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By John Manley. This piece originally appeared in iPolitics.
Responsible Canadian companies, especially those doing business around the world, understand that a reputation for ethical practice is vital to their corporate brands. So it should come as no surprise that business leaders overwhelmingly support the federal government’s attempts to police corporate wrongdoing, and to ensure that Ottawa only does business with ethical suppliers.
According to a recent national survey commissioned by the Business Council of Canada and conducted by Ipsos, Canadians themselves are nearly unanimous in wanting to see this country’s companies held to the highest ethical standards, both at home and abroad (93 per cent agree). A similar proportion (92 per cent) feel that when Canadian companies and executives are involved in unethical or corrupt practices — such as paying bribes — they should face tough consequences.
At the same time, the survey shows that Canadians want to avoid some of the unintended consequences of overzealous prosecution. Nearly 9 in 10 agree that it’s not fair to innocent workers if the consequences a company faces for unethical or corrupt practices by a small number of people jeopardize their jobs, or the company’s survival (87 per cent agree, 53 per cent strongly agree). That’s especially true when the wrongful behaviour was committed by a small number of players and does not reflect a broader corporate culture of suspect ethical practices.
The fallout from the Enron Corp. scandal in the early 2000s was an example of unintended consequences. The scandal led to the collapse of one of the largest accounting firms in the United States, Arthur Anderson LLP, which had been Enron’s auditor. Thousands of innocent people suffered, and families lost their livelihoods, as a result of the actions of a relatively small number of rogue employees.
I am encouraged by the degree to which responsible Canadian companies have developed robust corporate compliance programs to ensure that employees understand their obligations, follow both the letter and spirit of the law, and alert their superiors as soon as they become aware of any transgression.
Governments can build on this culture of high ethical standards by creating an incentive for companies to report wrongful behaviour to the authorities. Some three in five Canadians (58 per cent) strongly agree that Canada should make it easier for companies to come forward, to cooperate and to self-report any corporate wrongdoing that has been uncovered.
As part of the study, Ipsos asked respondents whether Canadian companies should be subject to laws similar to those in some other jurisdictions.
In a number of other advanced economies — most notably the United States and Britain — prosecutors in certain kinds of cases involving corporate misbehaviour have the option of negotiating what are called “deferred prosecution agreements.” Such agreements allow charges against a corporate defendant to be stayed, provided that the firm pays a substantial penalty, implements new compliance measures and avoids future wrongdoing. If a company subsequently fails to live up to its commitments, prosecutors can easily revive the charges and press for a conviction.
In the United States, companies are eligible for deferred prosecution agreements only if they self-report misconduct and cooperate fully with investigators. That creates a powerful incentive for firms to come forward with evidence of ethics breaches that might otherwise go unnoticed and unpunished.
Four out of five respondents agree that Canada’s laws for dealing with companies involved in unethical or corrupt corporate practices should be similar to those in other developed countries, so that Canadian companies are operating on a level playing field with their foreign competitors.
Canadians clearly understand that governments need appropriate tools to effectively weed out and punish corporate wrongdoing. At the same time, they also appreciate that prosecuting the guilty should not mean hurting others who have done nothing wrong. Our laws should reflect that important principle.