Monthly Archives: October 2014

Bribery, Corruption and the “Social Cocoon.”

Bribery, Corruption and the “Social Cocoon.”

In an October 22, 2014 article in Foreign Affairs, titledGrappling With Graft, How to Combat the Growing Corruption Epidemic” authors Alexander Lebedev and Vladislav Inozemtsev (The Authors) state that corruption “wreaks havoc on the societies of developing countries, fuels social unrest and violence, and increasingly undermines the stability of the West.” Yet, as they argue, “despite all this attention, no adequate solutions to the problem have come to light.” Indeed, as I discussed last week, the article also calls attention to the link between corruption and the greater issues of international development and stability. As Lebedev well states, corruption “is fueling instability on the Western world’s periphery that increasingly threatens to spill over.”

In articulating their own policy recommendations, the Authors recommend “three broad steps,” the first of which is to “redefine the challenge by clearly distinguishing among different levels of fraud and identifying target areas for intervention.” While I will address the second and third steps, in a broad context, I would like to elevate the potential pitfalls of distinguishing among levels of corruption as creating great confusion to those who operate in the field of international business and giving the wrong compliance signals to multiple state and corporate entities.

The article describes the current definitions of corruption as “too broad for the international community,” as “there will always be individuals who use their access to administrative and financial resources to pursue self-enrichment.” Thus, the Authors seek a shift in approach by “introducing a crucial distinction between corruption and bribery.” Furthermore, they start  that reset  by stating that “bribery is mostly a low-level phenomenon, neither systemic or organized,” and that those who take bribes “do not act within organized networks and wield little influence over broader societal institutions.” Corruption, on the other hand, is labeled as “a high-level systemic phenomenon and is vastly more destructive.” In addition, they argue that those involved in corruption “not only abuse rules but set them.”

The Authors also describe a differentiator in terms of a ‘follow the money’ dynamic, as bribes stay in the local economy, whereas corruption “often involves moving and parking vast sums of money abroad,” thus draining away “critical resources needed for economic development.” Where this all converges is at the Authors recommendation that “the world’s focus must therefore be on fighting corruption not bribery.” Furthermore, the Authors argue that those countries that are increasing their efforts to fight corruption “should consider significantly relaxing the punishment for low-level bribery.” In fact, the Authors argue, “Bribe taking could even be reclassified as an administrative misdemeanor rather than a criminal act.” (Emphasis added) 

First, before expressing my deep reservations with respect to this “first step,” I want to express my appreciation for what the Authors have accomplished by publishing their work in Foreign Affairs.  In all three of their recommendations, the Authors address how the developing world can work together towards “stamping out the threat” of corruption by addressing those who abuse “power at home.” As I have found a lack (but growing) amount of debate and study of those who solicit and take bribes, I think this article’s publication in Foreign Affairs represents a significant elevation of the debate with respect to the demand side of corruption, and I hope that it will spur further discourse in order to address this “global epidemic threatening the very foundation of Western societies.” Accordingly, while I do not examine (in this post) the other  policy recommendations described as “A New Global Enforcer,” and “Beating Back the Epidemic,” I recommend them as further reading.

Small bribes: A “practical dilemma.”

As John Bray and Geert Aalbers (Control Risks), state inFacing up to demands for ‘operational bribes’: legal trends and practical dilemmas” (International Bar Association, September 2013, link here), “there is a clear trend on the part of both governments and companies towards the banning of all forms of bribery, including smaller operational bribes.”  In addition, as Bray and Aalbers well point out, when it comes to small bribes the problems are “particularly acute in countries with weaker governance standards.” Indeed, as they state, in countries with such governance problems, “demands for operational bribes are likely to remain high on the list of corporate headaches for some time.”

So, if small bribery is here to stay where the institutions of state are weak, does reclassifying it as a somehow “misdemeanor” in any way serve the goals of those who seek to enforce anti-bribery conventions, or the citizenry of the host countries where the demands occur? Does it help to sort out the challenges which front-line international business groups face in such regions? I say not, and making such a distinction would clearly send the wrong message to those at the field level of international business who might interpret such a peculiarity, as “it is only a misdemeanor here,” and “everyone does it,” as leading ultimately to greater peril and the grand corruption to which the Authors refer.

The “social cocoon” of corruption.

