Journal of Financial Crime Corporate Disclosure on Anti-Corruption Practice: A study of Social Responsible Companies in The Gulf Cooperation Council. Journal: JOURNAL OF FINANCIAL CRIME Manuscript ID JFC -05-2017-0045 Manuscript Type: Scholarly Article Keywords: Anti-corruption disclosure, Sustainability report, GCC, Arabian Gulf Page 1 of 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Financial Crime Corporate Disclosure on Anti-Corruption Practice: A study of Social Responsible Companies in The Gulf Cooperation Council. Ayman I. F. Issa * and Antonio Alleyne PhD Candidates in the Dongbei University of Finance and Economics, Dalian, P.R. China Abstract This paper seeks to determine the extent of anti-corruption information disclosure in the sustainability reports originating from Gulf countries. Focus primarily on the fight against corruption, this study utilizes a deeply-rooted content analysis technique of corporate sustainability reporting, covering 66 Gulf Cooperation Council (GCC) firms during 2014. Strengthened by the application of institutional theory, insight into the results points to a state of limited maturity regarding the disclosure of anti-corruption procedures in the region. More specifically, the results highlight the compliance in the reporting of conduct code, while reporting information on whistle-blowing was significantly less in comparison. Firms in Qatar and UAE ultimately release better informed reports; inclusive of detailed information on internal anti-corruption practices. Keywords: Anti-corruption disclosure, Sustainability reports, GCC, Arabian Gulf. 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Financial Crime Page 2 of 17 1. Introduction Across the business community, corruption remains a monumental challenge, particularly within developing nations. Corporate corruption has been known to undermine economic development, corrode civil society and diminish democratic accountability. Corroborated by the numerous internationally criminalized corporate scandals over the previous decade, awareness of this issue continues to rise, albeit at uneven rates (ERIS, 2005). Recent scandals of Xerox, Enron, WorldCom and Lehman Brothers have forced the attention of policy makers and governments towards the development of more restrictive anti-corruption policies. According to United Nations Global Compact (2006), corruption has been recognized as one of the world's greatest challenges. Corrupt practices have been known to ultimately robs the already disadvantage population; diverting resources for essential services (education, clean water, and health care) into the purses of corrupt officials (Hills et al. 2009). Through the literature, various definitions have been used to explain such acts of greed. However, throughout this analysis the explanation put-forward by Argandoña (2005) with the point of reference regarding corruption: "The act or effect of giving or receiving a thing of value, in order that a person do or omit to do something, in violation of a formal or implicit rule about what that person ought to do or omit to do, to the benefit of the person who gives the thing of value or a third party" (Argandoña, 2005, p. 252). Representing a major social issue around the world, corruption is any misuse of power and position for private gain while damaging organizational integrity (UN Global Compact 2006). Through acts of bribery, overestimated project budgets, legal and/or other expenses, corruption is estimated to incur a global cost of $2.6 trillion. As a result, corporations are constantly encouraged to avoid all forms of corrupt practices, to maximize operational efficiency and maintain a good social reputation. That is, increase anti-corruption practices through a strategic lens focused on corporate social responsibility (CSR) (Hills et al. 2009). The harmful effects of corruption are incompatible with sustainable development, Branco and Matos (2016) thus argues that the prevention of corruption is an integral part of any organization's CSR Anti-corruption activities are provided under the social category in sustainability reporting guidelines-Global Reporting Initiative (GRI) guidelines. According to the guidelines for 2014, an organization's sustainability report should include anti-corruption policies and procedures implemented in the organization training program on anti-corruption practices, as well as the total number of operations used to assess corruption related risks. Organizations should report any incidents of corruption and the actions taken. Sustainability reporting guidelines are commonly based on three pillars: economic, environmental, and social. This report conveys information related to an organization's impact (positive or negative) on the environment, society and the economy. The guidelines further assert the adoption of robust corporate governance system that counters financial statement fraud, corruption and money