News just before the Christmas season that Keppel Offshore & Marine (KOM) had been hit with a staggering fine of US$422.2 million for corruption came as a bolt out of the blue that soured the festive mood in Singapore.
After all, Singapore companies enjoy a squeaky clean reputation around the world and the Republic has consistently been ranked the least corrupt in Asia. Rubbing salt into the wound, KOM is a government-linked company, part of Keppel Corporation, whose chairman was a long-serving cabinet minister.
Yet what was particularly shocking was not just the large sum of bribes – some US$55 million – but the protracted period the corruption went on, lasting more than a decade from 2001 to 2014.
The bribes were said to be made by an agent of KOM to officials of Brazilian state-run oil company Petrobras and other parties, with the knowledge or approval of former KOM executives.
This raises serious questions of corporate governance in KOM. Did the company not properly audit the payments of such a large sum over such a long period of time? What oversight did its board and audit committee have over these payments?
To be sure, Keppel cooperated in the investigations and took “extensive remedial measures”, making what it described as “significant enhancements to compliance and internal controls systems” across the group.
Disciplinary action has also been taken against individuals in the misconduct, with Chairman Dr Lee Boon Yang coming out to stress that integrity is a core value of the company.
The Keppel group had previously shown a solid corporate governance record, always ranking among the top five in the Singapore Governance and Transparency Index since the study started nine years ago.
Interestingly, the case is not the only one involving a Singaporean company in the offshore and marine industry. ST Marine, a subsidiary of ST Engineering was embroiled in another corruption scandal in 2014, with seven of its executives charged with various offences ranging from offering bribes for ship-repairing contracts to accounting falsification and conspiracy.
The illicit payments in both the ST Marine and KOM cases were made ostensibly to secure business deals. What is not clear is whether the monumental decline of the marine industry in recent years could have created even more pressure for executives to close the dwindling number of available deals, nor is the extent of corruption in an industry which is still worth many billions.
Nonetheless the KOM case is a black eye for Singapore Inc’s reputation and will serve as a timely reminder that a country’s sterling anti-graft record – carefully built upon over many years – can easily be tarred by just one black sheep.
Naturally, the most important issue at hand is what companies in Singapore can do to ensure corruption does not take root in their business.
Beyond emphasising the importance of following “hard” rules and regulations, it is useful to pay attention to the underlying “soft” corporate culture.
In fact, the development of a new culture was a big turnaround for German multinational Siemens from a long history of mega-corruption scandals over a century.
It was only in mid-2007, when the company brought in an outsider CEO who initiated a massive restructuring of people and processes, that compliance with rules became ingrained as part of the company’s DNA.
On the other hand, Korean corporations like Samsung and Lotte have struggled to shake off repeated corruption lawsuits. This is likely because the culprits are in top leadership and there is no anti-corruption culture across the company.
The KOM case is not the first major corruption scandal to rock Singapore, nor will it be the last. Ultimately, tackling graft must go beyond having good corporate governance and involve checks and balances that drive a strong corporate culture of shunning wrong-doing.