But where this all becomes relevant is through a “must-read” work by Jamie-Lee Campbell and Anja S. Goritz in The Journal of Business Ethics (2014) titled “Culture Corrupts! A Qualitative Study of Organizational Culture in Corrupt Organizations.”   First, I view a country as being an “organization” and given that some of those who they interviewed were public officials, I do not see that as an academic or practical stretch. Accordingly, it then becomes clear that in such organizations, where bribes, even small bribes, “might be baked into the economic order,” (Ellis, How to Pay a Bribe, Chapter 8, Wrage, 2014), then what we have, as the Authors describe, is a corrupt organizational culture where “employees see corruption as a customary behavior, and employees behave criminally.”  In other words, the work of Campbell and Goritz make the critical link between the lowest levels of petty corruption to the organizational culture in which such behavior exists.

I have personally witnessed regions where corruption was exhibited up and down the organizational chart of State ministries, in a way that while formally unorganized, was clearly linked. Thus, trying to cut out the criminality of “small bribes” which Bray and Aalbers describe as “relatively small-typically less than US $100.00,” from greater corruption, could definitely lead to some significant policy and behavioral repercussions.  As Bray and Aalbers state, quite often small bribes come along with “a threat such as ‘if you don’t pay your business will suffer.” Letting those who use small bribery as a means of extortion think that their behavior is no longer criminal, presents great opportunity for contradictory messages to those who confront small bribes in international business and to those that seek them.

Campbell and Goritz set out to describe the mechanisms of rationalization, socialization and institutionalization that constitute a social cocoon of organizational culture because “it forms assumptions, values, and norms of employees to support corruption.” Furthermore, “this corrupt organizational culture has the purpose to ensure employees’ support of corruption.” While the leaders of corrupt organizations might establish offshore accounts and more sophisticated means of corruption “employees, by contrast, implement corrupt tasks in their work routines.” Maybe that is soliciting a bribe in lieu of a traffic ticket, or, as in Tunisia, permission to open up a fruit stand, but it is all the same, employees of the state, as part of a corrupt organization, behaving criminally.

Thus, why roll back and attempt to divide those who lead corruption and those ‘on the take.’ As Campbell and Goritz state, those in the social cocoon of corruption “facilitate corruption, expect their colleagues to act corruptly and punish those who refuse to engage in corruption.” Why would anyone deserve a “traffic ticket” for being a part of this system? Accordingly, it is here where I take greatest exception to Lebedev and Inozemtsev when they state that those who demand small bribes “do not act within organized networks and wield little influence over broader societal institutions.” The very act of solicitation as a State employee is entirely organizational in nature, and as events in Tunisia established, such demands have a tremendous influence over societal institutions. As Campbell and Goritz state, “employees are often  engaged in only a small part of a corrupt transaction because the division of labor forks corruption into different tracks.”

Also troubling is how those who demand bribes, large and small, perceive society and their fellow citizens.  As  Campbell and Goritz describe, “employees in corrupt organizations perceive human beings as evil. That is, all individuals play unfair.” Thus, to allow those who engage in such behavior to be written off as “misdemeanors” sends a troubling message to everyone involved in the chain of corruption, and perpetuates a view of society which we have recently seen boil over in the events which triggered and sustained the Arab Spring. Sending any message of tolerance is a danger to all, including those who confront bribery on the front lines of international business, to the societies which are victimized by it. 

As having once faced the ‘social cocoon’ of foreign corruption in my own career, I can see how Lebedev and Inozemtsev’s  “step one” recommendation to deal with the threat of corruption through “defining it better,” as resulting in a reversal of the existing gains in anti-corruption initiatives. In addition, such an institutional redefinition of petty bribery would also create future challenges by sanctioning such behavior via a criminal “downgrading” which is entirely unnecessary.  Those on the front lines of international business already face tremendous challenges in their work where they confront corruption risk. Institutionalizing petty bribery, as a misdemeanor in the host countries, would only reinforce the field level illusions and rationalizations that bribery is “the way things get done here,” by a “it is not even criminal here” mentality. From my own perspective and experience, it would be a perilous step back.

“Corruption: Misunderstanding the Impact.”

“Corruption: Misunderstanding the Impact.”

