Cleaning Up the Skies

Photo Credit: Janak Raja via Flickr

Throughout its forty plus year history, European aircraft and defense group Airbus has been no stranger to controversy. Whether it was the long-running investigation into alleged corruption in an Airbus subsidiary operating in Saudi Arabia or an insider trading investigation involving company shares, scandal seems to follow Airbus, no matter what endeavors the company pursues. However, the latest corruption probe involving the European defense group might be the case that finally forces reforms throughout the Airbus Group.

In August 2016, the UK’s top anti-corruption watchdog, the Serious Fraud Office (SFO), opened a formal investigation against Airbus into allegations of fraud, bribery and corruption in France, Germany and the UK. The investigation is related to irregularities involving third party consultants and the sale of passenger jets overseas. According to the UK’s 2010 Bribery Act, “the bribery risks associated with reliance on a third party agent representing a commercial organization in negotiations with foreign public officials may be assessed as significant and accordingly require much more in the way of procedures to mitigate those risks”. The Airbus Group not only admitted but self-reported that it had failed to act in full accordance with the UK Bribery Act. Namely, it did not fully report the involvement of independent consultants in Airbus deals that sought loans on behalf of customers from Britain’s export credit agency. Then, in early 2017, French authorities followed with a similar investigation into the Airbus Group’s dealings with middlemen in France.

With both the UK and French governments jointly cooperating in the inquiries, Airbus is under immense pressure to review their organizational culture. In May 2017, Airbus took steps to address this issue by appointing an independent review panel to examine the group’s anti-corruption practices and procedures. The panel is comprised of three advisers: UK lawyer and House of Lords member David Gold, former German finance minister Theo Waigel, and former French European affairs minister Noelle Lenoir. The independent panel, made up of members from countries that are Airbus’s biggest financial backers, will be tasked with doing a comprehensive review of all aspects of Airbus’s systems and cultures, and will have complete access to all areas of the company. In addition, Airbus has hired forensic accountants to review the exact timeline and nature of what transpired and in the meantime, has frozen all payments to third-party consultants.

Although the voluntary decision to have an independent review panel has been considered by legal experts as a political gesture designed to strengthen Airbus’s chances of winning a deferred prosecution deal, the overall move is a positive step towards reforming an organization that has dragged its feet much too long on instituting good corporate governance within its culture. The self-imposed review panel suggests that Airbus is gradually understanding the significant costs non-compliance can have on a corporation, even if not its bottom line. After all, Airbus is one of the largest multi-national corporations in the world and generates over $60 million in revenue a year, so despite all the scandals the organization is still doing well financially. However in terms of the brand and image of Airbus, the scandals have negatively affected the perception of the organization and as time goes on, a continuation of unethical behavior could have disastrous consequences on future sales and employee morale. The only way forward is a thorough examination of the policies and culture that got them here in the first place.

This is also a good reminder that the cost of compliance is not always a matter of resources. Indeed, the panel is not likely to identify the lack of sophisticated compliance tools as the main barrier to ethical behavior among Airbus employees and third parties alike. Establishing a culture of intolerance towards corruption goes much deeper than the legal or risk departments. As Airbus braces for a potentially long and arduous probe into their anti-corruption practices, the company has at least shown that it is looking to rid itself of its old image and become an organization that embraces compliance, ethics and integrity.

Amol Nadkarni is a Program Assistant for Global Programs at CIPE