Helping companies steer clear of corruption
Alexandra Wrage receives more than a few calls from nervous CEOs these days.
They’re worried about dinner invitations to foreign officials. They’ve budgeted $200 for a meal—but when a large entourage arrives and orders expensive wines, the bill climbs to $1,000 or more. They want to know: Are we guilty of corruption? Bribery?
These dinner dates aren’t like handing over briefcases filled with money. But it’s an issue, Wrage says, that will keep executives up at night worrying about the consequences of possible wrongdoing.
How times have changed since November 2001, when Wrage founded TRACE International Inc. with the goal of making it easier and less expensive for companies to avoid corruption.
Wrage was born and raised in Vancouver, and now lives in Annapolis, Maryland. She left her position as international counsel for U.S. multinational Northrop Grumman, a global aerospace and defence technology company, to found TRACE.
“Through my in-house experience, it occurred to me that there was kind of a hostage taking going on,” Wrage says. She recalls working in North Africa seeking a contract. An official told her that her competitor had offered him bribes. She knew the competitor, called him and discovered that he hadn’t. The official was “playing this game, trying to drive up the bidding between unwilling parties.”
Generally, there are powerful anti-trust and competitive reasons not to talk to your competitors. “But with respect to bribery, it’s really important to share information,” she says. “It became obvious to me that corporations would be in a stronger position if they could resist bribe demands collectively.”
Wrage founded her start-up with the belief that corporations need help to supplement their compliance programs. Her business model is based on a shared-cost philosophy, emphasizing best practices across numerous businesses, tracking trouble spots and identifying the “bad actors.”
Wrage left a secure job to start a business with no clients. Many colleagues, only half-jokingly, asked if she was insane. She wasn’t. She called her contacts in the aerospace and defence industry, took out a second mortgage on the family home—and watched the nascent business take flight.
“The timing was very lucky,” she says. There was no real competition, unlike today, and business grew at a manageable rate. The pace accelerated by the fourth year. Large multinationals became clients, with blue-chip names such as General Electric, ExxonMobil and Canadian Bank Note providing added credibility.
Today, Wrage’s company boasts an association of over 300 member companies. It charges annual membership fees that haven’t changed for a decade and are either US$15,000 or $18,000 depending on the service package. TRACE also works with tens of thousands of small- and medium-sized enterprises (SMEs). “It’s fair to say that the multinationals are driving the anti-corruption standard, but the SMEs are responding to the standard,” she says.
Canadian companies were late to the table but are now the third largest member group, behind U.S. and U.K. corporations. “It’s kind of endearing, but there was this strong sense that Canadians are fundamentally honest and decent,” she explains, “so that a whole lot of checks and balances and controls weren’t necessary because when it came down to it, people would do the right thing.”
But that’s not the way to run a compliance program, she advises. Companies need to determine where the lines are drawn. Trust people—but have controls in place to make sure you know if they are stepping out of line.
High-profile corruption cases, particularly charges against Montreal-based SNC-Lavalin, have help changed Canadian attitudes. For a time, only the U.S. enforced corruption laws, but Germany, the U.K. and Canada are now more active.
Aggressive enforcement is not lost on corporations. Neither are massive fines, legal costs and reputation damage associated with corruption charges. These are obvious impacts, but what some companies overlook is the inefficiency. It takes an extraordinary amount of time to manage a bribe, Wrage explains. People are meeting secretly, burying payments, fiddling with the books. “It’s exhausting because you are constantly watching your back.”
Then there’s a large degree of uncertainty. Bribery is an illegal contract that can’t be enforced, she says. If a government official is bribed and later reneges, there’s no recourse. Business people hate that kind of uncertainty.
Wrage calls TRACE’s approach one of a kind in creating a business association organized on a shared-cost basis while providing effective anti-bribery compliance tools to multinationals and the third-party intermediaries with whom they work.
TRACE is two integrated entities, based in five countries and now establishing a presence in Vancouver. It has 110 employees who in total speak 34 languages. Her team of lawyers and compliance professionals offer service in three main categories: training, due diligence and benchmarking.
