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The Business of Corruption

Should companies be actively shamed into stopping bribes in the global business world?

August 8, 2003

Should companies be actively shamed into stopping bribes in the global business world?

The view from my hotel room in Yaoundé, Cameroon is pretty distressing. There is a small park, full of trash. I see people stopping to urinate as they pass through. This country, like most of Sub-Saharan Africa, is very poor.

I came here to speak to a conference on trade, investment, entrepreneurship and development.

In explaining why Africa is not just poor, but also has fallen so far behind most other regions in development, the usual suspects are quickly lined up: Lack of infrastructure, political and macroeconomic instability, poor education — and, of course, lots and lots of corruption.

Debate about corruption tends to focus almost exclusively on the receivers of corruption, rather than the purveyors.

So much has been said and written about corruption that one wonders whether there is anything that can be added. And yet, despite the fact that much may have been said and written about corruption, it has not in any way lessened. Corruption is alive and well and living in myriads of places.

Corruption is truly a global problem, indeed a global cancer. Contrary to a fairly common, but incorrect, impression, it is not exclusively — nor even predominantly — a cancer in the South. It also turns up in many a country in the North.

Why then focus on it as a problem in developing countries? Ultimately, for the same reason that a Nigerian friend of mine gave when asked why developing countries shouldn't practice protectionism.

Bad as these policies are, my Nigerian friend said, rich countries can afford to pay for their sins. Poor countries cannot. Consequently, corruption is taking a much heavier toll in the South than in the North.

But this logic lets industrialized countries off the hook too easily. After all, corruption is also a phenomenon of the North for another reason.

Though lots of corruption in the South is purely local, it is much exacerbated by the purveyors of corruption from the North.

The explanation for this is rather straightforward: Many of us in the North who write about the issue of corruption have probably never, or just rarely, been in a corruption-receiving situation.

In addition, there is a healthy dose of self-righteousness involved. Just the day before I left for Yaoundé, some of the Western participants in an executive development course told me it was naïve to believe anything could be done about corruption.

Bribery is simply the way business is done in these countries, some say.

But then a Chinese and a Nigerian in my class got very upset. They did not try to deny that their countries are corrupt. But they were furious, indeed indignant, by the cynicism displayed by their western colleagues.

They argued instead that the business executives offering the money were perpetrating what should be regarded universally as evil. The Nigerian described it as giving someone dying of lung cancer a cigarette.

As he put it, the main difference between robbing a bank and bribing a Nigerian official is that you are more likely to get caught and punished when robbing a bank.

Also, if you are caught robbing not "just" a bank, but say the savings of an old lady, you will not only suffer legal punishment.
You also suffer from social disgrace.

Society — third parties, your friends, even possibly your relatives — will castigate, possibly ostracize you. In the case of bribery, however, too many people take the attitude that "that's life."

Western hypocrisy and double standards regarding corruption in developing countries are not only reflected in the academic literature on the subject. You can see it also — even if unintentionally — in the work of some NGOs.

Take Transparency International, which, among other things, publishes an annual corruption index. In that index, you have countries listed from 1 (least corrupt, Finland!) to 163 (most corrupt, Haiti).

Useful as that index is, it is not fair. After all, it's only one side of the story. In response, Transparency now publishes a list of the countries whose business executives are seen as the most corrupting — as opposed to countries whose officials are the most corrupted.

Switzerland got the best marks, followed by Sweden and Australia. Worst is India, which ranks just behind Russia and China. The United States and Belgium tie for 9th place, behind the Netherlands but ahead of Japan.

While the development of such an index is progressive, the penalty incurred by the corrupters is much less than that imposed on the corrupted.

Countries that are listed among the most corrupt suffer economic consequences (such as loss of investments and higher risk premiums). Meanwhile, the corrupting countries do not really suffer at all.

Four things need to be done to improve the situation.

    1. Not just countries, but actual companies must be put on an index from least to most corrupt. This may be difficult to do, as Transparency International depends on the participation of companies to do their country corruption index.

    One solution might be to have the company corruption index undertaken by a different NGO. Alternatively, if companies participating in the survey were willing, this would serve as a sterling example to politicians — and as a strong sign of good corporate citizenship.

    2. Laws have to be tightened so that penalties are imposed — and stiff ones, at that.

    3. Much more exposure needs to be given to the perpetrators. It's not just about the naming — but the shaming!

    4. Social attitudes must change. Not only should corrupters be treated by their home societies like the pariahs they are, but much more encouragement should also be given to denouncing suspects.

If you know someone who is a dangerous pedophile, or an arsonist, or a thief, you will (certainly should!) feel under compulsion to report him or her as a threat to society. The same thing should apply to corrupters.

Of course, there are some difficulties and obstacles to realizing this program. While there are a limited number of countries where corruption is rampant, there are an almost unlimited number of companies ready to use corruption as a business tool.

As a start, Transparency International — or whichever NGO or research institute that would undertake this work — will first need to prioritize its new corporate index. It could begin with, say, the top Fortune Global 1000 companies.

The system may be open to abuse, or viewed as unfair. And legal fees will go up astronomically. Tough luck, "that's life."

But life — as we all know — ain't always fair. What is sauce for the goose might just as well be sauce for the gander!

Of course, some will argue that action of this kind might actually inhibit companies from operating in poor countries. Hence, the argument goes, the stringent fight against corruption that I advocate would do more damage than good — as is often the case with "do-gooders".

Not necessarily, though. Countries might be under greater pressure to clean up their act. Then there is the perennial problem of definition. Where does hospitality and nurturing good business relations end — and where does corruption begin?

In the meantime, companies should review their human resource policies, especially in the appointment of expatriates.

There are, I know, lots and lots of good people from the North doing business in the South who are beyond reproach. So let's not tar a large and diverse population with one stroke of the brush.

But having said that, I am also quite convinced that there are many sharks among business executives from Northern countries in the South who spread the cancer of corruption because they actually enjoy it. They are in their element. Some people, perhaps more than we realize, actually enjoy being "soft" criminals.

There are those who believe that, in bribing African officials, one is just doing one's best for one's company. (And, after all, that's business — and who are we to pass moral judgments?) But these people are harmful and need to be rooted out from the world of business.

As I conclude this article and look out of the window to the park in Yaoundé, I see two old people defecating. Not a pretty sight. But they are not defecating in a park because they enjoy it.

More likely than not, the money for building public toilets in Yaoundé has been diverted to several officials' bank accounts.

It would be great — for the two people, but also for human dignity in general — to think that one day, they, or at least their daughters, might be able to use a public lavatory with running water and paper. Is that too much to ask?