A way to weed out the undesirables

If FIFA does integrity checks on candidates for key posts, shouldn’t listed companies do the same for directors and top managers?

SPORTS is big business. We know that to be true just by looking at how often athletes and officials are caught cheating, and how many sports bodies have been tainted by corruption and intense power struggles.

These are indicators of the huge amounts of money at stake.

The less scrupulous are likely to ignore rules and ethics in the pursuit of broadcasting contracts, product endorsements, sponsorship income, merchandising deals, prize money, incentive payments and bribes.

It’s the same greed that prods companies, directors, executives and investors into committing fraud, insider trading, market manipulation and other offences.

However, it can be said that the corporate sector is far better regulated than the sports world.

But that doesn’t mean the capital market regulators have nothing to learn from the sports administrators.

Believe it or not, even world football’s governing body FIFA can teach us a thing or two about integrity, or more specifically, about integrity screening.

It sounds absurd that the scandal-hit association, currently swamped by mounting allegations of widespread corruption that go back many years, can be a positive example on choosing leaders with integrity, but at least it has a framework for that.

On Thursday, FIFA said its Ad-hoc Electoral Committee had declared five candidates eligible to stand for election in February as the next association president. Another person was disqualified.

These decisions were made after the investigatory chamber of the Ethics Committee had conducted integrity checks on the candidates.

This is how FIFA describes the checks: “This two-step process involved first creating detailed reports of risk-relevant information relating to each candidate.

The integrity check included a review of corporate records, litigation cases, bankruptcy proceedings, potential regulatory actions taken against the candidate and a review of media reports concerning potential red flags (fraudulent behaviour, match manipulation, human rights violations, etc.). Each candidate was then asked to comment on the content of the detailed report produced.”

The reports, the candidates’ replies and their declarations of integrity were then submitted to the Ad-hoc Electoral Committee.

On the disqualification of Musa Hassan Bility (pic), the head of the Liberian Football Association, FIFA said it was because of the content of the integrity check report on him. The Ad-hoc Electoral Committee has explained this to Bility but FIFA refuses to comment publicly on the specifics for “reasons of protection of personality rights”.

FIFA’s rules on integrity checks came into force in July 2013 as part of a governance reform process launched in June 2011. With this change, it is mandatory for those vying for key position in the association to be subjected to an integrity check prior to their election.

A candidate’s declaration of integrity is the basis of the integrity check. The declaration form covers matters such as conviction for certain offences, disciplinary action by a sports governing body, and potential conflicts of interest.

The candidate is also required to declare that he is fully aware that he’s subject to FIFA’s Code of Ethics and its other rules that address integrity issues and that he fully complies with those provisions.

It’s ridiculous to think that integrity checks will work as force field that keeps out dishonest people.

Many past wrongdoings are well-kept secrets and some of the worst crooks are very good at pretending to be otherwise. Also, we can’t be sure that a person with a spotless record will forever resist the temptation to cross over to the dark side.

But when diligently implemented, integrity screening will weed out some of the undesirables, and that’s a good thing.

Shouldn’t the corporate sector have a similar framework for choosing directors and top executives?

Pick any listed company and chances are its chairman or CEO has plenty to say about integrity and how important it is to the business. But what exactly has the company done to ensure that integrity is at the heart of everything it does?

This column has talked about the disappointing number of listed companies that have signed the Corporate Integrity Pledge, a framework initiated by the Malaysian Institute of Integrity and supported by the Performance Management and Delivery Unit (Pemandu), Malaysian Anti-Corruption Commission, (MACC) Securities Commission, Bursa Malaysia, Companies Commission of Malaysia and Transparency International Malaysia.

A company that signs the pledge is basically declaring that it won’t commit corrupt acts and that it will work towards creating a highly principled business environment.

The pledge also a promise to uphold the five Anti-Corruption Principles for Corporations in Malaysia:

  • Committing to promoting good corporate governance, transparency, accountability and values of integrity;
  • Strengthening internal systems that support corruption prevention;
  • Complying with laws, policies and procedures relating to fighting corruption;
  • Fighting any form of corrupt practice; and
  • Supporting corruption prevention initiatives by the Malaysian Government and the MACC.

Perhaps this is a long-haul mission and it will take a while before most listed companies are ready to embrace the pledge.

Meanwhile, it’s a good first step if these companies incorporate integrity checks in its procedures for appointing board members and employing key managers.

Of course, the process needs to be consistent and transparent. To find a person with integrity, the search itself must be conducted with integrity.

Executive editor Errol Oh is terribly curious about what might be uncovered if rigorous integrity checks were done on current chairmen and CEOs of listed companies.