption unless it incorporated and replaced the best provisions of existing initiatives. Otherwise, there would simply be an increase in the incoherence which already exists.

  Finally, these initiatives are important, but they are largely led by European and developed world businesses and organisations. Without programmes which enable capacity building for governments, civil society, and businesses in the developing world, there is a risk that genuine progress will not be made, or that the result will be to the disadvantage of companies that play by the rules.


  We are aware that the Committee has expressed an interest in our actions in Bulgaria in March 1997 when we closed our Representative Office and ceased to do business there. We would be happy to explain this matter in more detail during questions.

  It is important to note that we would take action on these lines very much as a last resort. We do not readily walk away from obligations that we have to employees, customers, suppliers, and shareholders. In business terms, it may involve us in abandoning a market position that will be swiftly taken over by competitors and which may proved very difficult to recover. But, equally, if we cannot work according to our own standards and values, then regrettably we have to leave.


  We trust that the foregoing has been helpful to the Committee in tackling the complex but vital issues of corruption and bribery. We look forward to answering the Committee's questions on the subject and to supplying any further information that may be useful.

Unilver plc

January 2001

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