laundering activities. Good corporate governance has been identified as important way to curtail 2 Page 3 of 17 Journal of Financial Crime 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 such activities. Firms, posited by Rose-Ackerman et al. (2012), need to push towards a selffulfilling cycle of good governance to promote the efficacy of anti-corruption practices. Osuagwu (2012) adds that governance system designed to fight corruption should be built to reach effectiveness and improve performance. Currently, laws which exist within the Gulf Cooperation Council (GCC) countries prohibit any acts of bribery. The violation of these laws are accompanied by criminal fines and or periods of imprisonment for both parties involved; those who offer the bribe, as well as for the local official receiving. Gifts in any form, hospitality, or entertainment can constitute a bride and therefore forbidden under the laws of the GCC states; if influential to an official's decisions (Jones Day, 2013). The Corruption Perceptions Index (CPI) published on an annual basis by Transparency International (TI), in 2015, ranks all GCC states. A review of this index reveals that Qatar and the United Arab Emirates (UAE) both enjoy better rankings compare with other GCC states. Qatar was labelled the least corrupt country, ranking 22 nd on a global scale, followed by UAE, Saudi Arabia, Bahrain, Kuwait and Oman have CPI ranking of 23 rd , 48 th , 50 th , 55 th and 60 th , respectively. Heightened by this ranking, the aim of this study is to determine the extent of sustainability reporting in GCC companies under coercive isomorphism concept; with a special interest in the disclosure of anti-corruption practices. Ultimately, addressing the following questions: To what extent the GCC companies disclose their anti-corruption practices in the sustainability reports? What areas of anti-corruption disclosure the GCC is more concern in their sustainability reports? To what extent do external forces under coercive isomorphism explain the extent of anticorruption disclosure? The remainder of this paper is structured as follows. The next section will provide a review of the existing literature relevant to the research. This will be followed by theoretical framework. Section 4 provides a description of the methodological process. Section 5 provides the results and discussion followed by conclusive remarks of the study in Section 6. 2. Literature Review There is little research in literature on the anti-corruption practices disclosure as an integral part of CSR themes or sustainability reporting for firms (Rodriguez et al. 2006; Dissanayake et al. 2011; Ho & Lin, 2012 and Branco & Matos, 2016). In 2006, Wilkinson (2006) notes that anti-corruption information by firms does not have the lengthy reporting history compared with ecological issues. However, the lack such discourse by firms due to reporting on anti-corruption presents practical difficulties. Corruption by its very nature is secretive, complex, hidden and or viewed as sensitive by firms, yet it does not carry the same emotive weight as other social issues. In an effort to evaluate managers' perception toward anti-corruption practices and reporting, Gordon and Wynhoven (2003) examined the top 100 non-financial multinational firms' websites listed in United Nations Conference on Trade and 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Financial Crime Page 4 of 17 Development's (UNCTAD) World Investment Report 2002. The authors reported that only 43% published anti-corruption material on their websites, while 95% disclosed environment related information. They also found that the propensities to disclose anti-corruption practices where based on the country of location and or the sector. Resulting in similar findings, Healy and Serafeim (2014) used TI's scoring index of anticorruption reporting on 480 firms to investigate whether their disclosures reflect firms' real efforts to fight corruption or are "cheap talk". They found that ratings of firms' anti-corruption practices reporting are predictably related to strong enforcement, such as home country laws and regulations, industry corruption risk, U.S. listing, Big Four auditors, and have greater board independence. In KPMG (2005) surveyed, exceeding 1600 annual reports, of the world's largest firms in 2005, reported that 61% of the firms included a section on corporate governance, but only 18% included policies for bribery or corruption. In further efforts to evaluate perception to combating this negative practice, TI (2009) examined the sustainability reports, annual reports and websites of the Fortune 500 world's largest leading corporations. It is found that while firms may often disclose high-level strategic commitments to fight corruption, they are less likely to disclose information on the necessary support systems required to meet these commitments. Day and Chambers (2011) analyzed the annual reports of