BUSINESS CORRUPTION: CIRCUMVENTION OF LEGAL AND REGULATORY MECHANISMS BY BUSINESSES AND GOVERNMENTS

INTRODUCTION

When morality comes up against profit, it is seldom that profit loses. — Congresswoman Shirley Chisholm.

The lines between profit generation and organizational goals, and sharp practices are often blurred in the quest for business survival, ultimately resulting in corrupt behaviour. The ambition and pressure to achieve substantial corporate and commercial successes often drive business organizations and corporations to develop and implement strategies and policies associated with traces of corruption, thereby breaching accepted norms and regulations. From an economic viewpoint, corruption is generally defined as the misuse of a position or title of authority for private, personal, and/or group benefit or gain, and this “misuse” typically connotes a breach of legal norms. Corruption is the most salient factor negatively affecting growth and development in most economies. The 21st century in particular has witnessed an avalanche of capitalist tendencies where the emphasis is placed more on profit-making than the morality or ethicality of making such profit.

In 2001, ENRON, the USA global energy giant, filed for bankruptcy amidst charges of malpractice and deception, with debts of billions of dollars. The indictments against the former chief executive officer, Jeffrey Skilling, and his fellow executives alleged that they had crafted schemes that produced phantom profits and let them skim millions for themselves. A US government estimate over an eight-year period put the total cost of corruption over the said time period (1994 – 2002) at about $240 billion[2]. Given the fact that the United States is believed to be one of the least corrupt countries in the world (ranked 19 out of 174 in the Corruption Perception Index 2012 published by Transparency International), this is quite a surprising amount of money.

In January 2008, Société Générale (SocGen), France’s second-largest bank, announced it had incurred a loss of €4.82 billion after Jerome Kerviel, an options trader, had staked €50 billion on European futures markets. Kerviel himself did not personally gain from these transactions and claimed that his primary concern was to benefit the bank. His superiors might have been aware of his trading activities, ignored them, or even tacitly encouraged them.

Business organizations operating in developing economies, such as Nigeria, are affected by many environmental factors such as political instability, policy inconsistency, deficient infrastructure, and acute competition, among others, and these environmental factors have created unfavourable effects on the operations of business organizations. Consequently, some organizational decision-makers devise managerial practices that are seemingly unethical in order to cope and survive in their business operations.

Therefore, it is important to take a closer look at the individual behavior of companies in different countries in order to fully understand the level of unethical business practices occurring in every country in the world almost on a daily basis. Clearly, corruption is usually connected to weaknesses of government and the enforcement of rights, as a result of which most countries are affected by the negative impacts of corruption. Although there have been a lot of governmental failures, Transparency International emphasized that businesses are one of “the weakest pillars in regard to their resistance to corruption”.[3] Empirical identification and analysis of pertinent arguments and opinions with regard to the nature of corruption in business organizations, including its causes, consequences, and remedies have been undertaken by various researchers across countries and continents and the results are unanimous in their findings – that corruption hurts both wealthy and poor economies, as well as private and public sectors. It is trite that business trust plays a large role in the economy of nations and business corruption affects economic growth, mostly in wealthy countries. Whereas prior research showed that government corruption mostly hurts poorer countries, it has been found that business corruption is a greater concern in wealthier economies. In several instances, strong rivalry in some economies leads to unethical acts by businesses. This points to the fact that policies and checks that curtail the activities of public officials may not stop business persons from corruptly pursuing profits.

Business success is achieved through networks of demand and supply, distribution chains, and the conduciveness of the business environment. In theory, individuals have different levels of adherence to a given logic. In practical situations, the response may depend on the environment, i.e., whether it is a country with a high or low corruption rate. While outsiders would challenge the corruption logic and defend the ethical logic, insiders would tend to follow the locally dominant logic, possibly out of self-interest (albeit unconsciously). To test these assumptions, a study was conducted with 464 participants from the United Kingdom, the United States, Russia, and Kazakhstan, presenting them with a fictitious scenario involving a potentially tainted bidding process. The results suggested that outsiders more strongly internalize ethical logic independently of the environment’s corruption levels. Attitudes may boil down to opportunism, i.e., corruption is viewed as unethical by those who cannot be part of it, explaining why certain political groups take actions that defy their official positions. For instance, a party may take an anti-corruption stance when it is the opposition but engage in bribery during its mandate. Thus, the lack of understanding of corruption as dependent on context leads to inefficient efforts by international agencies, such as the International Monetary Fund (IMF), World Bank and the World Economic Forum (WEF) to combat the phenomenon. To its credit, the efforts of the World Economic Forum to combat this global plague must be commended. Amongst other efforts, the WEF hosts the Partnering Against Corruption Initiative (PACI), the largest global CEO-led anti-corruption initiative. The PACI is a global, multi-industry, multi-stakeholder anti-corruption initiative set up to raise b business standards and to contribute to a competitive, transparent, accountable and ethical business society.

In their work “Corruption in international business: A review and research agenda”, Salman Bahoo, Ilan Alon and Andrea Paltrinieri systematically reviewed literature on corruption in international business (137 articles) between 1992 and 2019 and identified seven research streams:

• the legislation against corruption;
• determinants of corruption;
• combating corruption;
• the effect of corruption on firms;
• the political environment and corruption;
• corruption as a challenge to existing theories of management; and
• the effect of corruption on foreign direct investment and trade.

Based on their research, they recommended that strong international laws are needed to minimize the negative impact of corruption on international business. Firms must also consider corruption when formulating strategies to increase operational efficiency and performance. Finally, their findings suggest that corruption challenges some key assumptions of existing theories of management and that scholars need to test and expand these existing theories by considering corruption as an important issue in international business and broaden the focus to explore the impact of corruption on inward and outward foreign direct investment and the moderating role of political connections or political risks in the home and host countries.

On October 21, 2003, the General Assembly of the United Nations adopted the United Nations Convention against Corruption and designated December 9 as the International Anti-Corruption Day, to raise awareness of corruption and of the role of the Convention in combating and preventing it.

It is satisfying to note that the fight against corruption has taken the center stage in developing communities. In the decades to come, a myriad of anticorruption programs would be implemented across the globe, targeted at shedding more light on, and propagating anti-corruption measures.

The impact of corruption on investments and business survival cannot be underestimated. Therefore, effective collaborations between governments and the private sector is crucial, in order to achieve successful reforms.