UK Bribery Act & Adequate Procedures: A look at Wolseley plc

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The Bribery Act is currently under review by the UK Government, which has delayed the implementation of the Act to allow for clearer guidelines. Nevertheless, many companies have been proactive in their implementation of adequate procedures. Wolseley plc (Wolseley), the world'slargest specialist trade distributor of plumbing and heating products to professional contractors and a leading supplier of building materials to the professional market, is one of them.

Prior to the co-located Corporate Counsel Exchange and Corporate Compliance Exchange this April, where Tom Brophy, Group Deputy General Counsel is speaking, we caught up with him to hear his views on adequate procedures, what Wolseley have done to prepare for the Act and the challenges they have faced along the way.

To open our conversation, Tom Brophy puts forward his opinion on why the Act has been delayed. He believes, in part, it is because of pressure from business lobbying groups that believe the corporate offence will make the UK uncompetitive for business in comparison to countries that don't have this legislation. Further, it is a concern that just because one's business is owned by a UK company, one is 'disadvantaged'. Mr. Brophy believes the delay is worth it. "Businesses require clarity on what would constitute a bribe, a facilitation payment, and the extent that companies are liable for the action of third parties. I don't think there's any doubt that the legislation will come into force, so if the delay results in better guidance, that's clearly a positive". 

There is the concern that the review could result in the draft guidance changing, which could mean that companies who have already implemented adequate procedures may have to amend their policies. While Mr. Brophy concurs that no-one will know what the guidelines will say, he notes that the six key principles previously used in the draft guidelines (risk assessment, top level commitment, due diligence, clear practical and accessible policies and procedures, effective implementation and monitoring and review) are unlikely to change. "I think what will change is the guidance on specifically how business can implement these principles, and hopefully what will be seen as effective adequate procedures".  

Adequate Procedures: Helpful Guidelines

Without proper Government guidance, how can companies effectively prepare for the legislation's implementation? Mr. Brophy outlined some of the key documents he read, the first is Transparency International's self-evaluation tool, 'Business Principles for Countering Bribery'. Mr. Brophy says of the tool, "It is very comprehensive, and reading that certainly informed my conversations with the business. It was useful to some extent, but I found it was probably too detailed for what we were trying to achieve at Wolseley". 

Mr. Brophy also believes that the Woolf Committee Report (BAE Systems), is a document that those involved in implementing adequate procedures will find useful to read. He also read the Serious Fraud Office guide in 2009 on its approach to dealing with overseas corruption  and the US Sentencing Guidelines - the latter of which he believes probably informed the UK government guidelines. Reading these documents was useful to see what the big issues were, and as a result, when the Government released their draft guidelines there were no real surprises. However, Mr. Brophy thinks that, "it is important for  businesses to take a risk based approach on how they deal with adequate procedures, or else there is a danger that their businesses will  come to a standstill". 

 Wolseley plc's Approach

Wolseley has implemented a combination of new policies, programmes and strategies which Mr. Brophy describes as simply reinforcing the message that bribery is not acceptable, and as a result has prepared them for the Act coming into force. Listed below are the key methods used by Wolseley. 

Group wide Ethics Programme - combined with Wolseley's fraud programme. 

Code of Conduct - updated and re-launched to include a foreword by the Group CEO that talks specifically about honesty and integrity, and sets the tone from the top about bribery and corruption not being acceptable in Wolseley. 

Introduction of Policies - designed specifically to deal with the bribery legislation. Risk assessments, business partner due-diligence, gift and entertainment policies. 

Risk Reporting Tool - adapted to deal with bribery risks. "We're an international company with lots of different business units, so local management need to consider bribery and corruption issues along with all the other risks - it's about introducing these risks into the management's decision making" 

Whistleblowing - re-launched the reporting service and named it 'Speak Up'.  Also adding a web reporting facility to it. 

Communication - "To support the programme we have lots of publicity, lots of posters, we're using our intranet to publicise the programme. We have two online training programmes that we're offering to the business units, one in relation to the code of conduct, and one in relation to anti-corruption. The business units can take those and roll them out to the employees they see as most at risk to being exposed to corruption". 

