Select Committee on International Development Minutes of Evidence

Memorandum submitted by BP


  1.  Corruption is an important issue for BP and for many other companies with international operations. It is not in BP's interests to engage in corruption, nor do we believe it to be in the interest of host countries or our competitors.

  2.  Sometimes, however, the distinction between what constitutes corruption and legitimate business incentives can be difficult to draw for a manager working in different cultures. Moreover, there can be forces at work which increase the temptation to indulge in questionable business practices and which, although counter-productive in the long-term, are mistakenly believed to bring immediate competitive advantage. The purpose of BP's Ethical Conduct policy is to ensure this does not happen.

  3.  In BP, we strive to institutionalise barriers against corruption via our Business Policies. This is being achieved by:

    —  insisting upon internal transparency;

    —  urging openness and transparency from our partners, including governments;

    —  refusing to collaborate in corruption, even if this will entail local commercial loss and decrease our competitiveness.

  4.  It is in our commercial interests that BP should be able to pursue its business interests in an open, transparent environment; and in a meritocratic society - one in which ideas and knowledge move freely within a clear system of law and intellectual property rights. Such a society tends to be both stable, and flourishing, and consistent with the group-wide policies which govern all our business operations and activities.

  5.  An open, law-based, society tends to be conducive to good corporate governance. Key criteria to having good governance would be open markets (so that companies are able to apply skills based on an efficient allocation of resources); a liberal trade regime; development which benefits communities rather than government ministers or privileged individuals; equitable tax rules; and, fair and enforceable environmental regulations. Good business requires good governance. The problem is that good corporate governance in the absence of accountable, law-based, institutions is extremely difficult to achieve.

  6.  However, the lack of such accountable, law-based, institutions does not mean that companies can ignore the requirement for good corporate governance. Just because a country has a weak rule of law without a proper regulatory climate, transparency or accountability, it does not excuse foreign investors from the duty to resist corrupt practices. International companies which do not pay sufficient attention to the ethical or regulatory climate of the countries in which they invest are increasing the risk to their own shareholders.

  7.  To reduce this risk, BP has developed, first, our own set of policies to which we operate and, second, an internal compliance system which checks our performance against these values. The more that companies can impress upon governments - through their own behaviour and example - that corruption is counter-productive, the less widespread it will become. But corruption is rather like blackmail. In certain circumstances, it can be difficult to resist. And therefore there has to be in place within company's policies and standards, which institutionalise opposition to 'corrupt' practices. There is a need to reduce the temptation to corrupt by increasing the transparency of governance mechanisms.

  8.  At BP we believe we can only substantially reduce the risk to our shareholders by convincing governments that we have a selfish and mutual interest in improving societies for the better and in rooting out corruption. This is because the deeper the corruption, the more negative will be the impact on growth and development. This in turn widens the gap between rich and poor, thereby contributing to growing instability in society. The more unstable a society becomes, the greater the risk of violence and human rights abuses and then the greater the dilemma for the international investor.

  9.  There are a number of strategies BP can pursue in order to improve the situation in a host country. We can lead by example - which in practice means refusing to participate in, or benefit from, any corrupt practices even if this poses a short-term competitive threat to our operations in a particular market or country. There are examples (albeit difficult to discuss publicly) where BP has sacrificed short-term commercial gain through a refusal to engage in practices outlawed by our Policies statement. In addition, we can set clear standards for our contractors. We can try to influence whenever it can be effective. But one important lesson we have learned is that we get further by not lecturing in public.

  10.  Bribery is the receiving or offering of any undue reward by or to any person whatsoever to seek to influence their behaviour and incline them to act contrary to the principles of honesty and integrity. It is a form of corruption and BP will never offer, solicit nor accept a bribe and nor will we permit third parties acting on our behalf to do so.

  11.  Facilitating payments are, in some countries, a normal means of obtaining routine low-level actions and/or approvals. They can be distinguished from bribes which involve paying or influencing someone to do something improper or illegal. BP's preference is not to make facilitating payments, but where they are essential to ensure business efficiency we tolerate them under carefully controlled and transparent circumstances.


  12.  The following extracts from our Ethical Conduct policy illustrate the expectations which BP has of our staff - and in turn this policy is intended to protect individual members of staff from corrupt advances of third parties. They include such statements as:

    —  "We will pursue our business with integrity, respecting the different cultures and the dignity and rights of individuals in all the countries where we operate."

    —  "BP supports the belief that human rights are universal. They are enshrined in the UN Universal Declaration of Human Rights (UDHR), which we support."

