There are many different forms of business corruption that exist in the corporate world these days. Let’s take a look at differences in them in this post.
First of all, it is pertinent to draw a purely quantitative distinction between ‘small’ and ‘big’ business corruption. And qualitatively we can distinguish between corruption for legal and for illicit ends.
1. Petty ‘small’ corruption
This form is defined as ‘small’ payments intended to get someone empowered to take and enforce decisions to see to it that something he or she is duty-bound to do is actually done within a reasonable period of time. The payments are made because without this additional ‘stimulus’ nothing would happen, or else its happening would be unconscionably delayed. Hence, the existence of the expression ‘speed-up gratuities’.
The word ‘petty’ in ‘petty corruption’ refers to both the size of the financial transaction and the size of the obligation that the transaction buys. In many poor countries petty corruption pervades every segment of society. And, an impoverished society many people’s success in the daily struggle to survive can depend on doing things that they would not be constrained to do if they were better off. In this light petty corruption appears as a defensive strategy that people must resort to because their income does not suffice to feed and clothe their families.
Professionals working for Switzerland’s official development aid agency have described the concrete implications in strikingly candid fashion. They pointed out that ‘ (…) the responsible ministry officials (can) cause us very serious difficulties by dragging out procedures if friendly relations are not cultivated – with an invitation to attend the Swiss national holiday celebration on August 1, say, or a small Christmas present. Such token gestures have an immediate effect on the dispatch with which our requests are dealt with at the administrative level.’
If someone takes a firm line in resisting demands his work is impeded. Sometimes this can be offset by extra personal effort, sometimes not. Each person has to find out for himself how clean he wants to stay – and how firm he can remain.
A case history from Mexico illustrates the consequences that can ensue from a demonstration of ‘firmness’. All over the country it is difficult to obtain a telephone extension. The price set by Teléfonos de Mexico, which has the monopoly, is USD$500, inclusive of installation. Only 5 out of 100 applicants try this route. The rest prefer to shell out USD$1,000 to USD$1,500 dollars on a huge black market controlled by employees of the monopoly itself. For USD$1,500 dollars you get your phone within days.
But if you pay Teléfonos de Mexico that USD$500, you can wait 12 months-if you are lucky. The workers, who install the illegal extensions at incredible speed, earn USD$400 a month. A Mexican political analyst’s commentary: ‘Everything can be fixed like that- whether you want to enroll a child in secondary school, evade a traffic fine, or leave the country without having to show your military identity card. Every victory over hopelessness has its price.’
One may justifiably wax indignant about corruption in connection with humanitarian aid, yet, taking every aspect into consideration, it becomes clear that simple solutions are not possible here either. A former deputy director of The Swiss Federal Directorate for Development Cooperation and Humanitarian Aid (DEH) has admitted to carrying on the mission even under conditions tarnished by corruption. ‘Development cooperation is necessary all the same’, he said. ‘If one went so far as to declare that we shall cease helping countries where corruption exists, then there would be practically nothing more we could do. But the whole point is to bring about improvements.’.
Terminating a development assistance program because of ‘small’ exactions seldom has an impact on those who are the intended target anyway. Instead the brunt falls on those whose chances for a better life depend, sometimes critically, on humanitarian aid. Here again the social consequences of an alternative course of action in a given case have to be weighed in a situation ethics framework. Private enterprise, too, should follow this guideline. The following case can serve as an example from the real-life world of doing business:
An official of the central bank of a developing country has the authority to grant import licenses. In public bidding a company has obtained a contract to supply life-saving drugs to the national hospitals and now wishes to import them. To secure the needed foreign exchange, however, an import license is required; but the central bank official is prepared to issue one only if he profits personally. Because patients’ lives depend on the timely delivery of the medicines the company comes under pressure, while the official drags his feet.
In this situation the manager of the drug company decides to bribe the official with an ‘expediting’ payment. For the sum of USD$500, the import license is authorized on the very same day. As I reason it, handing over the USD$500 creates an ethical problem. However, weighing the ‘sin’ of paying against the benefits of risk-averting for innocent patients, I consider it to be a lesser evil than risking even one patient’s life.
Corruption can have a direct influence on business success. With its help the whole climate of doing business can be changed in the bribers favor. Without resort to corruption well-nigh insurmountable problems can arise: deliberate foot-dragging instead of friendly treatment, e.g. in passing on information or granting approvals. For example, holding back information rather than imparting it in time, e.g. in connection with a crucial deadline such as the latest date for submitting a tender in a public bidding competition; or shelving vs. approving applications, e.g. for import or export licenses or sales authorizations.
All this can add up to the decisive difference between business success and failure.
In the sphere of ‘petty’ corruption gifts present a delicate special problem, in that there is always the possibility that they may be given without ulterior motives as tokens of personal sympathy.
2. Gifts
In many cultures gifts given directly, as in the form of an invitation to dinner or other favors of this order, are frankly expected as marks of respect or as proof of amicable relations. Refusing them can be taken as a sign of rejection or even as an affront. In other cultures the fact that a company presents potential customers with gifts may be criticized as bordering on corruption, or at least as ethically suspect. The problem lies not in the giving as such but in the value of what is given. Unproblematic under a certain limit, as soon as this is exceeded the practice may be looked upon askance.
Various organizations have drawn up guidelines on how their employees should act with respect to the gifts they give to customers or business friends as well as those they themselves receive. The practice may be expressly forbidden, pointers to what is appropriate given, or an upper limit specified-value must not exceed USD$100, for example.
A critic of the pharmaceutical industry once put it thus: ‘Whatever you can eat or drink in a day does not constitute corruption.’ As both recreations can be enjoyed at differing levels of quality, however (a 1947 vintage Bordeaux is in a loftier league than, say, a bottle of last year’s Valpolicella), purists may well regard this way of demarcating the borderline with skepticism.
