This chapter analyses the Ecuadorian government's actions to promote the adoption of a culture of integrity by the private sector and to raise awareness among companies on their co-responsibility in promoting public integrity. Additionally, it offers recommendations aimed at providing greater support to companies to enhance business integrity and at strengthening the evidence base on business integrity practices and challenges to inform decision making and the formulation of business integrity policies.
Promoting Public Integrity across Ecuadorian Society
Towards a National Integrity System
Report
OECD Public Governance Reviews
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4. Engaging the private sector in promoting public integrity in Ecuador
Abstract
4.1. Introduction
The private sector can harm or promote public integrity through its actions and thereby damage or contribute to the development of a country's business environment. For example, when companies evade taxes, offer bribes, or engage in fraud associated with public procurement, they distort markets, reduce competitiveness and discourage investment and trade. However, the private sector can also be a force for good by becoming a driver of the change needed to promote integrity reforms, practising responsible business conduct and ensuring responsible influence in the public policymaking and implementation processes (“responsible influence” through, for example, transparent and honest lobbying and political financing). In this sense, a whole-of-society approach to public integrity requires governments to partner with the private sector to work together to uphold public integrity.
There are different ways in which governments can promote the adoption of a culture of integrity by the private sector and raise awareness of their co-responsibility in promoting public integrity. First, governments can ensure that relevant legislation is in place not only on anti-corruption, but also on responsible business conduct and public integrity. Responsible business conduct includes aspects such as the protection of human rights and the environment, the application of international labour standards, tax standards and corporate governance structures (OECD, 2020[1]). Public integrity in business refers to ensuring that common values and standards of integrity are upheld when companies interact with government, particularly through their lobbying and political finance practices, as well as in the movement between the public and private sectors known as the “revolving door” (OECD, 2020[1]).
Second, governments can encourage the implementation of standards through a combination of sanctions and incentive schemes (OECD, 2020[1]). Indeed, while effective and proportionate sanctions can deter companies from acting against relevant legislation, incentives can be used to recognise companies' commitment to corruption prevention efforts and corporate integrity policies. Incentives can include preferential access to government benefits and business opportunities, mitigation of sanctions, and public recognition of a company's commitment to good practice and combating corruption (UNODC, 2013[36]).
Finally, governments can also provide guidance to companies on the design and implementation of their public integrity compliance programmes, emphasising the importance of going beyond a formal compliance approach and also addressing informal aspects of their organisational culture that could undermine public integrity.
4.2. Strengthening the Ecuadorian government's efforts to promote public integrity in the private sector
4.2.1. Superintendencies, in partnership with the SPPA, could develop initiatives to support companies in designing and implementing their integrity systems
In Ecuador, initiatives are being implemented with the purpose of supporting integrity practices in private companies. For example, the Superintendence of Control of Market Powe has been working since 2012 and has been a driving force behind many of Ecuador's initiatives to adopt international competition good practices over the past two years (OECD, 2021[37]). As part of these initiatives, the Superintendence of Control of Market Power has developed a series of guidelines that seek to provide guidance to civil society and private sector actors (Box 4.1).
Box 4.1. Guidelines of the Superintendence of Control of Market Power
The Superintendence of Control of Market Power has developed a series of guidelines aimed at a wide audience, including law students, lawyers, businesspeople, traders and civil society in general. Gguidelines include the Good Practice Guide for the Prevention of Collusive Agreements between Bidders in Public Procurement (Guía de buenas prácticas para la prevención de acuerdos colusorios entre oferentes de contratación pública), the Guide for the Application of Unfair Conduct contained in the Organic Law for the Regulation and Control of Market Power (Guía de aplicación de las conductas desleales contenidas en la Ley Orgánica de Regulación y Control del Poder de Mercado) and the Guide for the Investigation of conduct involving Abuse of Market Power (Guía para la investigación de conductas de abuso del poder de mercado).
In particular, the Superintendence of Control of Market Power elaborated the Competition Compliance Guide (Guía de Compliance en Competencia) with the support of various actors from civil society and the private sector. Indeed, for the development of this guide, dialogue and co-creation roundtables were held in which academia and the private sector participated, contributing to the participatory elaboration of this guide.