As I have shared in prior blogs, from the vantage point of business class and inner city hotels, there is an unhealthy distance and an often ethical unawareness from front lines of international business, when it comes to the victims of bribery. I have written about the field level illusion, which I too embraced, that bribery has no victims, or worse, that corruption can be a win-win, as those engaged in overseas bribery rationalize that “no one is getting hurt here.”

While there is no shortage of information that academically and practically addresses the impact of corruption upon governance, standards of living and human rights, (and I would recommend a start with Transparency International for more information), the Carnegie Endowment for International Peace has published a work titled Corruption: The Unrecognized Threat to International Security which elevates this issue and which deserves advancement and discussion in the compliance community. On page three, I found the header, appropriately captioned “Corruption: Misunderstanding the Impact,” and hence, the title of this blog post.

As someone who has confronted corruption, and who rationalized that no one was “getting hurt,” I hope that the Carnegie paper can make it into the required reading of those who operate overseas. This publication provides an important focal point on how any engagement in bribery, including small bribes, “enables” those who use government “to capture specific revenue streams.” In addition, the work points to such conduct as contributing “to other international security threats, such as symbiotic relationships between states and transnational organized crime networks, facilitation for terrorist organizations, permeable international security regimes and acute economic disruptions.” For those at the front lines of business, and those who help them with compliance issues, as someone who has been through real-world bribery and consequences, take notice: there is yet another layer to corruption risk which has implications far beyond international bribery laws.

A White House Initiative

As the paper states, “systemic corruption has an unrecognized bearing on international security,” adding that “Western decision makers need to be clear sighted about the ways actors in their own communities are facilitating corrupt behavior or contributing to incentive structures that select for it.” The report continues, “When every government function is up for sale to the highest bidder…violations of international as well as domestic law become the norm.” The White House amplified this dynamic in President Obama’s “The U.S. Global Anticorruption Agenda,” (link here) which isolates corruption as “a growing threat to national security for our country and allies around the world.” The President makes very clear that “pervasive corruption siphons revenue away from the public budget and undermines the rule of law and the confidence of citizens in their governments, facilitates human rights abuses and organized crime, empowers authoritarian rulers, and can threaten the stability of entire regions.”

The Carnegie paper maintains “to insure impunity, kleptocratic networks typically co-opt the judicial function.” In addition, in such areas “control over legislative systems further guarantees corrupt networks ability to achieve their directives.” While that might appear to address only the few who rule, the report adds that “petty bribes, with a percentage demanded by superiors up the chain, is also a key element.” In other words, even small bribes, as part of the chain of command, where corruption exists throughout the instruments of state, “when added up, proves not to be petty at all and can represent a significant revenue stream.” Where those bribes intersect with global security, as the report well states, are the illicit fund flows that often start with corrupt regimes, where leaders “behave in criminal ways,” and “violations of international and domestic law become the norm.”

“Low Level Corruption Has a High Level Impact.”Twitter Icon

Bribes are the air that corrupt systems need for continued sustenance, and enable “the personal enrichment of the ruling network.” As such,  front line business personnel need to be reminded of the real consequences to national security when corrupt governments become failed states, which triggers instability, and allows terrorism to flourish. Does anyone remember how the Arab Spring started? It started when a young fruit and vegetable seller in Tunisia had his wares confiscated after he refused to pay bribes to local police.

Now the US has a substantial military presence in Liberia and a budget of $750 million to match, in order to combat Ebola. While US and other partners work to contain and treat the disease, with great risk to their own health, “some of the teams sent to retrieve bodies of suspected Ebola victims are collecting cash instead.” These bribes, according to the Wall Street Journal (Heidi Vogt reporting), are solicited and paid “to issue death certificates to families saying their loved ones died of other causes” which allows the  bodies to be collected by the families and hence, “to become a major source of contagion.” As Andrew Medina-Marino, an epidemiologist at South Africa’s University of Pretoria stated in the WSJ article “low-level corruption has a high level impact.”

A problem that can’t be ignored

A recent article in the Harvard Business Review, “When Your Company Has a Problem It Can’t Ignore” by Malachi O’Connor and Barry Dornfeld has great relevancy to the Carnegie work. As the Authors state, “there are critical times in the life of every organization when it faces challenges that can not be sidestepped.” In addition, as the Authors continue “good leaders recognize unignorable moments as opportunities to have unprecedented influence.” Clearly, the Carnegie report has helped to make the challenge of international corruption as a global security issue, as one of those moments. If it seems a stretch as opposed to a ”moment,” consider the White House when it states “The United States continues to use law enforcement and administrative tools to hold corrupt actors accountable and to retrieve the proceeds of corruption hidden in the U.S. financial system.” As I look at my own conduct in the field while I was engaging in corrupt behavior, global security was the  furthest issue from my own field of vision, yet for those on the front lines today, the potential for bribery to facilitate and enable other more serious transnational crime and instability should be taken quite seriously.

