Against corruption, compliance

By Roberto Abdenur, Executive President of the Brazilian Institute of Ethics in Competition (ETCO)

Beneficial changes in the business environment are already beginning to appear as a result of the Anti-Corruption Law (Law No. 12.846 / 2013), even before it was regulated. Approved and sanctioned in August, it still depends on the veto analysis process. The law, which for the first time in the country opens the possibility of punishing legal entities in the event of corruption, revealed a horizon hitherto little perceived by many executives, who now see the need to create or strengthen the compliance area, even as a way to prove an ethical performance.

Compliance programs are known by publicly traded companies, which are committed to acting with transparency and following the parameters of corporate governance.

The dissemination of the concept of compliance, thanks to the Anticorruption Law, which aims to hold the company responsible for illicit acts practiced by its employees, will certainly bring about a cultural change in the modus operandi of companies and organizations, but not without presenting challenges that, in many aspects, they are very Brazilian. Acting as an ethical company is much more than complying with the rules: it means eradicating the culture of tolerance with deviations from conduct of all kinds. It means forgetting the meaning of the famous Brazilian way.

The incentive to change is due, in large part, to one of the articles of the law, which provides for a reduction in the penalty for companies that prove compliance programs. This means that if the company creates a structure to encourage everyone to follow the laws, it is already doing its part. It is assumed that, in this way, there is less chance of an employee having misconduct and the company may, eventually, be exempt from guilt. Without conformity, the terrain becomes more fertile for unethical attitudes.

Law 12.846 also innovates by involving the activities of Brazilian companies abroad. In this sense, it is in line with the laws of the United States and Great Britain, for example. In the USA, since 1977, the Foreign Corrupt Practices Act (FCPA) prohibits bribery of foreign civil servants by American companies. In 2011, Britain passed the Bribery Act, the anti-corruption law that also provides for punishment in cases involving foreign officials.

With globalization increasingly consolidated, the tendency is for governments to be concerned not only with corruption at home, but also with out doors. In theory, the Anti-Corruption Law can be applied in the recent case of a foreign company that revealed a corruption scheme in public service bids in Brazil.

In short, by law, it is harmful to the public administration, national or foreign, to promise or give an undue advantage to a public agent; finance or sponsor illegal acts; defrauding the bidding process; create, in a fraudulent manner, a legal entity to participate in public bidding; obtain undue advantage or benefit in contracts with the public administration; manipulate or defraud the economic and financial balance of contracts; or hinder investigation or inspection by public bodies or agents. All of this to avoid any misunderstandings in the public-private relationship.

They took the legal steps. After three years in Congress, it was voted and sanctioned in early August, largely because of popular pressure stemming from the June demonstrations.

Proposed by the Executive, Bill 826/2010 became Ordinary Law 12.846 / 2013. As it was sanctioned by President Dilma Rousseff with some vetoes, the Chamber constituted a Mixed Commission in charge of reporting the veto. The commission is made up by deputy Carlos Zarattini (PT-SP), rapporteur of the PL. For him, the approval of the law is a great advance, since it also provides for the company to repair the damage caused.

Among the penalties provided for are fines ranging from 0,1% to 20% of the company's revenue, loss of assets, suspension of activities or even the dissolution of the legal entity in the case of orange companies. Penalties can be mitigated if organizations collaborate with investigations or if they already have compliance mechanisms.

As with the principles of sustainability, in which large companies adopt internal models and start to demand the same from suppliers, today there is a great opportunity to create a virtuous circle of compliance. Two immediate consequences can be seen with this: Brazil will attract more foreign investment and the relationship between the private sector and the public sector will be more ethical.

Corruption in check

Roberto Abdenur, Executive President of the Brazilian Institute of Ethics in Competition (ETCO)

Against an evil that pervades all strata of society, we need powerful medicines, or better, vaccines. When there are no vaccines, as against the evil of corruption, which has a direct impact on the socioeconomic development of countries, the path to prevention lies in simplicity, transparency, clarification and punishment.

Simplicity can be the key to overturn arguments of those who practice tax evasion, illegal trade or informality. The complexity of the Brazilian tax system, the size of its cargo, the bureaucracy and the long process to pay taxes have been a pretext and a factor for corruption and tax evasion. Numbers help the perfidious arguments: in Brazil, companies spend an average of 2.600 hours per year to pay taxes, compared to the world average of 277 hours, according to the Paying Taxes 2013 ranking, prepared by the consulting firm PWC, in partnership with the World Bank and International Finance Corporation (IFC).

Transparency is the basis of democracy and the greatest antidote against corruption. In recent years, Brazil has established changes in the relationship between governments and the population, largely as a result of pressure from representative sectors of society. New laws, such as that of Fiscal Responsibility and 8.666 (of Bids), show that the country has been investing in increasing transparency. Other initiatives reveal hopes for greater transparency in dealing with public affairs, such as the Federal System of Access to Information, the creation of TVs Câmara and Senado or the project that creates Ethics Councils in Legislative Assemblies and Municipal Councils.

