Clean up the house for the New Year

TWO days ago I read an article which says companies like to “hide bad news.''

That was based on a landmark survey by the Australian Securities & Investments Commission corporate regulator. It looked at the quality of disclosures of annual reports of 50 of the top 200 listed companies with June 30 balance dates. The findings a number of entities appeared to focus on removing the “bad news” and focus on more favourable-looking numbers.

And a day later, the international bribery scandal hit our shores because two employees purportedly from Telekom Malaysia Bhd (TM) accepted bribes totalling US$700,000 between 2004-2006 from French equipment supplier Alcatel-Lucent SA.

They got paid for feeding information on competitors' bids pricing and contract budgets to Alcatel.

And Alcatel got to win a US$85mil contract to deploy 3G in 2006 for Celcom, then the unit of TM.

No one would have found out if the US Justice Department and US Securities and Exchange Commission (SEC) did not unearth it.

Now that it is in the open, TM is rushing to get to the bottom of things. It has set up a board sub-committee to investigate the Alcatel kickback scandal.

The irony of it all is that “the matter was brought up in 2007 at one of TM's meetings as the deal did not follow procedures but nothing was done then.''

The bribery scandal is a hot topic from coffee tables to the cyber space. Netizens are not sparing anyone for they believe there should be a genuine crackdown on corruption.

Kickbacks are not new in the global telecoms sector, it is just that this time around the authorities caught up with the givers.

Before the Alcatel telecoms bribery scandal broke out, the spotlight was on India's telecoms minister who quit because he was accused of depriving the government US$36bil in potential revenues relating to the 2G spectrum auction years ago.

Three years ago, Siemens Alcatel's rival ended one of the biggest corporate corruption investigations in history when it agreed to pay around 1 billion euros to settle probes by US and German authorities into bribes it paid to win contracts.

And last month Panalpina World Transport Holdings Ltd cooperated with the US Justice Department, and while it admitted to a “culture of corruption' it also paid US$81.5mil in fines to the Justice Dept.

Alcatel agreed on Monday to pay US$137mil to settle US charges that it paid millions of dollars in bribes to foreign officials to win and maintain contracts in Costa Rica, Hondurus, Taiwan and Malaysia.

These companies cooperated with the authorities to evade prosecution for the bribes paid. The move was to avoid a loss in confidence which will have severe impact on their businesses and share price.

That also explains why precise details on the dealings with the two Malaysian consultants were spelt out in the SEC documents, short of their names being quoted in the documents.

Besides paying the fine, the companies have to clean up their practices and strengthen compliance programmes to avoid recurrences.

Due to that, Alcatel CEO Ben Verwaayen does not want Alcatel to do business via sales and marketing agents and consultants any more and it is the first in the industry to move in that direction.

That is drastic action. It comes from the top and it needs to if it is serious about fighting corruption. TM says it has a zero tolerance policy towards bribery and corruption.

Fighting corruption requires a lot of will-power and while having layers of transparency, a culture of compliance and adherence to ethics is critical, making people accountable for every single action is necessary. The change has to come from the top and the punishment needs to be severe, not a one-day jail term. Or else, corruption will still lurk. A shift in the way we educate, train and conduct our business is necessary.

So hiding bad news may not be such a good idea but bracing up to it requires a lot of courage. We have seen some successes this year in the fight to prevent corruption. Let us hope there will be a marked reduction in crime and corruption in 2011.

  TM :  [Stock Watch]  [News]For latest Bursa Malaysia indices, charts and other information click here

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Related Stories: TM's move to probe corruption allegations lauded Minister asks TM to explain kickback allegations Is it time for telcos to self-regulate? TM to provide high speed broadband access to Maxis TM plans to sell Axiata shares for RM879m

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