Training can involve 200 people attending sessions at one time, where everyone hears the same message about expected standards of behaviour.
TRACE also carries out tens of thousands of due diligence reports on SMEs. These are the local partners in foreign countries that corporations need to conduct business with—enterprises that may also present a corruption risk.
As an example of benchmarking, Wrage revisits the sometimes thorny question of gifts and hospitality for a foreign official: Is $50 or $500 acceptable for dinner? TRACE can survey its 300 members about their own thresholds. “Given that the law says gifts and hospitality have to be ‘reasonable,’ in some respects we’re setting the standard for what’s reasonable because that is what 300 serious, well-run companies are doing.”
The more Wrage learns, the clearer it becomes that there is a corruption component in almost every international crime. “Human trafficking, narco-trafficking, environmental atrocities, child labour, terrorism—at some point, someone is bribed to look the other way, to falsify documents, to lower permitting standards,” she says. “Corporations shouldn’t want to be part of commercial bribery any more than they want to be a part of the underlying misconduct.”
Her expertise provides a platform. An author, editor and speaker, Wrage has held numerous roles on anti-corruption committees and in 2011 was named one of the “Canadians Changing the World” by the Globe & Mail.
Wrage’s interest in corruption and governance dates back to the mid-1980s, when she immersed herself in different cultures while volunteering and travelling in Asia and the Middle East for two years. As a young high school graduate, she was a rare Westerner backpacking around China. Her teenage adventure ended in England, where she would earn her law degree at King’s College, Cambridge.
After graduation in 1989, she moved to the U.S. and raised two sons with her husband, a professor of political science at the U.S. Naval Academy in Annapolis.
This year, Wrage will visit 38 of the 120 countries in which TRACE does business. It’s only been in the last year that she has set aside a day or two for leisure and tourism on these extended trips. Back in her office, she “walk-works” most mornings at a treadmill desk. “Otherwise, I’ll take the shape of an airline seat,” she jokes.
Wrage is certain corruption is being reduced but her global travels reinforce the view that it’s a fight that requires vigilance. She has heard hundreds of stories from people whose lives were made more difficult by corruption: people who can’t get drivers’ licences without paying someone off, who can’t get “free” medical care if they don’t slip doctors a little something under the table, who can’t get licences for their businesses through official standards, or who are harassed for bribes by the police or military.
“These people don’t think bribery is a white-collar crime,” she says. “They know corruption makes their lives incredibly difficult and they’re angry about it. We saw that anger in the Arab Spring, in protests in Brazil, and in the anti-corruption campaigns we’ve seen recently in India.”
Wrage, ever an idealist, believes there is a great opportunity to use the business community and the law for good, but she’s practical too.
“Some companies are ready to hear that they should avoid bribery because it makes them complicit in international crime—because it is wrong and unfair and a form of theft,” she says. “But far more are ready to hear that it’s just a bad business strategy.”
This article was initially published in the Spring 2017 issue of CCCA Magazine.
Anti-bribery compliance support
Whether a company is large or small, there are tools and resources—many inexpensive or free—to support those early first steps in creating an anti-corruption compliance program.
TRACE International’s Alexandra Wrage offers this advice:
Work with non-profit groups and others who offer free assistance like training materials and roundtables.
If you don’t have a budget for travel and training, put an hour of compliance on the agenda at sales meetings, conferences, retreats or other gatherings.
If you’re not sure how many third parties your company engages worldwide, the first step in building a due diligence program is to work with Accounts Payable to develop a list. Similarly, make sure your auditors, who probably travel internationally already, are trained in how to spot bribery risks.
TRACE hosts free workshops throughout the world where experts discuss local law, help benchmark programs and share stories about challenges specific to that market.
The free TRACE Matrix® is an index that measures business bribery risk in 199 countries and is updated every second year: www.traceinternational.org/trace-matrix
The free TRACE Compendium is a searchable database of comprehensive summaries of international anti-bribery enforcement actions, updated frequently
TRACEpublic is the first global beneficial ownership register, containing ownership information on thousands of companies in more than 100 countries and is free to use