While Mr. Brophy describes the programme as not being 'rocket science', the implementation was not without its problems. The economic climate at the time meant that people had lost their jobs and there were little resources available for non-front line projects. "Although it's never a great time to implement a Group wide compliance programme, coming off the back of one of the deepest recessions in recent times was not an ideal time – the business was quite rightly focusing on getting back to profitable growth and implementing procedures to deal with corruption was perhaps not seen as a high priority. Indeed it wasn't obvious to some of our mid-level managers why they needed to do this when our business is not exposed to many corruption risks.  Further challenges were around implementing this programme outside the UK as initially our overseas managers saw this as a UK piece of legislation and were unsure what it had to do with them." 

This is a common view held by executives outside of the UK; either they don't see how the Bribery Act affects them, or they believe the FCPA (Foreign Corrupt Practises Act) to be more stringent and dominant. This is not the case. Mr. Brophy explains that, “the FCPA particularly relates to bribes to overseas public officials but the Bribery Act, in contrast, goes further than the FCPA - it makes all bribes illegal;  ,  there is no facilitation payment exemption;  it makes companies strictly liable for failure to prevent bribery; and the prison sentences for offences committed under the Act are up to 10 years, compared to 5 years under the FCPA”. 

Wolseley had an interactive and surprisingly simple solution to educate the mid-level and overseas managers. They formed a working party where the local business units helped to create the policies and devise the programme, giving them ownership and buy-in from the outset. Those involved in the project also have the task of educating their business unit. In order to avoid businesses reinventing the wheel locally, the head office provided publicity, training tools and guidance to the business units. "We found it was slow going, and we started a long time ago. I'm pleased we did though; gradually people are understanding the point".  

Who is Most at Risk?

The misunderstanding of how far-reaching the Bribery Act actually is can perhaps be down to the fact that a lot of UK national press focuses on how small businesses will more affected. Mr. Brophy can understand this logic, but argues it is more to do with a company's exposure to and risk of corruption, rather than the size of the company. "My view is it's all in relation to the corporate offence, and the way you get over this is to show you had adequate procedures. What is adequate should be assessed on the vulnerability of each company to corruption, no matter how large or small the business is - but clearly what resources are available to a company will be taken in to account". 

The argument that small businesses will suffer is probably in relation to facilitation payments, as a small company may not have the resources to resist making these payments. "In contrast, a larger company may be expected to swallow that delay until officials realise they are not going to make that payment...Also, multinationals are more likely to be exposed to corrupt practices because they have a larger workforce, are in more countries, and have more ‘associated persons' (agencies, business partners etc)". 

Wolseley has a trading and compliance team who deal with the payment of duties. Mr. Brophy explains that it's important to engage with them about risks they are currently facing and Wolseley are still learning what the big issues are at the moment. "Each business unit needs to ask them, are you facing facilitation payments? If so, why? In which ports? ...and work out strategies to deal with these issues".

Is a facilitation payment ever acceptable? Defined by the Act, the answer is a categorical no. However, Mr. Brophy hopes that if companies are making steps to eliminate facilitation payments they would not be prosecuted. "Hopefully they will only prosecute companies that are really doing wrong. There is going to be a point in time where some companies will be made examples of, and if companies are ignoring the Act, they are more likely to face prosecution". 

In terms of corporate hospitality and gifts, Mr. Brophy believes they are fine if they are proportional, there is a proper business purpose and there are policies and controls in place. "The recent government draft guidelines that are going to be rewritten, and hopefully wont change in this respect, set out what a proper business purpose would be and it's given quite a wide meaning. It included things like expenditure to improve the image of your organisation and establishing cordial relations." 

Mr. Brophy concludes our conversation by giving his opinion on what will be the most difficult part of the act to measure and implement; the bribing of foreign public officials, section 6 offence. He points out this although this isn't really a major  issue for Wolseley, it may be difficult for some companies as there does not need to be an intention that the foreign public official will perform their duties improperly, nor that the payments are made to them corruptly. To some extent, there will need to be a reliance on prosecutors to agree with companies that a certain expenditure is not an advantage for the foreign public official. "It's a very grey area so it will be difficult for some companies to make a clear, simple policy - which all companies like to do". 

This debate will continue at the Corporate Counsel Exchange and Corporate Compliance Exchange, 4th - 6th April, 2011, Radisson Edwardian Heathrow Hotel, London. To join this unique gathering of General Counsel and Chief Compliance Officers, request your invitation online today.

Contributor:   Lindsay Lovell

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Lindsay Lovell is the Marketing Manager for IQPC Exchange Europe, with responsibility for a portfolio of senior-level networking events in the legal industry. She is also a contributor to Legal IQ.

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