What’s Wrong With Wal-Mart Bribery, Anyway?

Everyone is aware by now of the stunning exposé on bribery at Wal-Mart de Mexico. As promised, this is the next in what will likely be a series of commentaries I’ll post on the scandal.

It’s worth starting at the very beginning, by considering the very basic question: What’s wrong with bribery in the first place?

The fundamental ethical problems with bribery are clear. Bribery of public officials induces those officials to engage in acts of disloyalty. Civil servants are sworn to uphold the public good, and every decision they make needs to be made on that basis. Bribery violates that principle; it interferes with the decision-making of the functionaries of a democratic system.

Bribery also tilts an otherwise fair playing field. It’s one thing for a company like Wal-Mart to muscle into new territory by means of its superior management techniques and hyper-sophisticated supply-chain. Such advantages are well within the rules of the game. If you invent a better mousetrap, the maker of the old mousetrap has little grounds for complaint when driven out of business. But bribery is well outside the rules of the game. It represents a refusal to compete openly and fairly, and an attempt instead to gain special advantages that have nothing to do with ingenuity or with the quality of one’s services.

And, from a systemic point of view, bribery is a zero-sum game that acts as a drag on an economy. Consider: when two companies engage in bribery as a competitive strategy, the only guaranteed winner is the undeserving recipient of the bribe. The companies involved suffer unnecessary expenses that could better have been spent on research and development, on higher wages for employees, and so on — if only they were jointly able to forgo the bribery.

There is, from an ethical point of view, no plausible pro-bribery argument.

What about cultural differences, you ask? We are all aware that, in doing business in a foreign country, we are liable to run into ways of doing business that would not pass muster back home. And we’ve all heard the saying, “When in Rome, do as the Romans do.” But that saying is no doubt used as an excuse for wrongdoing far more often than it is used as a reminder to be sensitive to cultural variations. The trouble is that bribery is a lousy way to show respect for someone’s culture. You don’t respect a culture by corrupting its public officials. Never mind the fact that bribery, though perhaps not uncommon in Mexico, is none the less illegal.

But perhaps the most stinging critique of bribery is this. If you have to engage in bribery in order to succeed, it implies that you are not very good at your job. Eduardo Castro-Wright, the man who was Wal-Mart de Mexico’s CEO at the height of its bribery activities, was considered a true Wal-Mart star. In fact, he’s now vice chairman of Wal-Mart Stores, Inc. And his reputation was built in no small part upon his stunning success in pushing Wal-Mart de Mexico’s rapid expansion. But, as it turns out, he wasn’t quite as great a manager as he seemed to be: the rapid expansion wasn’t so much a credit to him as it was a credit to the campaign of carefully-targeted bribery conducted by his underlings. As is so often the case when it comes to white-collar crime, this suggests that senior managers at Wal-Mart de Mexico were not just lacking ethically, but lacking as managers too.

6 comments so far

  1. Constant Geographer on

    Agreed. Bribery undermines the “Rule of Law.” The Rule of Law creates (theoretically) a level field of play, with all players knowing the costs, benefits, and penalties. Bribery not merely lowers than standard of business protocols, bribery tosses protocol out the window. Why would companies invest in a region where local, provincial, or national laws can be manipulated on a per case or person basis? Where is the confidence in knowing the rules applied today will be applicable tomorrow? However, companies can and do see value in the risk, right? Punitive costs may not exceed the potential revenue and/or market share in developing markets. Perhaps not “on paper” but I would guess “napkin calculus” might consider risks associated with bribes should the benefit greatly outweigh the penalties

    • Chris MacDonald on

      Yes, I think you must be right about the napkin calculus. But the usual cognitive bias that leads criminals to underestimate the risk of getting caught probably skews the math significantly.

      • Constant Geographer on

        Ah, yes..”What’s the worst that can happen?”

        What about the culture of mutually-assured incarceration, meaning, “If I get caught we all get caught?”

  2. Jonathan on

    In response to your comment, “There is, from an ethical point of view, no plausible pro-bribery argument,” there can be an argument made from the perspective of certain participants. I recently had a conversation with a friend who runs a small business in a very competitive environment, and one that deals often with suppliers in China. He commented to me that the industry is quite corrupt and sometimes the only way he can secure a sale is to bribe a supplier. He doesn’t like doing it, and he doesn’t explicitly tell his sales people to do it, but he simply cannot compete (and thus earn a living) if he refuses to do it. He is by no means a powerful Wal Mart who is muscling competitors out of the market; he is the hard working small business owner who is just trying to survive in a competitive and corrupt business environment.

    • Chris MacDonald on

      Jonathan:

      Thanks for your comment.

      Well, it’s an argument, but I don’t think it’s a very plausible one. It’s an argument of the form “I need to do X in order to compete; therefore it’s OK to do X.” That’s clearly not a generalizable pattern of reasoning. There are lots of practices that could be common, and even “necessary,” yet (for instance) violate fundamental rights and so we wouldn’t condone them. Better to get out of the business altogether than to be complicit in such an unethical and corrosive practice.

      Secondly, the determination that something is “necessary for business” is subject to too much self-serving rationalization. It’s just not always true that that’s the case. “We need to” might well be a stand-in for “we’re lazy” or “our product is too weak to compete otherwise” (no offence to your friend!) I’ve also heard it said that, with regards to bribery, it tends to be a self-fulfilling prophesy: officials expect bribes because companies expect officials to expect bribes.

      I sympathize with businesses that seem to be caught between a rock and a hard place, but I don’t think that condoning bribery is the right solution.

      Chris.

      • Jonathan on

        I certainly agree in principle that the right thing to do would be to get out of the business and into one that doesn’t present the same challenges, but it’s obviously not that easy for the person who has invested his own time and money into a business and has a mortgage to pay and kids to support and so on. Imagine how patronizing it would have been for me to give him that kind of advice when he’s telling me the story. It’s a bit like how some physicians respond when I suggest challenging the medical decision of a substitute decision maker: easy for you to say, Mr. Ethicist, you’re not the one who has to put yourself on the line in a legal battle and deal with a complaint to the college. You’re right, it is easy for me to say.


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