    —  "In our actions and our dealings with others, we will:

    Respect the rule of law

    Promise only what we expect to deliver, make only commitments we intend to keep, not knowingly mislead others and not participate in or condone corrupt or unacceptable business practices

    Fulfil our obligations and commitments, treat people according to merit and contribution, refrain from coercion and never deliberately do harm to anyone

    Act in good faith, use company assets only for furthering company business and not seek personal gain through abuse of position in the company"

  13.  What it is important to appreciate is that our business policy on ethical conduct forms an important part of our System of Internal Control. BP published a brochure entitled "Ethical Conduct policy: Guidelines on Business Conduct" in November 2000. It states the principles which, if followed in all our actions and dealings with others, will ensure that our reputation for acting with integrity is maintained. The commitment and policy expectations describe the boundaries for what is and what is not acceptable practice.

  14.  The updated brochure updates and improves the guidance available to staff in interpreting the Ethical Conduct policy. Historically, both BP and Amoco have had a form of ethical conduct compliance for many years. Today, relevant members of staff are required to register formally their understanding and compliance with these requirements in an annual ethical conduct certification process. The areas covered include BP's relations with government officials, customers, suppliers and partners; facilitating payments and political contributions; gifts and entertainment; and the personal conduct which is expected in areas such as conflicts of interest.

  15.  These are just a few of the topics encompassed by BP's "Guidelines on Business Conduct" which includes the important provision that each member of staff should feel able to speak openly about situations they feel unable to resolve and to receive the support they need. They also provide an email address and anonymous 24-hour telephone lines so that any known or suspected criminal acts, ethical violations, questions or concerns may be reported."

  16.  Increased public interest in, and concern for, ethical issues (especially within Europe and the United States of America)—together with BP's growing spread of business activities—has obliged us to state less legalistically and with greater clarity and transparency BP's attitude and response to the ethical problems and issues which frequently arise during the course of our business activities. This development has been recognised in BP's corporate governance. BP now has a Managing Director responsible for Group Policies and their Regional applications, who sits on its Main Board, and who chairs the Ethics and Environment Assurance Committee. In addition, he has reporting to him a team of Regional Directors and Country Representatives who are accountable to him for the assurance that BP's business policies are effectively applied by the BP businesses operating within their regions, and that BP's expectations on ethical conduct are met.

  17.  We recognise that many ethical decisions are not clear-cut and that these need more than the application of a simple set of rules in order to achieve resolution. These decisions require judgement in arriving at the best way forward. In cases of uncertainty, everyone working for BP is expected to raise the issues with their management and colleagues to obtain clarification. However, in deciding whether or where to do business, we must feel confident that we can implement our policy commitments in all our operations.

  18.  The Guidelines are particularly intended for all employees who are responsible for company assets (cash and physical), who are responsible for commercial or governmental relationships, who have staff reporting to them who handle transactions, and anyone whose behaviour is critical to our reputation. They comprise:

    (a)  A decision model which sets out a process to help clarify issues and potential consequences.

    (b)  A fuller exploration of the issues which most commonly concern BP staff, plus some experience of how best to deal with them and, in some instances, rules that must be applied. These issues include Human Rights; Legality; Political Contributions; Bribery and Corruption; Agents, Advisors, Consultants and Other Third Parties; Conflicts of Interest; and Gifts and Entertainment.

    (c)  Steps and tests which a manager might apply to ensure the policy is in place and working effectively in his/her organisation. It also covers information on handling policy breaches, reporting incidents and losses, and the annual ethics certification process.

    (d)  Additional information on the UN Universal Declaration of Human Rights, the US Foreign Corrupt Practices Act and other important laws, US political contributions, the use of agents and other third parties, and conflict of interests.

  19.  Business Unit Leaders are responsible for ensuring that the Ethical Conduct policy is understood and put into practice within their Business Units, as part of the process of ethical conduct certification referred to above. BP's Regional Presidents and Country Presidents should be consulted to ensure that the policy is appropriately aligned with local laws and practices.

  20.  Wilful or careless breach or neglect of the policy will be treated as a serious disciplinary matter. Internal Audit, Group Security, and Legal can assist by providing expertise to help identify an appropriate way forward. Confidences will be respected and any fears or concerns will be dealt with sensitively.

  21.  A copy of "Finding your way through the maze - BP's Ethical Conduct policy: guidelines on business policy" is attached to this submission.[1]

  22.  Finally, all activities in the BP Group will be subject to independent review at a frequency determined by risk. The extent of independent review will be determined by the internal and external auditors. Unrestricted access to staff and documents will be provided (subject to legal constraints) to Internal and External Audit on request.


December 2000

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