Shareholders pay the price for corruption

Minerva marks International Anti-Corruption Day
with new research and voting guidelines

News of Glencore's 7% share price slump after the UK's Serious Fraud Office confirmed investigations into "suspected bribery" across the Group's operations was a timely reminder that governance issues reach beyond the familiar and routine AGM shareholder resolutions on say on pay or director elections.

Corruption: a material governance issue

The World Bank and World Economic Forum estimate that the international cost of corruption is at least $2.6 trillion or 5% of global GDP annually. Of that, it is suggested that more than $1 trillion is paid in bribes annually. This significantly increases waste, inefficiency and the cost of doing business. Further estimates are that this adds up to 10% to the cost of doing business globally and up to 25% to the cost of procurement contracts in developing countries.

Businesses can both be a source of corruption and a victim. They have a role to play in developing solutions, whether by adopting ethical standards or pushing for enhanced transparency. Investors also have a role to play, by encouraging investee companies to adopt policies and practices that reduce corruption risk.

Reflecting the materiality of corruption and risk to shareholders, and to mark International Anti-Corruption Day, (Monday, 9 Dec 2019) Minerva is announcing the inclusion of a new anti-corruption metric in its pre-AGM research reports. Alongside indicators for climate change, cyber-security and tax governance, the new corruption indicator and voting guidelines will help investors take an integrated approach to ESG voting and stewardship decisions.

Beginning in the 2020 voting season Minerva will flag those companies incorporated in countries with a high level of perceived corruption using Transparency International’s (TI) Corruption Perceptions Index (CPI).

While advances have been made in objectively measuring corruption in specific sectors, there is no indicator which measures objective national levels of corruption directly and exhaustively. The CPI, however, contains informed views of relevant expert stakeholders, including surveys by the World Economic Forum and World Bank, which correlate highly with objective indicators, such as TI’s Global Corruption Barometer.

Full details of Minerva's approach are included in our latest Background Briefing. For more information please contact hello@minerva.info

About International Anti-corruption Day

"Corruption begets more corruption and fosters a corrosive culture of impunity. The United Nations Convention against Corruption is among our primary tools for advancing the fight. Sustainable Development Goal 16 and its targets also offer a template for action.”

UN Secretary-General, António Guterres.

International Anti-Corruption Day has been observed annually on 9 December since the passage of the United Nations Convention Against Corruption on 31 October 2003, to raise public awareness for anti-corruption.

The Convention states, in part, that the UN is: "concerned about the seriousness of problems and threats posed by corruption to the stability and security of societies, undermining the institutions and values of democracy, ethical values and justice and jeopardizing sustainable development and the rule of law" and delegates to the Convention the power to: "promote and strengthen measures to prevent and combat corruption more efficiently and effectively... promote, facilitate and support international cooperation and technical assistance in the prevention of and fight against corruption… [and] promote integrity, accountability and proper management of public affairs and public property…"