twenty FTSE 100 firms over a two year period (2007-2008) in terms of bribery and corruption reporting. They found additional evidence which indicated the absence of accountability from firms in regard to bribery and corruption information disclosures. Hess (2009) stated that reporting on the effectiveness of anti-corruption practices by the firm serves multiple organizational goals. First, it provides accountability. Second, it raises high level of public awareness and makes pressure on other firms to adopt the principles. Third, reporting on anti-corruption also serves the goal of organizational learning. Through disclosure, firms can begin to learn from the experiences of others' anti-corruption efforts and adopt best practices. Reporting on the effectiveness of anti-corruption provides indications that firms are taking responsibility for their employees' behavior and that they acknowledge the negative consequences to their reputation. There is proliferation of guidelines and initiatives for organizations to following, which can assist with reporting efforts geared towards combating bribery and corruption: such include TI, FTSE4Good Index Series, UN Global Compact and GRI (ACCA 2008). In 2012, Hoi and Lin (2012) investigated the development of CSR framework in Taiwan Semiconductor Manufacturing Company (TSMC), one of the largest semiconductor industries in the world, and its association with anti-corruption activities. It was concluded that there exist a positive relationship between firm's anti-corruption program and its commitment to CSR. Furthermore, the authors found that CSR undermines corporate corruption in two ways: through extrinsic regulations such as such as bureaucratic controls, codes of conduct, and legal and regulatory sanctions that emphasize surveillance and penalty, and or intrinsic motivations such as 4 Page 5 of 17 Journal of Financial Crime 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 such as company values, organizational ethics, and self-controls that emphasize integrity and self-monitoring. Branco (2016) analyzed the 2009 sustainability reports of Portuguese firms to understand the disclosure practices. He concluded that firms with a high level of corruption risk and firms in association with the UN Global Compact seem to show greater concern to improve corporate image through anti-corruption reporting. In context of the GCC and the Middle East, a void remains for studies examining the level of anti-corruption practices reporting. According to the CPI in 2015, issued by the TI, Qatar has ranked as "cleanest" of the GCC, it ranked 22nd and the UAE followed at 24. While the other GCC countries have higher serious corruption ranking, Saudi Arabia was ranked 48, Bahrain followed at 50, Kuwait was ranked 55 and Oman was placed 60. 3. Theoretical Framework Institutional theory is a widely accepted. The theory states that institutions are deeply embedded in wider institutional and environmental structures, thus institutional practices are often either direct reflection of, or responses to, rules and structures built into their wider environments (Powell 1998; Scott, 2005). According to Scott and Meyer (1994), institutions are symbolic and behavioral systems containing representational, constitutional, and normative rules together with regulatory mechanisms that define a common meaning system and give rise to distinctive actors and action routines. Across the body of academic literature, institutional theory has been employed in several studies to understand accounting practices and reporting. Examples include, case-mix accounting choices, budgeting, generally accepted accounting principles (GAAP) adoption, sustainability reporting, and financial reporting (see Mezias 1990; Covaleski et al. 1993; Carpenter & Feroz, 2001; Campbell, 2007; Joseph et al. 2015). The institutional theory posits that in order to survive, organizations must conform to the rules and belief systems prevailing in the environment, this behavior is called institutional isomorphism (Scott, 1994). Hawley (1968) define "isomorphism" as the constraining process that obliges one unit in a population to resemble other unites that face the same set of environmental characteristics, while DiMaggio and Powell (1983) later provide a more narrow definition – it is the likelihood of organizations to adopt the same structures and practices. Legitimacy is a major organization's need that comes from institutional isomorphism, according to Meyer and Rowan (1977), organizations mimic the structure and practices defined by prevailing rationalized concepts of an institutionalized society. The Institutional theory has numerous similarities with the legitimacy theory; organizations strive to increase efficiency by achieving some 'fit' between environmental condition and structure, but the objective of efficiency is a result from organization's need to legitimize itself (DiMaggio and Powell, 1983; Meyer and Zucker, 1989; Brignall & Modell, 2000). Greenwood & Hinings (1996) state that organizations conform to contextual expectations in order to promote legitimacy and rise their probability of survival. 