While maybe this linkage between bribery and global security has not yet hit the compliance headlines, as the HBR article states, often a crisis is “months, or even years, in the making-but when it explodes, it does so spectacularly.” Thus, the Carnegie report along with the White House Initiative, provides C-Suite personnel with a relevant opportunity to address this issue before “it explodes.” Compliance professionals now have occasion to provide yet another demonstration that bribery has many victims, among them: international stability. Accordingly, the Carnegie work and the White House Initiative, in combination, provide business leaders, as the HBR article states, with ample “opportunities to have unprecedented influence.”

Coca-Cola, the “pause that refreshes.”

The report provides numerous policy recommendations, as in the Appendix “Recommended Approaches.” Nonetheless, the conclusion remains that “the role of corruption in catalyzing significant international security hazards is now undeniable.” As to the power of example, one unexpected source came to my attention last week: Coca-Cola. As Pia Adolphsen, Associate Manager of Marketing Content Strategy at The Network wrote in a recent article  “Anti-Bribery Training from Coca-Cola: What I learned About Bribery, Corruption and Responsibly Entering Underdeveloped Markets,” there are indeed ways that business can commit to not be an enabler. It starts with corporate clarity: “Coca-Cola does not bribe. Coca-Cola’s vendors and suppliers do not bribe.”

Furthermore, Coca-Cola, which certainly operates in high-risk, low integrity regions, has another policy, “if Coca-Cola finds out that a vendor or supplier has paid a bribe, they will be put on a black list.” That means, no more business. No more Coca-Cola for you! In fact, Ms. Adolphsen points to a specific example of Coca-Cola being “pressured” to pay and play with respect to opening a factory on time in an overseas market. Coca-Cola said “no,” and demonstrated not only to the foreign officials, but also to its own employees (even more importantly), that “our values matter more than opening on time.” Thus, as opposed to being an enabler, Coca-Cola demonstrated that it was willing to walk business back before walking compliance back. Clearly, the leadership there decided that no risk is acceptable when it comes to engaging in bribery, and playing a role at any level, in the corruption ecosystem.

In sum, where front line overseas personnel engage with what might seem low level officials, using third parties and intermediaries to engage corruptly, they are now part of the economic network that supports international instability, crime and terrorism. Does a recreational drug user think that he or she is personally gunning down law enforcement agents involved in drug interdiction? Of course not, but are they a part of that network? Absolutely. Did I think about transnational crime and global instability when I was in the field engaging in corrupt behavior? No. Does it seem obvious to me now, and should others who confront corruption risk in their work consider the consequences of being an “enabler”? Absolutely.

Corruption and Compliance In Russia: A Long Term View

Corruption and Compliance In Russia: A Long Term View

The following is an interview conducted via e-mail with Anatoly Yakorev, (LinkedIn Profile here), Director at the Center for Business Ethics & Compliance, Moscow, Russia.

Q: Hello Anatoly, and thank you for joining me in the second of a series designed to bring in international views for the benefit of those on the front lines of international business. So, first, how about you tell us about yourself and  background.

Thank you Richard for inviting me to engage with your community. My observations are based on more than a two decades of corporate experience with a group of large US companies that operate in Russia. I joined Amoco Corporation, originally Standard Oil Company (Indiana), in 1991 when the company came to Russia lured by potential prospects. Initially, I was an interpreter for a company executive, which allowed me to participate in discussions related to ways to engage with local partners. That period in our history we call ‘the roaring 90s’, so against the backdrop of post-Soviet pains and transformation, foreign companies tried to enter the market at great risk for themselves (corruption was not the greatest risk at that time). As I developed my personal network with other companies and their managers, I took interest in various trends in terms of how companies entered the Russian market, and tried to do business while mitigating their risks.

