Talking about corruption, the general public will often remain skeptical about business’s commitment not to engage in bribery, especially in emerging markets. True, there are individual companies that engage in corruption (although bribery must be distinguished from extortion by government officials), yet it would be a stretch to argue that corruption is actually good for business. Why do businesses pay bribes? One answer has to do with the inefficient environments within which they operate. The reality is, if you are stuck in a weak rule of law business climate, you are going to be more susceptible to bribes (whether on the grand or petty level). This is why bribery by non-OECD companies operating in non-OECD countries is by far greater than bribery by OECD companies operating in OECD countries (these and some other interesting facts are highlighted in this Daniel Kaufmann presentation).
There are many business initiatives out there seeking ways to mitigate the risk of operating in emerging markets and reduce business involvement in corruption. The interesting aspect of many of these programs is that it is both a legal and an ethical leadership problem. And in the recent CIPE article, Alan Boeckmann, Chairman and CEO of Fluor and board member of the Partnership Against Corruption Initiative (PACI) talks about the PACI principles and, most importantly, the need for effective leadership in driving their implementation.
A commitment to stop corruption must start in companies’ internal practices, with zero-tolerance policies on bribery and effective programs to combat corruption. It is not enough to simply be against corruption or other unethical business practices. There must be an active movement to eradicate it at multiple levels: financially, by supporting leading advocacy groups; politically, by encouraging governments in corruption reform efforts; intellectually, by contributing knowledge and practical experience to front-line efforts; and especially, by committing to operational change.
Another important point brought up in the article, is the need for collective action, as
Underlying all of this, however, are questions of equity. Just as no state wishes to unilaterally disarm, no company or industry wants to be placed at a competitive disadvantage because it follows the rules and others do not. This dilemma is also seen in the battle against corruption, a major challenge to business leaders striving for ethical practice.
PACI principles are part of the increasing number of industry-level and broadly-applicable initiatives springing up around the world. While these initiatives should be commanded for the intention to reduce bribery, ultimately – they will have a limited success without complementary efforts to reform the environment within which companies operate.
Published Date: June 19, 2007