If your company faced a compliance litigation, please provide the amount/costs that incurred as a result of fines, penalties and settlements associated with bribery, corruption or unethical business practice and compensations paid to third parties.

  • Radia Guira

Please provide details in the comments section.

This question aims to understand the financial implications and consequences your company has faced due to compliance-related issues. Specifically, it focuses on the costs your company has incurred because of fines, penalties, and settlements related to bribery, corruption, or unethical business practices. This is a measure of the financial risk and potential reputational harm that your company might carry due to such practices.

Additionally, this question also requests details about any compensations your company has paid to third parties. This could be a result of a legal settlement, an out-of-court settlement, or any other form of compensation resulting from a dispute, controversy, or a wrongdoing. The cumulative amount paid as compensation to third parties can often be an indicator of the level of conflicts, disputes or disagreements your company might have had with various stakeholders.

An example of response to this question could be: « Our company faced compliance litigation in the financial year 2021. The costs incurred as fines, penalties, and settlements associated with misconduct like bribery and corruption amounted to $500,000. Additionally, we paid a compensation of $300,000 to third parties over the same period. » No further details about the individuals or organizations involved in the litigation or allegations are asked for, considering the privacy and confidentiality norms. Remember, honesty and transparency in these questions can help improve your ESG score.

Understanding the Financial Impact of Non-Compliance

When a company is entangled in compliance litigation, especially in cases related to bribery, corruption, or unethical business practices, the financial implications can be substantial. These situations often result in hefty fines, penalties, and settlements, and may also include compensations paid to third parties. It’s imperative for businesses to transparently disclose these costs when calculating their ESG (Environmental, Social, and Governance) score.

An accurate assessment of these costs not only reflects the financial impact of the non-compliance but also signifies the company’s attitude towards legal and ethical standards. To evaluate your company’s exposure, it is important to review all legal proceedings, including any outstanding or ongoing cases. Recording the total sum paid in fines, penalties, settlements, and third-party compensations will give stakeholders a clear picture of the compliance-related costs incurred by your company.

Documenting Compliance Litigation Expenses

Detailing the costs associated with compliance litigation involves a meticulous approach. It requires businesses to maintain comprehensive records of all incidents of bribery, corruption, and unethical practices. This includes any legal fees, investigation costs, and any money spent remediating the issues. When responding to questionnaires aimed at ascertaining your company’s ESG score, it is crucial to provide an itemized list of these expenses.

For instance, when calculating fines and penalties, ensure that your accounting team segregates these payments from regular operational expenses. This distinction is vital for accuracy and transparency. Similarly, when documenting settlements, include the rationale behind the amount and the nature of the litigation. Compensations paid to third parties should also be captured, detailing the reasons for these payments and the beneficiaries.

To better understand and implement the standards of anti-corruption measures, we encourage you to consult the French Anti-Corruption Agency’s presentation on international standards, which can be found here.

Best Practices for Mitigating Future Risks

While documenting past and current litigation costs is critical for your ESG score, it is equally important to establish and follow best practices to mitigate future risks. Implementing a robust anti-corruption compliance program can significantly reduce the likelihood of similar issues arising in the future.

Developing a culture of integrity starts with a clear policy against corruption and bribery, which should be communicated to all employees and stakeholders. Regular training sessions and a confidential reporting system can also enhance your organization’s capability to prevent and detect unethical conduct. For guidance on addressing bribery and corruption risks, particularly in mineral supply chains, the OECD’s guidelines are an invaluable resource.

Another effective measure is establishing an anti-corruption compliance function within your company. This function can oversee the implementation of policies and procedures, conduct risk assessments, and ensure that compliance is an ongoing process rather than a one-time checklist. A practical guide on setting up this function can be accessed here.

In conclusion, accurately reporting the costs incurred from compliance litigation is a fundamental aspect of measuring a company’s ESG performance. It reflects not only the past actions but also sets the stage for future improvement. By thoroughly documenting these expenses and establishing a strong framework to avoid future cases, companies can enhance their ESG scores and build trust with investors, customers, and other stakeholders.