Corruption Overseas: An Ethics & Compliance Minefield

The problem of corruption is a tough nut to crack. The bulk of bribery and other forms of corruption (though by no means all of it) goes on in developing countries where rule of law is lax and the opportunities for profit are rich. Companies succumb to the temptations at their peril. The ROI on bribes is pretty hard to specify, and the jail time that can result ought to be a pretty good deterrent. But evidently that doesn’t make the problem much easier.

Last week, in conjunction with Canadian Business, the Jim Pattison Ethical Leadership Program hosted an executive seminar on the topic, called “The Ethics and Compliance Minefield: New Rules for Doing Business Overseas.” The day’s schedule included terrific speakers from Siemens, the World Bank, and the RCMP. (If you want to find out more, see here.)

A number of themes came to the fore during the day.

First was the role of rationalizations. As I’ve written before, rationalizations play a key role in all sorts of wrongdoing. Good people generally need to give themselves excuses if they’re going to do bad things and still look at themselves in the mirror in the morning. This is nowhere more true than in the realm of corruption. Claims like, “That’s just how business is done over there,” and “No one really gets hurt,” or “We’ve always done it that way” or “That’s the only way we’ll make our sales targets” are often false, and seldom provide cogent support for the moral conclusions they are intended to support.

The second theme that came up repeatedly was the question of control systems. Companies whose employees and agents engage in bribery seem (anecdotally, at least) to have weak internal controls. And that’s not surprising. In order for a few million dollars to go “missing” here and there, and end up in the pockets of local politicians or shady middle-men, you’ve pretty much got to be mislabelling the money at the very least. This sort of thing should be worrisome, and not just from the point of view of ethics and compliance. Sloppy business is sloppy business.

A third theme that arose was the notion that companies who want to avoid corruption face what is really just a special case of a more general set of management challenges. Instituting appropriate financial controls is a general standard management challenge. Ensuring overall organizational integrity (in the broadest sense) is a standard management challenge. And engaging in serious organizational change (such as in the wake of a bribery scandal, for instance) is a standard management challenge. In other words, this stuff is the stuff that good managers, and good leaders, ought to be good at, and if they’re not they need to get good at it or face peril.

The final theme that arose was cooperation. Stamping out corruption requires cooperation at several levels. It requires cooperation among countries, and in particular among their police forces and other enforcement agencies. It also requires cooperation between companies, who have a lot to learn from each other. (What, for example, might smaller companies learn from a been-there-done-that company like Siemens?) It also requires cooperation between different kinds of organizations — for example, between companies and law enforcement agencies.

None of this is easy. But given the potent ethical arguments against corruption, not to mention the potent legal penalties for being caught engaging in it, it’s a problem that needs to be tackled head-on.

1 comment so far

  1. Marvin Edwards on

    Back in 1964 William Bowers did a study of college cheating that found that “perceived peer disapproval” was the most significant factor. If students felt that other students felt strongly that cheating was wrong, then they were less likely to cheat themselves. The odd thing was that students individually reported a strong sense that it was wrong, but often felt that their friends and other students were more accepting of the behavior, and this made them more likely to cheat.

    It’s probably also important that businesses publicly embrace their principles for the sake of mutual support in doing the right thing.

    It’s also important that the rules and penalties be made clear, and that regulators are willing to enforce them. This was a big factor in the financial collapse of 2008. Banks were temporarily making high profits on bad mortgages by packaging and selling the risk to investors. Quantity became more important that quality and the ethics at the point of generating the loans was lost. The Senate report on the meltdown is at
    http://www.hsgac.senate.gov//imo/media/doc/Financial_Crisis/FinancialCrisisReport.pdf
    for anyone interested in the several problems of regulation that failed.


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