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Financial Crime Page 6 of 17 According to Dimaggio and Powell (1983), three varying mechanisms exist through which institutional isomorphism occurs; coercive, mimetic, and normative. Coercive isomorphism is used to clarify the institutional environment in the fight against corruption (Joseph et al. 2015). Coercive isomorphism in itself is driven by two forces the response to pressures from organizations such as a government and key dependent affiliates, and the pressure to adapt to cultural expectations of larger society (Dimaggio & Powell, 1983; Mizruchi & Fein, 1999; Radaelli, 2000). This concept originated from the influence of government regulation, law and the external environment; resulting from both formal and informal pressures exerted by organizations of which the particular organization is dependent (Amran & Devi 2008). These pressures may be in the form of forces, persuasions or invitations to collude. In relation to the anti-corruption activities adopted by the international corporation, Rodriguez et al. (2005) mentioned that in a host country, which forbids corrupt behaviors, International Corporation complies with their institutional environment and adopts the same norms and practices in order to create acceptance by government. While in other countries, International Corporation becomes isomorphic with a pervasively corrupt; complying with forces to pay bribes, engage in other illegal activities, in efforts to gain legitimacy support. The coercive pressure used in this paper presents the regulations and laws imposed by the regulatory authorities; regarded as the external formal body that forces organizations to adopt anti-corruption practices and to disclose anti-corruption activities in their sustainability reports. Coercive isomorphism approach has been widely used by other studies, including (Carpenter & Feroz, 2001; Joseph and Taplin, 2011; Joseph et al., 2015). 4. Research Methodology The Content Analysis approach used have been applied in previous studies to collect anticorruption information from annual reports and examine the level of disclosure (Dissanayake et al., 2011; Joseph et al., 2015; Branco & Matos, 2016). Content Analysis is a technique of codifying the text of a piece of writing into groups based on selected criteria (Weber, 1990; Guthrie and Abeysekera, 2006). Following prior studies (Dissanayake et al., 2011 and Joseph et al., 2015), this study uses dichotomous scales of measurement of the availability of thematic disclosure (index measures) in order to capture the desired information. This comprehensive approach to examining the level of anti-corruption disclosure evaluates using seven general themes, of 40 sub-categories. The general themes include: (1) Accounting for combatting bribery; (2) Board and Senior Management responsibility; (3) Building human resources to combat bribery; (4) Responsible business relationships; (5) External verification and assurance; (6) Codes of Conduct; and (7) Whistle-blowing. The sustainability annual reports of GCC firms reported in 2014 were evaluated. These reports were primarily obtained from the Global Reporting database with others source through the individual firm's website. The sample consists of 66 GCC firms disclosing sustainability reports 6 Page 7 of 17 Journal of Financial Crime 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 according to GRI, the Organization for Economic Co-operation and Development (OECD) and The UN Global Compact guidelines. The sample also included firms not referring to any guidelines of reporting. Collectively, data was gathered from 8 Saudi firms, 5 Oman firms, 5 Kuwait firms, 1 Bahrain firm, 31 Emirates firms and 16 Qatar firms. 5. Results and Discussion The results of this analysis are presented in the Figure 1 and Appendix 1. Category 1 presents the number of items listed in the annual and sustainability reports for combating bribery. Notably, all of GCC firms provide information regarding the combatting bribery (item 9); indicating concerns with the process of the internal control systems. The majority of firms omit information on the facilitation of payment prohibitions and number of employee dismissal (items 7 and 12). Dissimilar, the disclosure of such information was without concern for 1 Saudi firm, 4 UAE firms and 1 Oman firm. The sample appears to have committed to disclosing charitable contribution and sponsorship (item 6); a measure of the organization's charitable efforts. Under Category 2, insight into the responsibilities of board members and senior management is gained. According to the data, the GCC made considerable efforts to disclose much less information on whether dialogue between NGOs and