In 2009 I became Deputy Director for the Center for Business Ethics & Corporate Governance (CFBE) in Russia (link here), a non-commercial partnership, founded in 2000 by Mr. Matthew Murray who is now the Deputy Assistant Secretary of Commerce at the U.S. Department of Commerce. CFBE’s mission was to help build a market economy in Russia based on global legal principles, in close cooperation with leaders from the Russian government, business, and civil society. Our goal was to increase voluntary compliance with ethics, corporate governance and anti-corruption standards.

The highlight of my work with Mr. Murray was launching the first Russian Collective Action Project called the Russian Energy Compliance Alliance (RECA). Launched in 2010, it was regarded as a potential global model by the B20 during the G20 meeting chaired by Russia in 2013. I left CFBE in 2012, and shortly thereafter CBFE terminated its activities in Russia due to the ban on NGOs with external funding; however, CFBE’s sister organization in the US is still operational.

In 2013 I turned to research and academia and started the Center for Business Ethics & Compliance (CenBeCom) under the direction of the International University in Moscow www.cenbecom.org. It is here at CenBeCom, where I synthesized my ideas from business, grass roots activism and academia to produce practical initiatives and projects that would build from the existing anti-corruption legislation of the Russian government. CenBeCom has international leadership along with Russian colleagues who have supported my work for many years.

Q: What are you doing now, especially in the context of sanctions?

In addition to CenBeCom, I am also working with the Financial University under the Russian Government to promote Anti-Corruption (AC) compliance in Russian financial institutions and to help implement the Russian Ministry of Labor guidelines on AC compliance. My experience has led me to believe that during the sanctions period it is imperative to try to maintain the level of anti-corruption compliance attained so as to not to lose ground to new corrupt tendencies in the market. Hence, I have organized an event on October 27, 2014, which is on the Center’s home page www.cenbecom.org, and which will address and raise issues of ethical leadership to promote anti-corruption programs. Richard Alderman, former UK SFO Director kindly agreed to address the attendees, and we hope to produce a new practical form of cooperation between foreign and Russian businesses to promote new Russian anti-corruption legislation, initiatives,  and to foster adherence to current national laws (i.e. Federal Law 273 etc.).

Q: In a general sense, what is the current state of corruption enforecement in Russia?

A: I would say that on some counts Russia has improved its record, including signing the OECD Anti-Bribery Convention and adopting  Federal Law (273) to implement internal anti-corruption compliance procedures by companies. Yet this is far from being enough. If you look at how corruption matured and spread in some Latin American countries, devouring and corrupting judicial systems, I fear that Russia is precariously edging towards a regime with similar traits. However, I am more hopeful that despite such troubling trends, Russia is a country that will ultimately come around and avoid a negative spiral because in Russia, despite the current environment, the institutions of State are quite strong; hence, the reason why I feel optimistic about the future with respect to the adherence to (and enforcement of) anti-bribery laws and conventions.

Q: And how is this impacted by the issuance of sanctions?

A: Well, now the bad news. On the back of the US and EU sanctions, whose impact was worsened by Russia’s self-imposed food ban, it appears that the country is turning back the clock in terms of anti-corruption enforcement. New AC risks have materialized that feed on recent imbalances in the internal market due to these new economic realities. In this standoff with the West, Russia has a lot to lose, including those achievements in the area of AC. Thus, the current challenge is not about improving AC levels but rather about maintaining those standards and commitments that have already been achieved.  Neglecting the gains made through internal laws and international conventions would just incur costs too high from a governance perspective. I don’t think that is where Russia is headed long term.

Q: What does this all mean for a multinational that might want to enter the Russian market, as well as for those entities that simply want to maintain current market-share?

A: This is the million Ruble question! I think Russia is destined to work with the West and Western companies just because you cannot throw away past decades of mutually beneficial cooperation. All this talk about leaning toward China is not serious. I think the political pressure on Russia, including sanctions, in the long run will help bring the level of political corruption down to create favorable conditions for democracy building and a commercial level playing field. Russia needs Western expertise and economic ties not only in oil & gas industry, but overall throughout the economy. Tackling corruption will then receive an impetus very much in line with global AC enforcement and outreach, but this is the long-term view.

Q: What about those individuals and groups who operate on the front line of business in Russia, what would you share with them?

