Corporate Culture and Corruption

The Financial Times is running a Russia supplement tomorrow, with a number of interesting articles, including the following bit from Leyla Boulton on the climate of fear and theft survived by businesses working in Russia.  I’ve noticed that it’s become rather customary to give BP a good kick in the ribs whenever a discussion of political risk and corruption comes up in the Russian context…

Equally important, say some foreign investors, is upholding one’s corporate culture in the face of local pressures to do otherwise.

“There can be no doubt on your stance on corruption,” says Elizabeth Sullivan, chief operating officer in Russia of UBS, the Swiss bank, whose message is targeted at both external parties and employees. “You have to keep saying ‘we don’t pay bribes’ and lead by example if necessary.”

Thiswas a lesson learnt too late by Ikea, when the Swedish retailer wasforced last year to dismiss two of its top managers in Russia for payingbribes to secure electricity supplies to a St Petersburg mall.

Morespectacularly, BP, the British energy group, discovered the perils ofrelying on a nod from one of the government’s most powerful officials tosecure its deal with state-controlled Rosneft to explore for Arctic oilreserves.

This came unstuck after objections from AAR, the Russian partners in the TNK-BP joint venture.

“Whatdue diligence was that?” asks one western banker, who declined to benamed. “If it had been the other way round, and Rosneft and AAR had donea deal, there would have been howls of protest [at injustice being doneto BP].”