Of 163 companies surveyed, 107 showed limited or no evidence of ethics and anti-corruption programmes

By Stella Dawson

WASHINGTON, April 27 (Thomson Reuters Foundation) - Two thirds of the world's major defence companies get a "fail grade" for combating corruption in their business operations, despite improvements in industry practices in the past three years, an anti-corruption group said on Monday.

In its survey of 163 companies, Transparency International UK found that 107 showed limited, or no evidence of ethics and anti-corruption programmes.

However, 33 percent of corporations surveyed worldwide have improved significantly since the Defence Companies Anti-Corruption Index was first published in 2012, rising several notches on the six-point TI UK scale.

The improvements were seen across the globe in companies from Brazil to South Africa and South Korea, suggesting there is a growing awareness of the importance of tackling corruption in foreign contracts within the industry.

"This challenges some of the notions that European and the U.S. companies are the best standard setters out there, and then there are the baddies," said Leah Wawro, a TI UK researcher who worked on the report.

Global military spending is roughly $1.6 trillion a year and any corruption in securing government contracts not only pushes up costs for taxpayers but also risks delivery of shoddy equipment that endangers citizens' and soldiers' lives, TI UK said.

The four companies receiving top marks in 2015 were all American -- Bechtel Corp, Fluor Corp, Lockheed Martin and Raytheon. In 2012, Fluor was the sole company in the index to score "A".

Fifty-seven companies got an "F" grade.

Particularly concerning, Wawro said, was the French corporation Dassault Aviation which announced this month it is finalising a contract for 36 aircraft for India, a country with significant corruption problems.

She also pointed to General Atomics, maker of drones, which scored 7 out of 100 for its ethics and anti-corruption programmes.

Neither Dassault nor General Atomics responded to requests for comment.

However General Atomics' sister company General Atomics Aeronautical Systems Inc, which makes the drones, said as an affiliate it had not participated in the survey, but that it vets sales and checks intermediaries in strick adherance with anti-bribery laws.

"Our company is committed to upholding the highest standards of corporate ethics and anti-corruption measures," its CEO Linden Blue told the Thomson Reuters Foundation by email.

Lockheed Martin, which moved up from "C" in the previous survey, said it has made a concerted effort to enhance its transparency and worked with other aerospace companies to improve anti-corruption in the industry.

"As the global security environment grows in complexity and government security increases, we will maintain our policy of zero tolerance for corruption," Leo Mackay, its vice president for ethics and sustainability, said in an email.

Bechtel's Chief Ethics and Compliance Officer Nancy Higgins welcomed the index as a way to encourage better performance. "Every company's anti-corruption program stands to be strengthened through sharing of best practices," she said by email.

The index is based on an analysis of publicly available information covering 41 topics, such as anti-corruption training programmes and whistleblower provisions. The information was gathered from the company websites and public disclosure statements.

Sixty three companies also responded to requests for additional information, which increased the scores of some companies in a supplemental index.

The 2012 index surveyed 129 companies, and this year's index found that 26 of those companies obtained top rankings, scoring an A or B, compared with only 10 previously. (Reporting by Stella Dawson; Editing by Ros Russell)

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