the public, to promote their anti-corruption program, exists. Limited information was also recorded regarding the existence of independent assessment of the program by audit committees (items 6 and 7). This is a possible indicator that few firms collaborate with third parties entities to improve anti-corruption policies; paying less attention to the assessment process of their anti-corruption program. Category 3 provides statistics regarding building human resources to combat bribery; a signal that firms are reporting on human resources practices and commitments (item 1) a commitment level exceeding 80%. This was closely followed by item 2, information on development of human resources policies with the assistance of trade unions and consultation with employees. Only 1 Kuwaiti was excluded from the list of countries not listed under item 2. Category 4 illustrates the reporting on responsible business relationships. The results of items 1 and 6, which include information on monitoring the performance of joint ventures and conducting the procurement practices, were disclosed by approximately 37% of GCC firms. However, the information on the remaining items was disclosed by every firm. Largely, the GCC firms show less awareness on the external business relations and communications. Category 5 demonstrates the disclosure on external verification and assurance. It indicates that a larger portion of GCC firms commits to the full disclosure on the provision of assurance statements (item 3). However, reporting on external verification or assurance of anti-corruption program was provided by UAE firms. Category 6 illustrates the disclosure on codes of conduct. It indicates that the majority of GCC firms reported on the codes of conduct in a good manner among their stakeholders (3 items). Category 7 also includes a shortened list of GCC firms, which disclosed adequate information on the existence and implementation of whistle-blowing system. Bahrain firms were completely excluded from the list. 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Financial Crime Page 8 of 17 Also gathered from Figure 1, is the GCC firms intent level to disclose the highest amount of information on category (6) Codes of Conduct; category (3) Building Human Resources to Combat Bribery and category (2) Board and Senior Management Responsibilities. Minimum disclosure was on category (7) Whistle-Blowing. GCC firms display great concern regarding the code of conduct and communicating their business ethics with employees. This demonstrates a proposal to safeguard business profits and professional ethics, while ensuring the firm continues to uphold high standards of ethical behavior in the business operations. However, the whistleblowing system of disclosure by GCC firms requires significant attention despite the assistance offered to governments by international anti-corruption groups, such as TI. Suggested in the results, UAE and Qatar firms were more inclined to engage in sustainability reports compare with firms from other GCC countries. This is consistent with the finds of the Centre for Sustainability and Excellence's (CSE) research on sustainability reporting in Middle East region (2014); where the country capturing the most sustainability reports in the period 2012-2014 was UAE (34%), followed by Qatar (22%). The other countries were represented by small groups of firms. Saudi Arabia and Oman had a small group of firms concerned with sustainability reporting, despite a high public awareness levels through several events held. This indicates a clear gap between the level of awareness and practice, coupled with a lack of enforcement by local governments. Regarding coercive isomorphism, an accurate comparison of best practices between UAE and Qatar firms and others (in Saudi, Oman, Kuwait and Bahrain) is impractical, due to the wide gap which exists between reporting habits. There is an absence of strict formal regulations and rules in other countries, which obligate firms to build a sound anti-corruption system. Furthermore, coercive isomorphism is more evident in UAE and Qatar, with global ranking for the two countries improving annually 1 . UAE and Qatar are noted with the least corruption among the GCC nations, justified by the significant progression in adherence of good corporate governance. Regulatory authorities in the both countries have imposed significant initiatives to enhance the corporate governance practices and fight against corruption, when matched against the other GCC countries. Additionally, the formal pressure by regulators in Qatar and UAE is demonstrated through the implementation and development of corporate governance system that inevitably results in enhancement of anti-corruption practices. UAE and Qatar governments have shown commitment efforts in their fight against corruption. Various mechanisms have been advanced toward this effort; including, ratifying the UN convention on corruption, signing the Arab Anti-corruption and Integrity Network. The UAE has also appointed a federal body to oversee the use of public funds – the State Audit Institution (SAI). Following UN anti-corruption recommendations, in 2011 the SAI issued a guide on best practices focused on anti-corruption and fraudulent activities (All & Bose, 2015). The Qatar 1 For example, in 2012, the both of Qatar and UAE had the 68th and they needed just two years to have the better global ranking. 