Growing concern on UK corruption

The notable drop in the UK's rating - to 7.7 from 8.4 - in the 2008 Corruption Perception Index (CPI) published recently by Transparency International raises the question of whether corruption is a growing problem in Britain.

The CPI is a compilation of polls and studies relating to the perception of corruption, and is one of the most widely regarded indicators of corruption at the individual country level.

George Dallas, Director of Corporate Governance at F&C, said: "F&C supports Transparency International's advocacy for higher anti-corruption standards in the UK, and believes this is fundamental to the interests of investors. We have been actively involved in developing engagement outreach on anti-corruption issues in both developed and emerging markets in addition to being the convener of the working group that developed the forthcoming International Corporate Governance Network (ICGN) Guidance on anti-corruption - a document which is currently being finalized at the ICGN".

F&C's own engagement on anti-corruption at individual companies focuses on a range of factors including the development of anti-corruption policies and internal controls with board level oversight. F&C also encourages companies to develop employee hotlines, to factor anti-corruption into remuneration policy and to report publicly on the effectiveness of these policies and processes.

"Whilst the CPI does not address the precise causes of the decline in the UK's rating the visibility and the controversies surrounding the corruption investigation at BAE Systems are likely to have had some impact on the lower score," Dallas said. More fundamentally, we believe that the lack of robust legislation and enforcement in the area of corruption can position Britain at a relative disadvantage to other highly developed economies".

Dallas concludes "Given the particular importance of financial markets and the knowledge based economy in the UK, growing perceptions of corruption or mistrust can prove to be a competitive disadvantage".