Guidelines are never the whole answer to the question, though, on account of factors such as a different standard of living between giver and receiver, cultural dissimilarities and divergent social norms, or quite simply the grey areas inherent in giving and receiving. What always remains is latitude of interpretation and discretion that demands an independent exercise of judgment on the part of the person concerned.
The intention of the giver is always a pertinent consideration in evaluating the merits of a case. If a gift is meant simply as a friendly gesture, free of any expectation that a reciprocal situation might arise-one need not always have ulterior motives in mind-then there is not much of a problem. Still, such gifts are not altogether unproblematic either, since they do serve to generate good will that can pay off later in some other connection. The sociologist Sighard Neckel refers in this nexus to the ‘Don Corleone Principle’, describing how subtly habit-forming gifts can get to be.
If on the other hand gifts are bluntly intended to spur the receiver into performing or omitting to perform a certain action within a relatively well-defined period of time in the interest of the giver, clearly what we have is a corrupt maneuver. As a general rule one is best advised to desist from giving or accepting gifts that go beyond small kindnesses and friendly gestures.
The second test that acceptability has to pass is, as already noted, a gift’s value. Obviously a ballpoint or fountain pen – assuming it is not a chic designer model – is not in the same class as computer equipment given for private use or airfare to coveted destinations.
In my experience a good way to stay clear of any suspicion of corruptibility is to have the gifts that employees have been given personally turned over to the company and made available to everyone – through a raffle, for example.
During an assignment in a developing country in Africa I was, to my utter surprise, showered with gifts. At the end of my first year I had them put on display in the company conference room, numbered, and raffled off among the full workforce. In this way everyone from the night watchman to the secretaries to management staff got the chance to acquire desirable items that would otherwise have been beyond their means.
Most of the gifts came from customers who knew that a certain discretionary elbow room existed where the provision of goods in short supply (on account of lacking import licenses) or the granting of discounts were concerned. Without wishing to insinuate that our customers hoped to point me in a certain direction with their gifts, I can report that there were no more gifts once the word had got around about how they had been disposed of.
As a preventive measure companies and other organizations are well-advised to oblige employees whose decision-making authority leaves them particularly exposed to temptation to inform their superiors of any gifts received. With the matter out in the open one can decide on how to handle it fairly.
3. ‘Big’ corruption
Although the transition from ‘petty’ to ‘big’ corruption is fluid in the individual case, the latter presents a distinct problem area.In the worst case a parasitic political and economic upper stratum ruthlessly exploits its privileges and the clout that goes with them to funnel huge sums into its own pockets. In order to bag loot on that scale corrupted and corrupters shop for ways to buy goods and services with the highest possible price tag.
Everyone involved has an interest. The supplier sells pricey, perhaps overpriced, goods and services, while the ‘customer’ takes his cut in the form of illicit ‘commissions’. Development ruins in many a poor country testify to the deplorable results of such wheeling and dealing. Most of them are relatively useless, ill-adapted and lavishly expensive installations, colossal prestige projects and outsized construction schemes, or armaments that far exceed a country’s legitimate defense interests. In most cases the purchase transaction as such is perfectly legal.
The illicit nature of such dealings consists in this: by dint of loyalty to their charge, and in view of the scarcity of resources, the officeholders or those empowered to make decisions would be duty-bound to serve the public interest, fending off whatever is harmful to it. For selfish reasons they fail to do so, however. Instead of seeking the most cost-effective solution to a problem-for example, by publicly inviting tenders and straightforwardly appraising the offers that come in-they give preference to the most expensive variant.
The overblown dimensions, technical complexity, lack of a flanking infrastructure before and after, or simply a non-existent need-all these factors often make it highly unlikely that such investments will ever be efficiently used.
Since the ‘commissions’ are normally high and, being underhanded, do not show up on any tax declaration, the direct effect on the beneficiary’s income is substantial-and the harm done to the public welfare usually great. The devious practice is considered to have added massively to the foreign indebtedness of many developing countries while seldom contributing to bettering the lot of their people. The upshot is the notorious ‘privatization of profits and socialization of losses’, with the public costs of corruption outweighing whatever private benefit it may bring many times over.
The privatization/socialization caper takes on especially opprobrious dimensions when large-scale corruption is carried on – that is, when payments are made in order to transgress the law. Again, an example will show what is meant.
A company in an industrial country wants to spare itself the high investment costs of building a special wastes incineration plant on its own turf and mounts a search for an alternative, cheaper way to dispose of the waste. In this situation a highly placed ministry official of a developing country approaches the company with a proposal: for a consideration of three million dollars he would arrange for the trouble-free importation of all of the waste into his country for a five-year period. He would also see to it that the special waste was buried in a remote and, in his perception, secure site.
In his native village he owns enough land that would be well-suited to the purpose. True, the import (and since The Basle Convention of 1989, the export as well) of such toxic substances is officially prohibited. However, he, the Deputy Minister for Economic Promotion, sees no cause for worry since, first, the waste can be mixed with other materials such as gravel or sawdust and, second, the waste dump would bring jobs and so benefit the people of his village.
After briefly considering the economic advantages of the proposal the company assents to it. The sequel: a few years later the people living in the vicinity of the disposal site fall victim to a mysterious ailment – later diagnosed as severe poisoning. The deputy minister swears that he knew nothing of the special wastes’ toxicity and that he was misled by the multinational corporation. The company is indicted in the host country and becomes a focus of public protests at home as well as in numerous industrial countries.
At the beginning of this discussion we pointed out that, far from being confined to developing countries, corruption is a world-wide phenomenon. Nevertheless, it does constitute a special problem in the developing world.