Source: Interviews during the fact-finding mission and https://www.scpm.gob.ec/sitio/guias-scpm/.
Additionally, in 2021, the Organic Law Reforming the Comprehensive Organic Criminal Code (Ley Orgánica Reformatoria del Código Orgánico Integral Penal, COIP) introduced important regulatory changes related to the fight against corruption in the private sector (OECD, 2022[38]). Indeed, before 2021, acts of corruption committed by private companies were not sanctioned by the COIP. Now, thanks to the reform, a definition of acts of corruption in the private sector has been introduced, criminalising them and establishing their sanction. In this sense, the Organic Law Reforming the COIP defines acts of corruption in the private sector as intentionally accepting, receiving or requesting “donations, gifts, presents, promises, rights, feed, contributions, income, interests, advantages, salaries, gratuities, immaterial benefits or undue economic benefits or other types of material goods” (Government of Ecuador, 2021, p. Artículo 15[39]), as well as omitting or committing an “act that favours oneself or a third party in the course of economic, financial or commercial activities” (Government of Ecuador, 2021, p. Artículo 15[39]). Both natural and legal persons can be sanctioned for these acts of corruption with imprisonment of five to seven years and a fine of 500 to 1 000 unified basic salaries. Penalties applicable to companies include dissolution or liquidation and a fine of 500 to 1 000 unified basic salaries of the general worker (Government of Ecuador, 2021[39]).
Moreover, the Organic Law Reforming the COIP establishes that sanctions imposed on legal persons can be reduced if there are mitigating circumstances. Such mitigating circumstances include:
(i) spontaneously reporting or confessing to committing the offence before charges are brought;
(ii) co-operating with the investigation by providing elements and evidence;
(iii) providing full compensation for the damage caused by the offence, prior to the trial stage; and
(iv) having implemented, prior to the commission of the offence, integrity systems, standards, programmes and/or policies for compliance, prevention, management and/or supervision (Government of Ecuador, 2021, p. Artículo 1[39]).
Regarding the last mitigating circumstance, the Organic Law Reforming the COIP specifies that such integrity systems, standards, programmes and/or compliance programmes and/or policies must incorporate a series of minimum requirements to qualify as a mitigating circumstance. These requirements include identification, detection and management of activities that present a risk; internal controls with those responsible for processes that present risk; complaints channel; code of ethics; rules for disciplinary actions for breaches of the system; among others (Government of Ecuador, 2021, p. Artículo 3[39]).
However, interviews during the fact-finding mission evidenced that there are insufficient guidelines to support the implementation of integrity systems, standards, programmes and/or policies for compliance, prevention, management and/or supervision by the private sector as well as insufficient guarantees with regard to assessment processes leading to the consideration of mitigating circumstances within a sanctioning process. In this regard, the Ecuadorian government could develop initiatives to support companies in designing and implementing the different minimum requirements that their integrity systems, standards, programmes and/or policies for compliance, prevention, management and/or control should include, in accordance with the provisions of the COIP. To this end, Ecuador could develop awareness-raising and capacity-building programmes for companies on the OECD's Responsible Business Conduct instruments and, in particular, the OECD Due Diligence Guidance for Responsible Business Conduct, a key tool for identifying, detecting and managing activities where risks arise, and for implementing due diligence processes, as required by the COIP and provided for in the National Anti-Corruption Strategy (OECD, 2022[38]).
4.2.2. The Anti-Corruption Public Policy Secretariat could lead the development and implementation of general and sectoral programmes to promote integrity in the private sector
As previously mentioned, governments can promote the adoption of a culture of integrity by the private sector in a number of ways, including by introducing a system of appropriate sanctions and/or incentives. Aware of this, the SPPA included in the ENA action plan a target regarding the “recognition of good anti-corruption practices” of companies, both public and private by means of establishing a programme of honorary incentives for good private sector practices in the fight against corruption (Secretariat for Anti-Corruption Public Policy, 2022[11]).
