Starting-Up Right!" Tips for achieving Business Excellence
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Starting-Up Right!" Tips for achieving Business Excellence
(1) Fund seeking
Kenny, a senior engineer of a telephone company, was approached by his friend Philip, an engineering company's proprietor, for assistance in his business in trading communications equipment.
Since Kenny was responsible for overseeing telecommunication network design and procurement of communications equipment, Philip requested him to make recommendations to the telephone company for purchasing the products of Philip’s newly established company. In return, Philip promised to employ Kenny as a consultant of his company.
Agreeing to the proposal, Kenny then helped in making Philip’s company an authorised vendor of the telephone company and lined up transactions for him.
An outside employment is an advantage under the Prevention of Bribery Ordinance (POBO). If Kenny accepted the consultant post for making Philip’s company an authorised vendor of the telephone company, he might be charged of acceptance of bribe. Philip might also be charged of offering of bribe. Both of them would commit an offence under Section 9 of the POBO.
Besides, there would also be a potential conflict of interest for Kenny to take up the consultant post in Philip’s engineering company even if no bribery was involved. Kenny should declare his interest by informing his employer in writing of this outside employment.
A sales supervisor at a telecommunications company was given easy access to the central database of telephone subscribers. A friend put him in contact with a debt collector, who offered him HK$80 to HK$100 to retrieve the personal data of each individual telephone subscriber. The sales supervisor accepted the deal and regularly faxed the requested information to the debt collector. In 26 months, he received a total of over HK$30,000 through 18 deposits made into his bank account.
Divulging information to unauthorised parties for personal gain is a criminal act under anti-corruption law. The sales supervisor had committed Section 9 of the Prevention of Bribery Ordinance. Leaking customers’ personal data is also a breach of the Personal Data (Privacy) Ordinance and can expose the company to damaging lawsuits.
In a case of this kind, a great deal of time was usually required in identifying the suspect during the investigation, because the client database was open to many staff members for reasons of operating efficiency. If no security measures were in place to control the retrieval of information, innocent staff would be unhappy to find that they were suspected of the illegal act when investigation was required. Besides, some staff members like the sales supervisor in this case might consider it a trivial matter to trade client information for some extra cash, especially when the information was so easily accessible.
Where important data such as customer details, business plans, product designs, etc., are kept in digital formats, this becomes an area that is vulnerable to corruption and related crimes. Managers must therefore be vigilant in maintaining the security of valuable information. Irrespective of the format in which it is stored, managers should classify information into different security levels according to the degree of sensitivity and confidentiality. This helps prevent unauthorised access.
It is crucial that managers inform staff clearly of the serious consequences, both for themselves and for the company, that can result from the unauthorised disclosure of company information. The human resources policy of the company should be regularly reviewed and constantly enforced to provide the necessary deterrents against misconduct, e.g. any breach will result in dismissal and report to the relevant law enforcement agencies.
A herbal tea manufacturing company sourced its raw materials from various Mainland suppliers. Mr Fong, a senior merchandiser of the company, was responsible for purchasing herbal materials and inventory control.
Recently, Mr Fong who had experienced financial difficulties was in desperate need of money. He sent several text messages to a Mainland herbal supplier to solicit a loan of RMB60,000. Mr Fong suggested to the supplier that more purchase orders would be placed if the supplier deposited the money into his wife’s bank account in Hong Kong. The supplier made no response to the request. Shortly after, Mr Fong sent another text message to the supplier asking for another loan of RMB30,000 and threatened to cut the purchase orders if it was not granted. The supplier did not agree to his request, as it amounted to solicitation of bribes. The supplier then reported the matter to the management of the herbal tea manufacturer. In view of the severity of the matter and having no tolerance for solicitation of bribes by its staff, the management of the herbal tea manufacturer immediately reported the case to the ICAC.
Soliciting bribes from overseas companies is also subject to prosecution
Though the supplier, from which Mr Fong solicited bribes, was outside Hong Kong, Mr Fong might still commit an offence of soliciting an advantage under Section 9 of the Prevention of Bribery Ordinance (POBO) as he sent text messages requesting for loans to be deposited into his wife’s bank account in Hong Kong in return for placing more orders.