Clarification results from efforts by governments, institutions and civil society organizations to raise public awareness of the importance of ethical behavior in all spheres. Both minor corruption, often tolerated, and the involvement of public officials in major scandals are essentially the same misconduct.

For a good part of the population, however, this relationship remains intangible. Purchasing pirated or counterfeit products, when there is evidence that they are, to resort to bribes instead of taking a refresher course for drivers with excess points in the driver's license or instead of paying any type of fine, letting yourself be carried away dark business advantages. This is all corruption. Often tolerated. Often not even perceived as such.

Minor corruption often involves well-intentioned citizens who consider that there is no other way out when they encounter a malicious public agent. But there are also many cases of well-intentioned public officials who come across people with malicious intent, for which only bribes are resolved. Fighting corruption is the duty of all of us.

But a large number of Brazilians have, as Minister Ellen Gracie Northfleet, former president of the Supreme Federal Court (STF), a dualistic attitude towards corruption. On the one hand, the denunciation that abuses prejudgment. On the other, lethargy condescending to certain non-republican practices.

The consequences of this indulgence are serious for the economy. The Global Fraud Survey 2012, by Ernst & Young, shows that 84% of Brazilian executives interviewed in the survey consider that corruption is widespread in the business environment. The index is higher than the global average (39%) and that verified in Latin America (68%). But respondents stated that they do not agree with this situation and want to improve the business environment. For 90% of them, there should be more sanctions against fraud and kickbacks.

Finally, punishment proves that society does not tolerate such deviations in conduct. The feeling of impunity has been identified as one of the main factors in the high levels of perception of corruption in Brazil. The study Perceptions of Corruption Index 2012, by the NGO Transparency International, places Brazil in 69th position among 176 countries. At the top, as least corrupt, are Denmark, Sweden and New Zealand. At the bottom of the list, Afghanistan, North Korea and Somalia.

In this sense, the approval by the Senate of the Bill of Law of the Chamber (PLC) 0039/2013 (PL 6826/2011), on July 4th, without changes, is encouraging. Certainly in response to the popular demonstrations in June, the Senate included on its priority agenda the vote on the bill known as the Anti-Corruption Law. It allows punishing companies - and not just their representatives, individuals - who commit acts against the public administration. The text guarantees the compensation for the damage caused to public coffers by acts of improbity.

Proposed by the Executive Branch, and with federal deputy Carlos Zarattini (PT-SP) as rapporteur, the bill was sanctioned by President Dilma Rousseff on August 1, with three vetoes. Because of these vetoes, it will go through Congress again. For Zarattini, Brazil is one of the three countries of the 34 OECD members that do not have a specific law to punish corruptors. Hence the importance and urgency of the approval of the Anti-Corruption Law.

Corruption constitutes an obstacle to economic development, especially as it subtracts resources from public policies, increases public spending, causes distortions and imbalances in competition between companies, stimulates tax evasion, causes legal insecurity, encourages crime and gives room to a certain culture of leniency with transgressions.

Only with simplicity, transparency, clarification and punishment, in addition to strong institutions in a democratic environment, will we be able to break the gears of corruption and create the society we aspire to. The fight against corruption must be one of the pillars in the construction of the values ​​that can lead Brazil to the place of deserved prominence in the world panorama.

ETCO discusses transparency and ethics at Live Marketing congress

For Roberto Abdenur, ethics must be included as a central value in companies' businesses

In order to expand the spaces for the discussion on the defense of competitive ethics, the Executive President of ETCO, Roberto Abdenur, accepted an invitation to be one of the speakers at the 1st Brazilian Congress of Live Marketing, promoted by the Promotional Marketing Association (Ampro) on July 29 and 30, in São Paulo.

The event aimed to promote the debate on relevant topics involving agencies, customers, suppliers and the entire production chain of Live Marketing, a concept that values ​​the live experience of a brand.

In his presentation, Abdenur stressed that ethics must be a central value in companies' businesses, both vis-à-vis the internal public, as well as customers and suppliers. “Including ethics as a company value, however, does not authorize it to use it only as a marketing tool. Ethics must be a real commitment of the company. ”

He recalled that the process of building a company's reputation is a long one and that includes ethical behavior, social responsibility and environmental sensitivity.

The ETCO Executive President presented research that shows the complexity of the tax system, impunity and corruption as the main obstacles to be overcome for the establishment of greater ethics in the business environment. Abdenur recalled that, in the Federal Senate, more than 20 senators have lawsuits, while in the Chamber of Deputies the number goes from 100. “The growing indignation about corruption occurs at a stage characterized by important advances in laws and institutions aimed at fighting it, ”said Abdenur, citing, among other measures, the approval of the Anti-Corruption Law.