To this end, the SPPA could consider collaborating with other public entities and sectoral associations to develop and implement such an honorary incentive programme to achieve the expected behavioural changes on the part of private sector actors. To date, the SPPA has generated several proposals for business integrity programmes and measures in co-ordination with actors such as EMCO, at the level of public companies, and with the World Compliance Association, Global Compact, Alliance for Integrity and GIZ, at the level of private companies. It is important to continue these partnerships and strengthen areas of joint work. Additionally, for the development of the honorary incentive programme, the SPPA could draw inspiration from international good practices such as the ProÉtica programme of the Brazilian CGU (Box 4.2), as well as rethink the goals and indicators associated with this activity within the ENA's action plan, in order to strengthen the initiative's monitoring and evaluation system, establish appropriate actions for improvement and determine the real impact of the initiative.
Box 4.2. ProÉtica Programme of the CGU of Brazil
As part of efforts to promote ethics and integrity in the Brazilian private sector, CGU created the Pro-Ethics (Pró-Etica) programme, an incentive programme that promotes the adoption of integrity policies by private companies. Through this programme, companies can voluntarily apply for CGU certification in recognition of their integrity and anti-corruption efforts through a “Pro-Business Ethics” seal. This programme has been implemented since 2010, and in its 2020-2021 edition alone - the most recent edition - more than 250 private companies participated by completing the questionnaire to be evaluated by the Pro-Ethics Committee.
The Pro-Ethics Committee is the collegial body responsible for deciding which companies will make the list each year, as well as for discussing and deciding on updates to the Pro-Ethics participation requirements. The current members of the Pro-Ethics Committee are: the CGU, the Ethos Institute, the Brazilian Agency for the Promotion of Exports and Investments - ApexBrasil, the National Confederation of Industries, the Brazilian Service of Support to Micro and Small Enterprises - SEBRAE, the Brazilian Confederation of Agriculture and Livestock, the Institute of Independent Auditors of Brazil - IBRACON, the National Confederation of Trade in Goods, Services and Tourism - CNC, the Brazilian Institute of Competition Ethics, the Brazilian Federation of Banks, and the Ministry of Development, Industry, Trade and Services. The diversity in the composition of the Pro-Ethics Committee – i.e. public entities, civil society organisations, civil associations, representatives of private companies - demonstrates the whole-of-society vision of this initiative.
In addition to general programmes such as the above-mentioned honorary incentive programme, the SPPA could take the lead in developing and implementing sectoral programmes to further promote integrity in the private sector. Indeed, fostering a culture of integrity in the private sector also implies taking into account the specific risks associated with the sectors most exposed to corruption. Integrity risks vary across sectors, and it is therefore essential that public sector organisations calibrate and adapt their guidance, tools and approaches according to the specific objectives, environment and context (OECD, 2020[1]). In this sense, tailoring existing initiatives to the specific risks and challenges of high-risk sectors - e.g. health, infrastructure, education, etc. - could help to further strengthen the whole of Ecuadorian society's approach to public integrity.
The SPPA has already made approaches to some private sector organisations with the aim of promoting integrity, ethics, anti-corruption and transparency in different areas. For example, the SPPA has considered signing an agreement with the Ecuadorian Association of Distributors and Importers of Medical Products (Asociación Ecuatoriana de Distribuidores e Importadores de Productos Médicos, ASEDIM) to promote integrity, ethics, compliance, transparency and anti-corruption in the Ecuadorian national health system. More generally, the SPPA could consider encouraging high-risk sectors to develop sectoral initiatives to promote companies' commitment to public integrity. This could be done on the basis of broader initiatives designed, implemented and tested at the national level, and in co-ordination with other relevant public actors such as the National Public Procurement Service (Servicio Nacional de Contratación Pública, SERCOP), the Superintendence of Control of Market Power, the Ministry of Production, Foreign Trade, Investment and Fisheries (Ministerio de Producción, Comercio Exterior, Inversiones y Pesca), the Council for Citizen Participation and Social Control, among others.