Businesspersons should be aware that the POBO can apply when part of the corrupt act, e.g. promising, agreeing, soliciting or accepting advantages without permission, takes place in Hong Kong.
Accepting bribes, whether directly or indirectly, is against the law
Loan is considered an advantage under the POBO. Accepting bribes regardless of whether the advantage is directly given to the acceptor or indirectly delivered to a third party is still against the law. In the case study, if the Mainland herbal supplier agreed to deposit the loans into Mr Fong’s wife’s bank account in Hong Kong, as long as it was proven that the receiving account was controlled by Mr Fong or that he was the ultimate beneficiary, Mr Fong would be considered as having accepted the advantage.
A plant engineer of a hi-tech electronic product manufacturer was responsible for maintenance of the company's production facilities. The plant engineer came to know a maintenance service supplier who frequently treated him to lavish entertainment at clubs and leading restaurants. Later, the supplier invited the plant engineer to join his company as a partner and promised him a share of the company's annual profits if the plant engineer agreed to award more contracts to him thereafter. Mindful of the supplier's past generosity, the plant engineer felt embarrassed to turn down the supplier's offer.
The plant engineer might contravene the Rules of Conduct of the Hong Kong Institution of Engineers if he concealed his personal interest in the supplier's company and secured business for the supplier who might not be the best capable service provider for his company.
Both the plant engineer and the supplier might violate Section 9 of the Prevention of Bribery Ordinance (POBO) if the partnership, which could be an advantage under the POBO, was offered and accepted without the permission of the electronic product manufacturer.
Although entertainment is common in business practice, the plant engineer should avoid accepting excessive entertainment that may affect his objectivity in discharging duties. He should also check whether his company has any policy on the acceptable level of hospitality offered by contractors/vendors to prevent any conflicts of interest or the potential for such a conflict.
Ivan had been in the toy business for many years. Some years ago he became a shareholder of a Shanghai-Hong Kong joint venture. Because of Ivan's substantial experience in the toy trade, he took charge of the production line, and divided much of his time between Hong Kong and Shanghai.
Ivan often made all the procurement and purchasing decisions, and was often offered with entertainment and gifts by many suppliers. One of these suppliers even went so far to offer Ivan a commission of five per cent of the value of each contract, as a reward for Ivan’s placing orders for industrial chemicals with their company. Ivan had received a total of HK$250,000 illegal rebates or commissions over an eight-month period.
The case was brought to the attention of the ICAC, who found that some of the shareholders were not aware of Ivan's acceptance of advantages from this supplier, and that the company did not have in place a clear policy on this issue. Some shareholders claimed they had given Ivan permission to accept commissions to subsidise his social expenses in Shanghai and Hong Kong, but they were not able to state when the permission was granted, let alone the approved amount or the circumstances under which the acceptance was permitted.
Under Section 9 of the Prevention of Bribery Ordinance (POBO), the principal's permission (in this case, the toy company) has to be given before an agent (Ivan) solicits or accepts an advantage; otherwise the agent has to apply for permission as soon as reasonably possible after the acceptance. In addition, for such permission to be lawful, the principal needs to carefully consider the details of the application before granting permission.
Ivan's company had not stated clearly in advance whether or not its staff members could accept advantages in relation to their official duties. In other words, Ivan did not have the company's permission when he accepted the commission. Furthermore, since he had not applied for retrospective permission from his company afterwards, and his acceptance of the commission was not known to and approved by all shareholders, such acceptance was considered without the principal’s permission.
Some of the company shareholders recklessly claimed that they had given permission for Ivan to accept commission. However, they had not specified the details and scope of acceptance, and there was no record of the accepted rebates. They also did not take into account the fact that such a policy would affect fairness of competition among their suppliers. This was against both the spirit and requirements of Section 9 of the POBO, so the defence of "permission of the principal" was not substantiated.
As such, companies should proactively formulate rules and regulations to govern the acceptance of advantages by staff at all levels. They should also state clearly in writing the company policy on the nature and maximum amount of advantages staff are permitted to accept, conditions of such acceptance, declaration procedures and enquiry channels, etc. for staff compliance.
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