Live Marketing representatives who participated in the panel following Abdenur's presentation agreed that it is impossible to make this market solid and reliable if companies do not act ethically with customers and suppliers, and also with each other.

“The new element (in business) is transparency. Some companies still practice the idea that in business one always wins and the other loses. But everyone can win, "said the editor-in-chief of the Meio & Mensagem newspaper, Regina Augusto, who concluded by saying that" a sustainable relationship between client and company is possible. "

Itaú's Marketing Director, Fernando Chacon, pointed out that transparency is no longer important only to the public. "We also want a transparent relationship with suppliers," he explained.

Johnson & Johnson's Marketing Director, Andréia Bó, stated that the company has a sustainability relationship with the agencies, that is, its suppliers. "For us, transparency is what governs the process of choosing a partner."

For Marcelo Heidrich, from Ponto de Criação agency, it is necessary to work with transparency and credibility. "This is the time to discuss new relationships, we cannot be wrong with each other because we are doing very well," he said, referring to the need for unity between the agencies in the search for a common goal: ethical business, where everyone is a winner .

A disease of R $ 730 billion

By Roberto Abdenur, Executive President of ETCO, and Fernando de Holanda Barbosa Filho, researcher at IBRE / FGV

The Brazilian underground economy - the production of goods and services not reported to the government, which is outside the national GDP - reached 16,6% of the Brazilian Gross Domestic Product in 2012, according to the Underground Economy Index, recently released by the Brazilian Institute Competition Ethics (ETCO), in conjunction with the Brazilian Institute of Economics of the Getúlio Vargas Foundation (IBRE / FGV). In absolute values, it is estimated that the underground economy in 2012 exceeded R $ 730 billion. This significant portion of the Brazilian economy is only the symptom of a disease whose cause can be attributed to factors such as the high tax burden, the rigidity of the labor market, the low average education of the workforce and the excess of bureaucracy in practically all countries. necessary steps to formalize a business. In other words, the high operational and financial costs associated with the fully formalized activity lead many people and companies to stay outside the law.

The 2012 result shows that the shadow economy had a reduction of 0,3 percentage point in relation to the previous year, despite the low growth of the economy in general. The observed drop, however, is small compared to the 0,8 percentage point reductions in the previous two years. This slowdown is due, in large part, to the decline in formal hires by the industry and the performance of the service sector, which is labor intensive and proves to be quite dynamic, but has higher levels of informality than the industry.

Like the figure of the “half-full, half-empty glass”, the result has two opposite interpretations, depending on the angle at which it is analyzed. The “half-full glass”, that is, the positive side, shows a reduction in the underground economy that happens even in a period of low GDP growth associated with less formalization of the labor market. On the side of the “half empty glass”, we see a reduction in the rate of decline in the shadow economy, which may indicate a stagnation in the index.

But, although below the previous years, this result is important and shows that the trajectory of reduction of the underground, giant and unknown economy in Brazil, which already represented 21% of the GDP, is consistent, and, even in a less favorable environment, this portion of the economy is declining.

Despite the government's effort to create measures that facilitate formalization, especially in the commerce and services sectors, where small entrepreneurs predominate, the levels of membership in these sectors are still quite low.

Research recently released by SPC Brasil and the National Confederation of Shopkeepers showed that almost half (49%) of the interviewees do not know what to do to regularize their business. On the other hand, among those who want to expand the business this year, most do not intend to go ahead because they fear bureaucracy, a drop in income and the appearance of new costs and tax burdens. Since the end of 2012, it has been observed that the growth of the formal labor market is very close to its limit due to two major factors: the rigidity of labor laws and the low level of education of Brazilians.

There is a need for a deep reflection on the reasons for the current results, so that public policies that are really effective are designed, so that the weight of the underground economy in Brazil gradually becomes less. Among the main obstacles to the continuation of this evolution is that of labor laws that bind the economy. The other, less obvious, but with a lot of impact on reducing informality, is the level of education of Brazilians. Between 2002 and 2011, informality in the labor market fell by 10 percentage points, from 43% to 32% of the total employed population. The increase in the 22 million people who were educated between 2001 and 2011, according to PNAD, accounts for 64% of this drop.

These numbers bring new and rich possibilities with regard to the improvement of the labor market in the country and the consequent reduction of informality in the economy. The easing of rigid Brazilian labor laws may be a next step towards deepening the process of formalizing the economy. The reduction in hiring and firing costs would encourage the formalization of workers on the part of companies that at the moment consider such burdens to be too much and opt for the informal route. On the other hand, continued investment in education would reduce the impact that the still low level of education has in terms of informality. On the other hand, it is necessary to make the population aware that the informal economy causes damage to the whole of society, as it deprives governments of resources for public policies that are so blatantly necessary today. In broader terms, it creates an environment of transgression that causes a fall in the quality of investment and a reduction in the growth potential of the economy.

