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Blog: Structural Challenges to Anti-Corruption in Canada

In this blog post Robert Hanlon takes a critical look at anti-corruption efforts in Canada, one of the countries that is generally perceived to be "clean" in global rankings. He uncovers some disturbing trends in the practices of the private sector, especially in the construction industry. Robert sheds light on some of the underlying reasons of corrupt practices and the challenges faced by anti-corruption initiatives in Canada.

Please note that views expressed in this blog post are those of the authors and do not represent the position of The Anti-Corruption Research Network, Transparency International, or any of its affiliates. To comment on this post please log into ACRN.


The Structural Challenges to Canada's Anti-Corruption Movement

By Robert Hanlon, Contributing Editor, the Anti-Corruption Research Network


The past year has seen a flurry of bribery and price-fixing scandals making headlines in Canada and leading many to question how industry works with government.   Allegations of endemic extortion and death threats in the province of Quebec’s beleaguered construction industry have left Canadians in disbelief[i].  But it’s the overseas bribery allegations involving some of the country’s most prized companies that have left others more ashamed and enraged than anything else.

On the international front, Montreal-based SNC Lavalin has been implicated in multiple scandals in North Africa and Asia.  The company has been accused of sending upwards of $300 million in questionable transactions to the Gaddafi regime in Libya[ii].  In Bangladesh, the company is caught-up in a bribery scandal which saw the World Bank suspend a $1.2 billion development project pending further investigation[iii].   

The engineering giant is not the only Canadian firm to be accused of corruption. For example, the Alberta-based Blackfire Exploration is being investigated for allegedly bribing a mayor in Chiapas, Mexico[iv].  Currently, the Royal Canadian Mounted Police’s (RCMP) anti-corruption unit has over 30 ongoing investigations involving businesses that may have violated the Corruption of Foreign Public Officials Act (CFPOA).   This number is expected to rise as the unit’s fourteen full-time officers are increasingly collaborating with foreign anti-corruption agencies[v].  

Domestically, sensational allegations of corruption in the province of Quebec have confirmed endemic levels of bribery and collusion between government officials, industry and organised crime.  The government’s effort to crack down on corrupt practices has been substantial. In a stunning press release, Transport Quebec has estimated it saved $1.136 billion in contracts since the province’s anti-corruption efforts began in 2009[vi]

Quebec’s new anti-corruption police squad has also begun raiding the residences of several prominent politicians and business leaders following a barrage of testimony being heard at a public inquiry[vii].  Over the past year, the Charbonneau Commission has seen a steady stream of informants, professed mobsters, anti-corruption experts and politicians paraded before the hearing to investigate public procurement in Quebec’s construction industry[viii]. Although these examples have raised questions towards the criminality of corruption in Canada, little attention has been paid to the controversial fact that firms that engage in corruption are taking a calculated risk.

No business can ignore the reality that one day they may be in a situation that will require them to pay a bribe.  And why shouldn’t industry make such payments? After all, a small fee to acquire a much larger contract is good for business, employee bonuses and career advancement.  Many of the shareholders of Canada’s most influential transnational corporations are pensioners, one of the most vulnerable groups of society. Paying bribes to win contracts ensures the well-being of Canada’s aging population.  Arguments have also been made that paying bribes in emerging economies can bring relative gains by funneling much needed capital into the local markets. Still, most analysts will readily acknowledge that the short-term gains never outweigh the negative long term-implications on the community. 

Society also forgets, forgives and in some cases even rewards. The embattled SNC Lavalin mentioned above has recently won a $1.4 billion dollar contract with the provincial government of British Columbia.  Provincial officials claimed they saw little connection between the companies corrupt past abroad and their ability to win and successfully delivery a high-quality infrastructure project[ix].  Yet why is society, and in this case the provincial government of British Columbia, so willing to forgive misdeeds? Speaking from the Canadian experience, it is a combination of weak laws, improper training of industry and a general sense of apathy within the public.

First of all, Canada’s anti-corruption legislation is weak as it does not allow law enforcement to charge a bribe payer or bribe taker with a criminal offence unless there is a substantial link to Canada[x].  This means the entity or individual would have to have made the some type of decision or act within the territorial geography location of Canada. Companies that understand the regulation can easily shield themselves from any uncertain exposure. Until Canada’s domestic laws are strengthened, there remains little incentive for industry to seriously consider the risks of corrupt practices abroad.  

Second, business schools are turning out graduates who remain largely unprepared to work within an environment that exposes them to corrupt practices, especially in emerging economies. Minimal training on how to deal with real-life corruption coupled with a serious lack of business programs that holistically incorporate sustainability and corporate social responsibility into the curriculum are hindering ethical innovation.  While some universities may require business students to sit through a required philosophy class, this will have little impact on a student’s career trajectory, especially when they are being taught to maximize profit at any cost.  Business schools must do more to reject the lure of corruption in the private sector by critically debating the profit-maximization principle embedded into the psyche of a B-school cohort. 

Finally, Canadians enjoy a high quality of life and strong sense of security.  The thought that such a lifestyle can be partially attributed to unethical business behaviour abroad is an uncomfortable issue. With roughly 9.6 million Canadians expected to retire over the next two decades, tremendous pressures will be placed on the system and will require new avenues of wealth creation[xi].  Questioning whether the government generates this wealth through ethical investment is a conversation that still has not penetrated the mainstream discourse.  A public disconnect between Canada’s economic development and corporate interest abroad is weakening the anti-corruption movement.

While these challenges are not unique to Canada, they are a reminder that corruption can be systemic and structural in wealthy societies.  Pointing fingers at corrupt officials in emerging economies is a convenient argument put forward by those satisfied with a blind sense of complicity.  Until Canadians are ready to deal with their own corruption demons, it will be difficult to build any sense of credibility within the global anti-corruption movement.



[v] Personal communication (17 September 2012) with RCMP Anti-Corruption Unit, Vancouver, Canada

[viii] See the Commission’s website here (in French): https://www.ceic.gouv.qc.ca/

 

[x] See Section 1 on ‘Jurisdiction’ here: http://www.justice.gc.ca/eng/dept-min/pub/cfpoa-lcape/index.html

[xi] For more information on demographics in Canada see here: http://www.justice.gc.ca/eng/dept-min/pub/cfpoa-lcape/index.html


 

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