8 Page 9 of 17 Journal of Financial Crime 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Financial Market Authority (QFMA) established a corporate governance code in 2009, based on international standards set forth by OECD, the Bank for International Settlements (BIS), the International Corporate Governance Network (ICGN) and the Institute of International Finance (IIF). The corporate governance code has been amended several times in the latter years to match the sustainability goals of Qatar's National Vision 2030 2 . The implementation of anti-corruption systems is favorable to a firm's corporate image and reputation. Alternatively, a firm considered to be involved in corrupt or fraudulent activities is expected to receive a negative outlook. Consequently, the limited number of firms which engage in sustainable reporting and anti-corruption practices, in Saudi, Oman, Kuwait and Bahrain, tend to be more visible to the public while maintaining a positive reputation. Furthermore, the high level of public awareness particularly in Saudi Arabia and Oman requires a response from firms to maintain their legitimacy and to explain their commitment to the community through good governance and reporting (Suchman, 1995). It is worth-of-note that CSR reporting by Saudi Arabia, Oman, Kuwait and Bahrain firms are primarily focused on charitable philanthropic activities. Fombrun and Shanley (1990) previously postulated that firms with foundations and give more to charity, are likely to have a higher positive reputation. Figure 1: Anti-corruption disclosure P er ce nt ag e 100% 80% 60% 40% 20% 0% Category 1 Category 2 Category 3 Category 4 Category 5 Category 6 Category 7 Category 1: Accounting for combatting bribery. Category 2: Board and senior management responsibilities. Category 3: Building human resources to combat bribery. Category 4: Responsible business relationships. Category 5: External verification and assurance. Category 6: Codes of conduct. Category 7: Whistle-blowing. According to Meyer and Rowan (1977), Isomorphism forces may be a result of the several corporate governance incentives and rewards granted to firms as a result of the adoption of best 2 Qatar's National Vision 2030 is a development plan launched in October 2008 by the General Secretariat for Development Planning in the State of Qatar. The aim of QNV 2030 is to transform Qatar into an advanced society capable of achieving sustainable development by 2030. 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Financial Crime Page 10 of 17 practices 3 . With regard to institutional theory, conformance to the ceremonial measurement criteria has also proven useful to organization. It legitimizes the organization with internal participants, stockholders, the society and the regulatory bodies, demonstrating socially the fitness of an organization. High ceremonial values help the organization to boost its legitimacy consequently loans, donations or investments are more easily to be obtained. 6. Conclusion This study assesses the level of sustainable reporting performance on combating corruption under the coercive isomorphism concept, in efforts to understand the anti-corruption systems, strategies and policies of GCC firms according to 2014 data. GCC firms disclosed the highest amount of information under the category (6) Codes of Conduct, while the category (7) WhistleBlowing has the least disclosure. Although there has been a significant increase in the importance of anti-corruption reporting as a means of reducing corruption, globally. The study finds that anti-corruption disclosure in GCC region has yet to reach a high or maturity level. Interpreted through the lens of institutional theory, the regulatory authorities are coercively pressured to fight corruption in GCC region. Firms in Qatar and UAE notably abide by the rules set by the regulatory authorities to disclose anti-corruption information. The sustainable developments in Qatar and UAE required enacting laws to follow the global trend of efforts in improving the sustainability. These firms in the both countries release more detailed anti-corruption information than other countries in GCC region. Furthermore, evidence suggest an increasing trend in GCC to include more anti-corruption information. Conclusively, the growth in sustainability reporting within GCC countries was justified under the institutional theory legitimacy is an essential organization's need that comes from institutional isomorphism. Thus, the GCC firms attempt to present a socially responsible image through their reports in order to increase legitimacy and credibility with stakeholders. Despite the present increasing trend, only a small percentage of reports remain fully compliant with the respective rule of law. Reference All, S., & Bose, S. (2015). Corporate governance in the GCC: An Analysis of Selected Listed Companies in The UAE. 