In cooperation with TI, HOCHTIEF works to uphold transparency and integrity within the Group and fair conditions for competition in the construction industry. Fighting corruption effectively over the long term requires greater awareness of the topic in business and society.
What drives the growth of corruption at home and abroad?
Peter von Blomberg: The impression given in the public and the
media is of an ongoing rise in corruption. But there are no hard data to back a real increase.
No such data can exist, either, because when it comes to corruption, we can only talk about
what comes to light. The number of cases of corruption that are exposed varies from year to
year and the Federal Criminal Police Office in Germany says quite explicitly that there are no
indications pointing to any trends in the development. The variations can partly be explained
by the number of staff available to carry out investigations – because investigating corruption
may need a lot of resources. So what can happen is that public prosecutors are still so busy
with cases from the previous year that they can't yet investigate the new cases that are
reported.
So we don't know whether we're dealing with an increase in corruption. We only see the tip of the iceberg. The fact that it is attracting increased attention in public has more to do with corruption being fought more systematically and with greater success – both by the authorities and by companies engaged in prevention and educational measures. Public awareness of the fact that corruption is harmful has also risen. To an extent, we ascribe this to the efforts of Transparency International.
Hartmut Paulsen: We have also seen awareness rise sharply in our company. We mustn't forget that issues such as corruption and anticorruption policies can have an influence today on company's share prices.
What moved HOCHTIEF to join Transparency International?
Paulsen: One of the main motives was to send out a signal, both inside and outside the company. It was important to make it clear in the company, as well as in the construction industry, that we want nothing to do with corruption. HOCHTIEF wishes to set an example in this regard. There is also a good fit between Transparency International's philosophy and our vision and guiding principles. There was a broad basis for cooperation. Clearly, HOCHTIEF cannot fight the war on corruption on its own. We have found a strong partner in Transparency International.Why does the construction industry head the list of those prone to corruption?
Von Blomberg: This is another area where we have no reliable research into the causes. In general it has to be said that proper studies of the issue of corruption have tended to be few and far between. Our experience shows that there may be several reasons: First, building is big business – if there is a sizeable enough cake, everyone is tempted to take a slice. Second, no two building or engineering jobs are the same. The construction process – design, costing, execution and control – offers ample scope for shady dealing. This is compounded by the flotilla of service providers surrounding every project – in other words, the large number of service providers, developers, planners, agents and specialists. This may, on the one hand, help efficient division of labor but, on the other, can unfortunately turn into a clearing house for corruption. This is exactly where anticorruption measures need to home in: Transparency must be improved and contractual agreements with service providers made watertight.Paulsen: The specific competitive situation is also important: In Germany, about 70,000 construction firms are in competition with each other, also in major projects. In our industry, whoever comes second in the competitive lineup is out of the game. That sets us apart from other branches of industry. If ten construction companies submit tenders for a project, only one of them ever gets the order. Also, the amounts invested up front sometimes run into the millions and are not recouped. That alone can make corruption tempting.
In other countries competition is fairer in this respect. In the Netherlands, for example, the company that wins an order reimburses to the second- and third-placed companies the costs which they have incurred in drawing up their offers. That alone makes it easier to have fair, honest competition.
Von Blomberg: Let me add one other aspect. Local authorities are generally one of the biggest providers of orders for the construction industry. Politicians are justifiably anxious that local companies should have a competitive chance and receive preferential treatment. And here, unfortunately, everything is not always above board.
Is it at all possible for a construction firm to hold up against fierce competition without paying bribes?
Von Blomberg: Yes, of course. But unfortunately not all companies think so. Some actually believe they can secure their company's long-term survival that way. I think they are deluding themselves very seriously indeed.
Paulsen: We do, though, increasingly see corruption being acknowledged as a problem and branded as unacceptable. Think of the blacklists that are now circulating. We support fair conditions for competition–so that quality counts and not just price.
What can a company do to effectively counter corruption?
Von Blomberg: Four essential points go to make up a minimum anticorruption program: Absolutely zero tolerance–this is a voluntary commitment which management must expect to be measured against. Second, identify the weak points so potential gateways for corruption can be given security mechanisms to guard them. Here we're talking about structures and processes. Establish where the critical, corruption-prone functions, positions and work processes are in the company and in the industry. The third point is the workforce. Specific directives such as a code of conduct help workers spot corruption traps and avoid them. The workforce must know what is expected of them and what the consequences for misconduct are. What is decisive is not what's written on paper or what can be read on the Internet, but what people really believe in. This takes a big investment on the part of the company, because the workforce must really take this code of conduct on board. I'm sure that it's here that most companies make the biggest mistakes. The fourth point, and this is something that is not yet widespread in Germany, is protection for whistleblowers.