A: I would say that they should keep their guard up because these days like never before any misstep could cost a great deal, especially with the introduction of new internal commercial players due to the sanctions regime. It is critical to implement and comply with the new AC Russian legislation, even if they are not being rigorously enforced, and be vocal about it. Engage in local AC initiatives like the Anti-corruption Charter of the Russian business.  Companies need to try to show they are committed to keep their house clean, help their Russian partners, clients, distributors and suppliers to improve their AC compliance commitment. The most important guidance I would give now is to think about how they want to be viewed post-sanctions, and conduct themselves like that now.

Q: Are there any resources that you might want to suggest?

A: I think these days most MNC’s employ compliance specialists that along with their legal departments have access to all the relevant information in terms of laws and conventions. But business needs to do more, so much more. Initiatives like Collective Action  are always most effective in elevating the issue of business compliance to the right level. I would also definitely recommend reviewing the Anti-corruption Charter.

As I shared, compliance leadership issue in now the hands of business, and multinationals need to use legitimate means to promote anti-corruption initiatives that in turn would impact not only the business environment, but make a difference for society as a whole. I know this might seem strange, as I am recommending that the private sector take the lead on anti-corruption in a rather non-aggressive AC enforcement environment.

Q: Well, thank you. Any other thoughts you might want to add?

A: My message to the business people and their senior management to seriously consider using Collective Action initiatives as providing greater protection against manifestations of corruption. Collective Action raises the “water level” for everyone in terms of promoting anti-corruption initiatives. Remember – Russia agreed and endorsed Collective Action as an initiative, plus the OECD, and G20. Russia is committed to anti-coruption, but right now, our leadership is distracted, but that should not be a reason for businesses to “lift” their compliance programs and initiatives in Russia. When the governement refocuses its energies with respect to anti-corruption programs, you are going to want to show an exemplary record during this period, even if on your own initaitive.

I would just add that the perspective from those like yourself who have come from business, and that have a personal story that people on the front line can relate to, adds great value to organizations and teams which confront with bribery and corruption. Lawyerly mantras are naturally appropriate, but do they resonate in the field? We need more AC ambassadors to go out there and make their messages heard because such experiences strike the right chords with international business leaders who are at the greatest risk. Thank you.

“Employees Facing Corruption: A Personal Reflection.”

“Employees Facing Corruption: A Personal Reflection.”

In the Journal of Business Compliance, which was brought to my attention via Philippe Montigny (CEO, Ethic-Intelligence) and Scott Killingsworth (Partner, Bryan Cave, and who also is on the editorial board) I read with great interest a three-part article* by Esther Pieterse and Sven Biermann titled Employees Facing Corruption. By way of background, Sven Biermann is the Director of Anti-Corruption Projects at the HUMBOLDT-VIADRINA School of Governance in Berlin/Germany and Ms. Esther Pieterse is a PhD candidate at the Europa- Universitat Viadrina Frankfurt (Oder).

Shortly thereafter, I was contacted by the Editor-in-Chief, Anthony Smith-Meyer, who asked me if I was interested in evaluating and comparing my own experience and conduct in the context of the academic theory of Pieterse-Bierman. Mr. Smith-Meyers asked if I thought there were lessons from my own experience that might be relevant to those at the front lines of international business, and to those who are tasked with helping them to manage corruption risk. Accordingly, using the Pieterse-Biermann Generic Decision Making Model (GDMM) as a companion to my own business behavior, I accepted Mr. Smith-Meyer’s challenge, as providing the potential to advance a “way forward” for corporations through further discussion, actionable “to-dos”, and  perhaps to even inspire further internal research with respect to anti-bribery compliance. As I shared with Mr. Smith-Meyer, “I do not see my own story as entirely unique, (so) I hope this commentary, by detailing my own experience, might assist organizations by elevating topics that are not often discussed, or even acknowledged by some corporate executives.

The following is a modified excerpt from my essay (with permission of the publisher), and for the entire article, I invite you to contact the publisher Baltzer Science Publishers, by linking here:

Employees Facing Corruption by Esther Pieterse and Sven Biermann

In their introduction Pieterse and Biermann (the “Authors”) state that bad behaviors and bad outcomes are “the result of bad decisions,” and that by better understanding the decision making variables which influence individuals, and how those factors interact, that the creation of an “effective anti-corruption risk mitigation strategy” will be made that much easier. Their work sets out to do this by describing “how employees make decisions and how such decisions can be influenced by targeting the underlying decision-making factors and variables.” The model they present is a Generic Decision Making Model (GDDM) and “that decisions and behavior are determined by a thought process” that is guided by:

  • Personal considerations, based on personal calculations of risk (detection) and reward (benefit), as well as values and self-image. The rewards issue is similarly addressed as “gain” or “hedonic” goals in the article – Combining Purpose with Profits – by Birkinshaw, Foss, Lindenberg, MIT Sloan Management Review, Spring 2014.
  • Societal considerations, based on the environment around the individual “including the workplace, and interaction with the expectations set by private and public circumstances in which they employee finds him/herself.”