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Business Against Corruption: Case Stories and Examples (United Nations Global Compact Office, New York), 96-107. 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Financial Crime Page 14 of 17 Appendix Category 1: Accounting for combatting bribery. Saudi Oman Kuwait Bahrain Emirates Qatar Accounting for combatting bribery n: 8 n: 5 n: 5 n: 1 n: 31 n: 16 Tota % Tota % Tota % Tota % Tota % Tota % l l l l l l 1 The company prohibits all forms of 5 62.5 4 80 4 80 1 100 25 80.6 11 68.8 bribery whether they take place directly or through third parties. 2 The company prohibits its employees 4 50 3 60 1 20 1 100 18 58.1 10 62.5 from soliciting, arranging or accepting bribes intended for the employee's benefit or that of the employee's family, friends, associates or acquaintances. 3 The company, its employees or agents 3 37.5 0 0 0 0 1 100 5 16.1 0 0.0 make clear commitments that they do not have direct or indirect contributions to political parties, organizations or individuals engaged in politics, as a way of obtaining advantages in business transactions. 4 The company discloses all its political 0 0 1 20 0 0 1 100 4 12.9 0 0.0 contributions. 5 The company ensures that charitable 1 12.5 1 20 2 40 1 100 1 3.2 0 0.0 contribution and sponsorship are not used as a subterfuge for bribery. 6 The company publicly discloses all its 5 62.5 3 60 1 20 1 100 22 71.0 14 87.5 charitable contribution and sponsorship. 7 The company does not make facilitation 0 0 1 20 0 0 0 0 4 12.9 0 0.0 payments and takes the initiative to identify and eliminate them. 8 The company prohibits the offer or 2 25 1 20 1 20 1 100 13 41.9 7 43.8 receipt of gifts, hospitality or expenses whenever they could affect or be perceived to affect the outcome of business transactions and are not reasonable and bona fide. 9 The company establishes and maintains 4 50 5 100 4 80 1 100 24 77.4 15 93.8 an effective system of internal control to counter bribery, comprising financial and organizational checks and balances over the enterprise's accounting and record keeping practices and other business processes related to the program. 10 The company subjects the internal 5 62.5 3 60 2 40 1 100 16 51.6 5 31.3 control systems, in particular accounting and record keeping practices, to regular review and audit to provide assurance on their design, implementation and effectiveness. 11 Discloses the number of violations. 5 62.5 1 20 3 60 1 100 8 25.8 3 18.8 12 Reports the number of dismissals of 1 12.5 0 0 0 0 0 0 0 0 0 0.0 employees. 14 Page 15 of 17 Journal of Financial Crime 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Category 2: Board and senior management responsibilities. Saudi Oman Kuwait Bahrain Emirates Qatar Board and senior management n: 8 n: 5 n: 5 n: 1 n: 31 n: 16 responsibilities Tot a % Tot a % Tot a % Tota % Tota % Tota % l l l l l l 1 The board of directors or equivalent body 2 25 4 80 4 80 1 100 26 83.8 8 50 should commit to an anti-corruption policy and program based on business principles and provide leadership, resources and active support for the management's implementation of the program. 2 The company makes compliance with the 2 25 2 40 3 60 1 100 7 22.5 0 0 program mandatory for directors and applies appropriate sanctions for violations of its program. 3 The company establishes feedback 4 50 5 100 4 80 1 100 14 45.1 9 56.2 mechanisms and other internal processes supporting the continuous improvement of the program. 4 Senior management of the company 6 75 5 100 3 60 1 100 20 64.5 15 93.7 monitors the program and periodically reviews the program's sustainability, adequacy and effectiveness, and implements improvements as appropriate. 5 Senior management should periodically 5 62.5 3 60 1 20 1 100 11 35.4 3 18.7 report the results of the program review to the audit committee, board or equivalent body. 6 Management offers dialogue with the 2 25 2 40 0 0 1 100 11 35.4 0 0 NGOs and public so as to promote its awareness of and cooperation with the fight against bribery and extortion. 7 The audit committee, the board or an 1 12.5 0 0 1 20 1 100 1 3.2 0 0 equivalent body should make an independent assessment of the adequacy of the program and disclose its findings in the enterprise's annual report to shareholders. Category 3: Building human resources to combat bribery. Saudi Oman Kuwait Bahrain Emirates Qatar Building human resources to combat n: 8 n: 5 n: 5 n: 1 n: 31 n: 16 bribery Tot a % Tot a % Tot a % Tota % Tota % Tota % l l l l l l 1 Human resources practices including 8 100 5 100 4 80 1 100 29 93.5 15 93.7 recruitment, promotion, training, performance evaluation, remuneration and recognition should reflect the companies' commitment to the program. 