The international evolution
Since the phenomenon of globalization, companies that decided to broaden their horizons have to face multiple challenges and their management functions need some adaptations. While going abroad, companies may become concerned with the subject of corruption that makes the business with foreign countries even more complicated.
Even if there is a willingness to fight and reduce the corruption across the world, companies must be aware that this subject exists and must take it into account while dealing with foreign companies, their efforts to understand and adapt to local corruption influencing their success of failure. Analyse the causes of corruption. Why has corruption been greater in countries with extensive government regulation?
Will a shift to free markets inevitably reduce corruption? Many authors tried to understand the subject of corruption and its causes. Among them, the government weaknesses or shortcoming may lead to higher corruption since companies are not afraid of being apprehended (David Conklin, 2009). Besides, government officials with low wages and low educational levels will be more likely to accept illegal payments to survive but also because they do not realize the consequences for the nation’s economic development (David Conklin, 2009).
Other reasons are given by the author like the widespread poverty, the possession of major reserves of natural resources, as being likely to influence positively the corruption. On top of that, the current literature identified a linear relationship between corruption and government regulations (Naved Ahmad, 2002) and it seems that higher degree of government regulations leads to higher levels of corruption. This is easily understandable.
The more the companies need the intervention of the government to run a business (licenses and permits, control over procurement, contracts, public investments, tax incentive, credits…), the more companies will be tent to “bypass the complex system of government approvals” in order to get quick endorsement in their favour. As an example, a study carried out by Licetti and Madani (2010) showed that there exists a positive relationship between corruption and the number of days needed to start a business and to import (see Appendix1).
The above analyse names the different causes of corruption that can appear in each country, separately. But with the phenomenon of globalization and the shift to free markets, companies have to deal more and more with foreign countries and the affirmation that corruption will be reduced need to be nuanced. There are a series of elements that speak in favour of that affirmation: first, with the shift to free markets and the increasing competition, companies have the possibility to search for multiple providers, to choose for the best and to switch for another one. Secondly, if they want to attract business, countries have to present clean business environment.
And thirdly, it seems that firms cannot afford the costs which corruption adds to the operating expenses in a competitive environment (Carolyn Warner, 2007). However, the reduction of the corruption is limited by a series of elements that increases the utility of bribery as a business tool: the fierce competition companies must face, the international organizations having limited or no enforcement power, the legal jurisdictions largely still being national…(Carolyn Warner, 2007). Where would you draw the line between acceptable gifts and unacceptable bribes? Does this line differ among countries?
Design an anti-corruption code you could give to your employees. Dealing with different countries, with different cultural is challenging for a company going abroad and with the subject of corruption, it is sometimes difficult to draw a line between what is acceptable and what is not. In some countries, like China, gifting is a part of doing business (in the cultural norm of “guanxi”, for example) while in others this would be seen as bribery. In order to draw that line companies should look at three different aspects. First, the international laws about gifts and bribes must be carefully analysed. Second, companies should gather information in regard to what is permitted by the local culture.
Last but not least, companies must look carefully at their CSR strategy in order to see which kind of gifts there are ready to accept in order to be in line with their core values. After analysing those three aspects, companies will be able to draw a line between gifts and bribes, using an ethical relativism or an ethical absolutism (Bricoe, Schuler and Tarique, 2012). This list must be integrated to a gift policy (anti-corruption code; see Appendix 2) that must to be well communicated, accepted and used by all members of the company.
In top of that, the company should put in place controls system in order to check if the anti-corruption code is respected. The role of the international human resources management function is therefore crucial. The IHRM function needs to understand the different cultures the company is dealing with, to tolerate the cultural diversity while avoiding moral recklessness. This will ask the managers to conduct deep researches about the cultural differences and to train people concerning the anti-corruption code. Are donations to politicians and political parties a form of corruption? Should donations be prohibited? Donations to politicians and political parties appears in more advanced nations and tend to be almost invisible as they have taken a permanent place in the election process.
Donations can be considered as a form of corruption if, by giving large sums of money to politicians, people think that they are going to get some kind of return for it. Corruption in politics appears also when politicians try to buy votes instead of winning them. Corruption in politics can have severe consequences. According Transparency International, “it can lead politicians in office to steer away from good government. Their decisions can benefit those who fund them. The public interest comes second”. Besides, when decision makers accept gifts, they give the appearance of being of the take and consequently they cannot be trusted anymore. According to me, donations in politics do not have to be totally prohibited but rather more regulated by a campaign finance reform as in the United States.
By this way, the government can have more control over who can donate to campaigns and can regulate how much they are permitted to donate. Can Law and international agreements change corruption where these are embedded in culture and societal norms and political actions? The case highlighted the cultural differences in terms of corruption across countries. Some practices are so embedded in societal norms that it is difficult to eliminate them. But it seems that highly corrupted countries like Bangladesh or Burkina Faso recognise that corruption is a major constraint in their business. I don’t really believe that more law or international agreements will change anything, but I really believe that there need a real change in officials’ mentality in order to change the situation. People need to realize that fighting corruption will have a positive impact on their nation’s economic development.
In these two pages, we first saw that corruption emerges from many causes and that countries with high regulations will be more likely to face corruption than countries with low regulations since companies need the government approvals to run a business and that the shift to free market can help to face corruption. Second, we saw that the line between acceptable gift and illegible bribes is difficult to draw. Thirdly, we saw that donations to politicians were, in certain circumstances a form of corruption and therefore needed to be regulated. Finally, a change in mentality is necessary in order to fight corruption in some countries. Appendixes
Appendix 1: Corruption and the ease of starting a business and importing (2008)1
Appendix 2: Example of Anti-Corruption code
1. The enterprise shall prohibit bribery in any form.
2. Gifts, entertainment and hospitality are acceptable if they are reasonable (ex. invitations to some events, social gatherings) and if they are related to our business.
3. Facilitations payments are not allowed.
4. If you have any doubt about the quality of the gift you received, ask you direct manager or the ethical officer.
5. Each gift must be monitored by the ethical officer and entered in the gift register.
6. Employees must not use their official positions to obtain private gifts or benefits from themselves.
7. Supplier selection will never be based on receipt of a gift, hospitality of payment.
8. Each employee has the right and the duty to denounce each situation of corruption with a guarantee of confidentiality.
9. Any violation of this policy will be regarded as a serious matter and you will be sanctioned and punishment for violating the law may result of imprisonment or probation.
10. Contributions to communities projects or charities need the authorization of the ethical officer