4.2.3. The Anti-Corruption Public Policy Secretariat could strengthen the evidence base on business integrity practices and challenges
To develop effective laws, policies and guidance to support business integrity, governments need reliable and up-to-date information and data to understand business integrity risks, motivations for corrupt behaviour, difficulties in implementing integrity programmes, among others. In addition, information disaggregated by company category – i.e. by size and sector, as well as more detailed information on the quality of anti-corruption and compliance programmes – is also useful for developing additional policies and guidelines tailored to the context. Finally, having regularly updated information and data also makes it possible to measure progress over time and to identify where additional attention and resources need to be devoted or which measures are not generating the expected results and need to be modified.
In Ecuador, there is no general up-to-date information on business integrity practices, needs and challenges. However, some public institutions have been implementing actions to collect up-to-date information and data to inform decision making and policy formulation on business integrity. For example, SERCOP designed and implemented a survey on integrity in public procurement (Box 4.3), which data is currently under a verification process.
Box 4.3. SERCOP’s National Survey on Integrity in Public Procurement
As part of its Institutional Strategic Plan, SERCOP developed and implemented the National Survey on Integrity in Public Procurement (Encuesta Nacional de Integridad en la Contratación Pública) between 21 October and 14 November 2022. The survey was conducted among a sample of contracting entities (310 entities) and state suppliers (1785 suppliers) in order to identify priority lines of action to establish an integrity policy in National Public Procurement that contribute to the promotion of a culture of integrity in the National Public Procurement System.
The questions of the National Survey on Integrity in Public Procurement were developed by the IAEN, with the support of SERCOP’s technical team and based on the objectives and characteristics of the target population. The Methodology for Assessing Procurement Systems (MAPS) was also used. In addition, the survey was inspired by the procurement integrity surveys implemented by the Chambers of Commerce of Quito (Ecuador), Colombia and Peru.
Quantitative results derived from the survey are now available for analysis. The quantitative analysis will be complemented by qualitative information derived from focus groups to be conducted during the first half of 2023.
Source: Interviews during the fact-finding mission.
Considering the relevance of ensuring that the measures implemented by the Ecuadorian government respond to current challenges and needs, the SPPA could take the initiative to strengthen the evidence base on business integrity practices and challenges. The experience of the French Anti-Corruption Agency (AFA) in implementing a national survey on business integrity can serve as an example of a government-led survey to better understand the challenges related to business integrity practices (Box 4.4). However, other alternatives could also be explored, particularly given the low level of trust in public institutions in Ecuador. For example, the SPPA could strengthen co-operation with the academic community, industry associations and/or private sector organisations to measure business integrity practices and challenges. The academic partner can serve as a safeguard for the independence and methodological soundness of the research, while sectoral associations can help disseminate both the surveys and the results to their members.
Box 4.4. French Anti-Corruption Agency 's efforts to measure business integrity practices
In 2020, the AFA conducted a national survey to analyse French companies’ understanding of corruption risks and the legal framework in place, as well as the maturity of their corruption prevention and detection systems. The survey was open to companies regardless of their size and consisted of an anonymous questionnaire accessible online. Professional organisations were key partners in the dissemination of the survey and actively participated in communication activities mobilising their members. As a result, more than 2 000 companies were reached, and around 400 companies, including small and medium-sized enterprises (SMEs), provided actionable responses.
The survey provided key information on the business integrity landscape in France, for example:
While companies reported having a clear understanding of corruption offences and 70% of them have an anti-corruption compliance programme in place, these compliance programmes tended to be incomplete in areas such as risk mapping and third-party risk management.
The position of the head of the compliance function is crucial for the effective implementation of compliance systems and needs to be strengthened.
SMEs (who are not subject to the compliance obligations set out in Article 17 of the Sapin II Law on transparency in economic life) seemed to be lagging behind in the implementation of anti-corruption compliance programmes.
The results of the survey will serve as a benchmark for measuring progress and gaps in business integrity in the future. Additionally, they helped inform AFA's 2021 priorities and recommendations for business integrity.
Source: (AFA, 2020[41]).