2 The human resources policies and 2 25 4 80 5 100 0 0 20 64.5 12 75 practices relevant to the program are developed and undertaken in consultation with employees, trade unions or other employee representative bodies as appropriate. 3 The company makes it clear that no 0 0 1 20 0 0 0 0 0 0 0 0 employee will suffer demotion, penalty or other adverse consequences for refusing to pay bribes even if such refusal may result in the enterprise losing the business. 4 Reports the percentages of employees 1 12.5 1 20 3 60 1 100 8 25.8 1 6.25 trained in the organization's anti- corruption policies and procedures. 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Journal of Financial Crime Page 16 of 17 Category 4: Responsible business relationships. Saudi Oman Kuwait Bahrain Emirates Qatar Responsible business relationships n: 8 n: 5 n: 5 n: 1 n: 31 n: 16 Tota % Tota % Tota % Tota % Tota % Tota % l l l l l l 1 The company monitors the programs and 3 37.5 3 60 3 60 1 100 14 45.1 11 68.7 performances of joint ventures and consortia; in the case of policies and practices that are inconsistent with its own program, the enterprises should take appropriate action. This can include: requiring corrections of deficiencies in the implementation of the program, application of sanctions, or termination of its participation in the joint venture or consortium. 2 Where the company is unable to ensure 1 12.5 1 20 0 0 0 0 2 6.4 1 6.25 that a joint venture or consortium has a program consistent with its own, it should have a plan to exit from the arrangement if bribery occurs or is reasonably thought to have occurred. 3 The company ensures that remuneration 1 12.5 0 0 0 0 0 0 0 0 0 0 of agents is appropriate and for legitimate services only. Where relevant, a list of agents employed in connection with transactions with public bodies and state-owned enterprises should be kept and made available to competent authorities. 4 The company contractually requires its 0 0 0 0 0 0 0 0 0 0 0 agents and other intermediaries to keep proper books and records available for 0 inspections by the enterprise, auditors or investigating authorities. 5 The company monitors the conduct of its 2 25 3 60 2 40 1 100 13 41.9 4 25 agents and other intermediaries and should have a right of termination in the event that they bribe or act in a manner inconsistent with the enterprise's program. 6 The company conducts its procurement 3 37.5 3 60 2 40 1 100 13 41.9 10 62.5 practices in a fair and transparent manner. 7 The company makes known its anti0 0 3 60 2 40 1 100 11 35.4 3 18.7 corruption policies to contractors and suppliers. 8 The company monitors significant 3 37.5 2 40 2 40 1 100 14 45.1 6 37.5 contractors and suppliers as part of its regular review of relationships with them and has a right to terminate in the event that they pay bribes or act in a manner inconsistent with the enterprise's program. 9 The company reports the number of 0 0 0 0 0 0 0 0 2 6.4 2 12.5 contracts terminated. 16 Page 17 of 17 Journal of Financial Crime 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Category 5: External verification and assurance. Saudi Oman Kuwait Bahrain Emirates Qatar External verification and assurance n: 8 n: 5 n: 5 n: 1 n: 31 n: 16 Tota % Tota % Tota % Tota % Tota % Tota % l l l l l l 1 The board or equivalent body should 0 0 0 0 0 0 0 0 4 12.9 0 0 consider whether to commission external verification or assurance of anticorruption policies and systems to provide enhanced internal and external assurance of the program's effectiveness. 2 Where such external verification or 0 0 0 0 0 0 0 0 2 6.4 0 0 assurance is conducted, the board or equivalent body should consider publicly disclosing that an external review has taken place, together with the related verification or assurance opinion. 3 Assurance statements explicitly cover 7 87.5 5 100 4 80 1 100 23 74.1 14 87.5 program reporting. Category 6: Codes of conduct. Saudi Oman Kuwait Bahrain Emirates Qatar Codes of conduct n: 8 n: 5 n: 5 n: 1 n: 31 n: 16 Tota % Tota % Tota % Tota % Tota % Tota % l l l l l l 1 Establishment of Codes of Conduct 6 75 3 60 4 80 1 100 28 90.3 16 100 relates to corruption practices 2 The Code of Conduct is effectively 6 75 3 60 4 80 1 100 25 80.6 11 68.7 communicated to the members of the organization 3 Establishment of a monitoring 5 62.5 3 60 4 80 1 100 25 80.6 12 75 mechanism on the implementation of the Codes of Conduct Category 7: Whistle-blowing. Saudi Oman Kuwait Bahrain Emirates Qatar Whistle-blowing n: 8 n: 5 n: 5 n: 1 n: 31 n: 16 Tota % Tota % Tota % Tota % Tota % Tota % l l l l l l 1 Existence of a whistle-blowing policy 3 37.5 1 20 3 60 0 0 13 41.9 4 25 2 Implementation of whistle-blowing 3 37.5 1 20 3 60 0 0 13 41.9 4 25 practices.