In general, a company's management and the investigating authorities depend on information from the heart of where the corruption is taking place – in other words from people who have either seen something or are even involved themselves. Typical scenarios are those in which such people would have to make accusations against the boss or against colleagues. An ombudsman can be appointed so people who raise the alarm know they will stay anonymous. We see this as an important instrument of prevention because it makes the risk of exposure significantly greater. However, it hasn't yet become established.
To sum up, then – these are the four points that form the basis of an anticorruption program: companies' own commitment, an analysis of weak points, a code of conduct and an ombudsman.
Paulsen: All four points are given consideration and put into practice at HOCHTIEF. We implement them in the context of our ethics management system. We have reviewed our Code of Conduct and make sure all employees are familiar with it. It is automatically part of all contracts of employment. We are also introducing training courses in which employees are taught how to cope confidently with situations that may lead to corruption.
In the USA, Turner, too, has recently reviewed its entire ethics management system. Turner has linked up with an outside body through which workers can report instances of corruption. In Germany, this service is provided by in-house attorneys who are subject to the legal profession's oath of confidentiality. Within the Group, we have now attained a high degree of openness as regards fighting corruption.
What happens if an employee does leave the straight and narrow: Would they expect to lose their job?
Paulsen: Yes. Every contract of employment states that we consider
our ethics management system to be very important, that we take a serious view of any corruption
and that violations can lead to dismissal. Of course, we apply the proportionality rule and judge
each case on its merits. The punishment must always fit the crime. For example, we can't simply
dismiss an employee who has given 200 euros to a customs official in Afghanistan just so that
construction equipment gets to a building site on time – even if in principle it's corruption. The
question is always: when does corruption begin? There are grey areas. Of course, that doesn't
mean that a little corruption is all right. No, it's simply that the consequences must be appropriate.
Von Blomberg: It is very important for the company to follow a clear line. There is nothing worse than ignoring things or sweeping them under the carpet for fear of the company's reputation. The tricky issue is precisely small bribes in other countries, which are not forbidden by law. They can very quickly assume bigger dimensions.
How do clients respond to rigorous anticorruption policy?
Von Blomberg: I have absolutely no doubt that clients view this very positively indeed.
Paulsen: Clear anticorruption policies can also have a significant impact at financing level, as there are investment funds around today that have ceased investing in companies unless these are committed to sustainability and live up to their business ethics. These companies are seen as reliable partners because there is nothing to fear – either in the company's development overall or that their shares might plummet through incidents such as corruption. This is a positive differentiator for HOCHTIEF, also in international projects. It becomes more difficult with clients or subcontractors and in joint ventures with other construction companies, when such companies have not implemented any code of business ethics of their own but we for our part want to act in accordance with our own ethical standards in such a joint project.
Von Blomberg: It is for situations such as these, as well as for difficult markets in which the basic conditions are not what they should be, that we have developed the integrity pact. This is a contract which obliges everyone involved – that is, the client and all potential contractors – to forego each and every form of corruption in the project. Secondly, they agree in this contract to accept external monitoring which verifies that the agreements are being complied with. The integrity pact also provides for severe sanctions in the case of any infringements. It is an attempt to create an "island of integrity" for certain projects on the basis of civil law. The integrity pact is a mechanism to create competitive conditions on the basis of agreements reached in advance, so that in the end the honest participants get a proper look in.
Paulsen: It really is very important that clients also join this "island of integrity". In other countries, in particular, there are still a large number of them who have no interest whatsoever in the issue of anticorruption and, in fact, who finance themselves via kickbacks. HOCHTIEF then really has no alternative but to cease submitting tenders in certain parts of the world. In the last thirty or forty years we have not submitted any more tenders in the majority of African countries, even though the projects there would have been lucrative.
Von Blomberg: That is a reaction which could really put on the pressure for a change in the situation – if enough companies follow suit and there is a corresponding lack of tenders.
Thank you for taking the time to speak with us today.
Further information on Transparency International is provided online at www.transparency.org.
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