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BHP’s $US25 million fine rings the bell on corporate sponsorship, reports The Age

BHP’s $US25 million fine rings the bell on corporate sponsorship, reports The Age

The Age newspaper, 23 May 2015. BHP’s $US25 million fine rings the bell on corporate sponsorship by Malcolm Maiden.

An edited extract of the article appears below.

The Olympics are arguably the standout example of corporate networking…

BHP signed on as an official sponsor of the Games in December 2005, and as part of its deal supplied the raw materials used to manufacture Olympic medals…

The Olympics are arguably the standout example of corporate networking because a company who’s who and government who’s who attends. Corporate sponsorship is these days a cornerstone of just about every major international event, however, and the Security and Exchange Commission’s BHP decision might be watershed for them all.

BHP will certainly not be getting involved in a major event like the Beijing Olympics as long as the memory of its run-in with anti-corruption regulators is alive inside its head office.

More generally however, BHP’s experience might work against the trend in recent decades for major events to rely increasingly heavily on corporate sponsorship.

BHP said on Thursday that its payment of a $US25 million civil penalty to the SEC had ended investigations by the US securities regulator and  that country’s Department of Justice into potential breaches of the Foreign Corrupt Practices Act, over its Beijing Olympics hospitality programme, and payments to government officials or their agents in countries where it was looking to expand. An Australian Federal Police investigation that is believed to be traversing the same territory has not yet concluded…

BHP had violated the FCPA’s “internal controls and books and records provisions” by failing to devise and maintain sufficient internal controls over the Beijing hospitality programme, the SEC said…

BHP has departed the major events arena – and other companies that, like BHP, are reached by the US Foreign Corrupt Practices Act and other anti-corruption laws that have extraterritorial reach, including Britain’s Bribery Act, may also head for the exit…

[The SEC], found that the Beijing Olympics programme itself raised the risk that the US   anti-corruption act might be breached, and then found that the Beijing project was not run by BHP in a way that controlled the risk adequately.

That methodology puts all general corporate sponsorship and entertainment programmes in the gun, potentially; and while the US law and Australia’s version of it focus on dealings with government officials, Britain’s Bribery Act covers both the public and private sectors…

Multinational companies within the ambit of the anti-corruption regimes need to not just ask themselves  if they can handle risks that are raised by major corporate sponsorships, but whether they have systems in place that are capable of detecting the risks in the first place.

My guess is that BHP won’t be the only company deciding that vacating the major-event field is the safest and best option. Major-event planners should also factor in the possibility that a golden age of corporate sponsorship and networking is drawing to a close: corporate sponsorships might have to be a less important part of major-event business cases in coming years.

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