A Look at Anti-bribery Efforts in Israel, Part One – Israel’s History with the OECD 1

We are excited to say that TRACE International will be conducting a one-day workshop this fall in Tel Aviv to explore the current anti-corruption regulatory and enforcement environment in Israel and to update participants on best practices to enhance compliance.  Last month also marked the fourth anniversary of Israel’s adoption of the OECD Anti-Bribery Convention.  It seems fitting then that TRACE is running a two-part guest blog series authored by our good friend Daniel Kessler, who now lives in Israel and is a seasoned lawyer with extensive in-house and private practice experience in U.S. and international anticorruption and trade law.  This first entry examines Israel’s involvement with the OECD’s Working Group on Bribery and the challenges and successes it has faced in implementing the Convention.  

Israel Flag

For Israel, the focus on international anti-bribery began about four years ago.  It was then, on May 10, 2009, three months after ratifying the UN Convention against Corruption, that Israel became party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Transactions (the “Anti-Bribery Convention”). While perhaps not quite as popularly recognized as the United Nations, the Organization for Economic Co-operation and Development, or OECD, has become one of the most important intergovernmental organizations in the spread of common anti-bribery principles worldwide. One reason for this is that not only must each country in the OECD enforce the Anti-Bribery Convention, but the OECD Working Group on Bribery monitors the country’s enforcement efforts and makes public its reports.  There are currently 40 countries that are being monitored under the OECD Anti-Bribery Convention.  This monitoring occurs in three phases: Phase 1 evaluates the country’s implementation of the Anti-Bribery Convention, Phrase 2 assesses whether the country is applying its anti-bribery laws effectively, and Phase 3 addresses outstanding recommendations.

Back in March 2009, Israel completed the first stage of the OECD’s Working Group on Bribery review.  It was then that the Working Group concluded that Israeli legal framework met the Anti-Bribery Convention requirements, and Israel proceeded to the second stage review.  In December 2009, the Working Group recognized that Israel took the necessary steps to implement Anti-Bribery Convention requirements.  These steps included the Israeli Attorney General’s guidelines for prosecuting foreign bribery offenses, the Civil Service Commission requiring government employees to report suspected foreign bribery acts, establishing a reporting duty on Israeli diplomats abroad, and the introduction of anti-bribery clauses in Israel’s export credit agency.

But the report also contained a series of recommendations to strengthen Israel’s battle against foreign bribery.  These recommendations included increasing applicable sanctions, ensuring that the Legal Assistance mechanisms are adequately resourced, obligating the Military Censor to disclose any relevant suppressed information to law enforcement authorities and clarifying that tax laws prohibit deduction of bribery payment as a deductible expense.

Israel heeded the Group’s recommendations, and in May 2012 the OECD acknowledged that the Israeli government had implemented 16 out of 22 recommendations.  It noted that another four had been partially implemented, and only two had not been implemented at all.  The efforts of the Israeli government indicated its commitment against bribery, and the OECD recognized the country’s efforts to implement stronger anti-corruption regulations. More…

Disclosure of Executive Pay a Global Trend Reply

Building Puzzle

(Courtesy of Creative Commons)

Recent corporate scandals and the global financial crisis have launched a renewed push for more visibility into executive pay.  This month, amid public outrage in France against the country’s former budget minister, the government revealed its proposals for financial transparency among ministers and other top officials.  And last month, in response to a scandal involving a Swiss pharma company, Switzerland passed what some are calling “the world’s strictest controls on executive pay.”  Those rules give shareholders binding say on the overall pay packages for executives and directors and require disclosure of all loans to executives.  Germany aims to follow suit, and Chancellor Merkel’s ruling coalition there has already proposed new rules giving shareholders more say as to executive pay.

The idea that companies should disclose how much they pay their top executives has a long tradition in the United States.  Since its creation in 1934, the Securities & Exchange Commission (SEC) has overseen disclosure of how top executives at publicly traded companies are compensated.  More specifically, pursuant to the Securities Act of 1934, companies must reveal in each 10-K or proxy statement how much their top executives earn.

Over the course of the past 80 years, the SEC has also periodically updated its disclosure rules to encompass new forms of executive pay, including stock options, compensation packages, perks (corporate jets, club memberships, etc.) and pension benefits.  Today, “[i]t is generally accepted that shareholders – and the public, for that matter – have a right to know how much the CEO and other top officers are paid, and that more disclosure is always preferred to less,” writes Kevin J. Murphy, a professor of Finance and Business Economics at USC Marshall School of Business.    More…