Decreasing the underground economy rates is essential for strengthening the entire Brazilian economy, since it imposes several difficulties on the country: official statistics lose their relevance; tax evasion, due to informality, disproportionately increases the weight of taxes on formal activities; unfair competition expands, and activities outside the law start to generate labor, social and even environmental problems. It is necessary to simplify and rationalize the tax system and, with this, make compliance with the law less painful for the population.

5 damaging effects of corruption you don't see

The discontent of Brazilians with the topic has become more than evident in recent months, but do we really think on all sides of the problem?

By Marina Pinhoni, - 20/08/2013

São Paulo - Brazilians' dissatisfaction with corruption has been more than evident in recent months with the demonstrations that have taken over the country. Although the protests triggered the increase in public transport fares, corruption was also identified as one of the main reasons for taking protesters to the streets.

“If you compare Brazil with other countries in the evaluation of politicians, if you have a perception of corruption that is much higher than the world average”, says Roberto Abdenur, director of the Brazilian Institute of Ethics in Competition (ETCO), which launched this month the book “Corruption - Barrier to the Development of Brazil”, organized by journalist Oscar Pillagalo.

Although the population's outrage comes due to the obvious conclusion that diverted resources should be used in essential areas such as health, education and transport, there is often no awareness that the practice of corruption also hides other consequences as serious as this.

In an interview with, Abdenur helps to list these consequences. Check out below 5 damaging effects not visible from corruption.

1) Multiplication of losses

"A recent study by the National Confederation of Industry (CNI) shows that each R $ 1 diverted by corruption represents a damage to the economy and society of R $ 3", says the director of ETCO.

Failure to pay taxes and jobs that will no longer be created, for example, enter this account. According to Abdenur, although it is not possible to measure exactly what the total damage caused by corruption is, the multiplying factors cannot be ignored.

2) “Contamination” of the honest

Another effect that can be noticed is the “contamination” of honest people by the corrupt. Public officials who previously performed their duties correctly may start to act thinking for their own benefit when they perceive the advantages that dishonest colleagues obtain. At the very least, you will feel a great disincentive in the profession.

If not out of greed, this "contamination" can also happen under pressure: often honest people are threatened if they do not agree to be part of the scheme in force in their area. For the director of ETCO, the “vaccine” against this problem is the adoption of severe punishment measures.

3) Increased inefficiency

Excessive bureaucracy can also be part of the vicious cycle of corruption. "Inefficiency fuels corruption and corruption fuels inefficiency," says Abdenur.

The ETCO director gives as an example in this case the figure of the dispatcher, who is an intermediary hired by the citizen in the face of the difficulty of having access to a service that is public. “Sometimes these dispatchers end up bribing public servants to speed up the service. Excessive bureaucracy makes the system even more expensive, ”he says.

4) Feeling of impunity of the citizen

Reducing corruption to zero is almost impossible. "Even in more developed countries there is corruption and sometimes it is not small," says Abdenur. The main problem in Brazil then, in the expert's opinion, is the lack of correct punishment for this type of crime. “In Brazil, there is a serious problem of impunity. In the United States, the average for a sentence in corruption cases to come out is one year. In Brazil, this time is ten, ”he says.

According to him, the amount of resources allowed by the Brazilian judicial system contributes to the cases being dragged to their prescription, causing the guilty to leave their accusations unharmed. “This creates a culture of leniency with transgressions. The citizen may think: 'if the politician steals and nothing happens, then I will also stop paying my taxes ”, he says.

5) Demoralization of institutions (and democracy)

A survey carried out by Ibope at the height of the June demonstrations had already pointed out that 89% of respondents did not feel represented by political parties. Earlier this month, a new survey by the institution revealed that Brazilians' confidence in institutions in general and in social groups fell 7 points compared to last year.

“There is a lot of discredit to politicians and consequently to parties and institutions. The State is facing a crisis that will only be resolved with the creation of more bridges of dialogue with society ”, says Abdenur.

However, the director of ETCO believes that discrediting institutions is often exaggerated. "We must remove the idea that the country is the worst country in the world," he says. “The scenario is not as bad as people think. The country is better than many of our Latin American neighbors in international rankings of corruption, for example ”.

The director of ETCO states that Brazil has strong control bodies and institutions such as the Federal Comptroller General (CGU) and the Administrative Council for Economic Defense (Cade), which have made progress in their autonomy in recent years.

Abdenur also welcomes President Dilma Rousseff's recent approval of the law that punishes companies that commit crimes against the public administration.