Drilling down into each of these considerations, the Authors isolate the following with respect to personal considerations of Profitability and Attitude:

  • Profitability is well understood when considering “benefits” “costs” and “risk of detection,” as determinants of the ultimate decision: to participate or refrain from corruption.
  • Attitude. The first description of attitudes pertains to ethical values where “unethical behavior is an action that violates widely accepted (societal) norms.” Next comes emotional awareness that corruption leads to negative consequences in local economies and societies, with the conclusion that “lack of awareness can cause an employee not to recognize corruption as a moral issue at all.” Most importantly, The Authors recognize that attitudes can change, especially “when an employee with a current strong disapproval of unethical behavior is exposed to an environment where corruption is an accepted societal norm for a longer period of time.” Indeed. some might call this as “going local.”

Now, to “The Decision.”

The Authors state that when an employee “decides to engage in corruption” that on balance, “personal and societal considerations have steered to the conclusion that the benefit gained from corruption…provides a greater inducement than when refraining from corruption.” As the Authors later declare, “approval of corruption implies that employees find corrupt behavior to be in accordance with social norms,” and that approval “may also result from a lack of awareness of the negative consequences that corruption has for third parties.” Simple, but sadly, true.

In choosing between participating or refraining from corruption, the Authors explain the complex and inconsistent ways employees consider the rights and wrongs of a decision. Furthermore, as one considers the choices, employees use “rationalization strategies (consciously or unconsciously),” as such strategies “enable the justification of generally disapproved behavior by finding moral excuses that segregate a decision from the generally held principles of the individual.” The Authors break down rationalizations into a number of components, including the trivialization of consequences, and the reference to corruption as victimless, among others. They also once again point to pressures to behave corruptly such as demands “to deliver ill-considered, unrealistic financial or other results.”

What now follows is a reflection of my own experience against what I consider to be a valid academic paradigm as summarized by the GDMM.

Engulfed by The Perfect Storm

As to the framework of the Authors, I agree with almost all of their points, components and variables. In the article, I  share from my own experience that the temptations or “tipping points” as they describe in their “corruption propensities,” can be potentially overwhelming in favor of corruption to those at the front line of international business. While their model is the GDMM, mine is “the perfect storm,” and is based on four elements:

In the Business Compliance article I address each one, as well as in individual posts on this blog (as linked above.) Nonetheless, each one of those elements was a significant “ingredient” in my ultimate decision to engage in corrupt behavior, and which I describe in great detail. Furthermore, as I share my own experiences and perspectives, I make no attempt to justify such conduct, even as I explain how I rationalized unethical behaviors and decisions.  I simply reflect upon my own experience,  as these are the emotions, temptations  and behaviors that I seldom read about in the compliance debates or witness at compliance symposiums.

Addressing underlying behavior  trumps detection 

Given the  isolated and secretive environments in which corrupt discussions take place, often in “wink and nod” terms, detection remains difficult. The Authors propose a set of policy options including internal controls, audit measures and communication channels to encourage good faith reporting. While all of those measures are helpful to contain the consequences of corruption by removing the financial tools of bribery available to field personnel (and which have been extensively and appropriately covered by such professionals), they don’t necessarily address  the underlying behaviors and assumptions prior to the corrupt conversation. As the Authors state, by addressing and discarding the illusion that bribery can be a “win-win” for the payer and payee, small bribe or large, corporations can “create an awareness of corruption as an ethical issue,” and create a “moral self-governance” among international business teams. Thus,  if a company can be proactive in fostering an ethical abhorrence to corruption,  through  an understanding of  the societal consequences of bribery, then those desired  behaviors will bring better long term results than a book of “rules and procedures.”  While policies and process are necessary and appropriate, without addressing the thought process which leads to corrupt behaviors,  such rules might viewed as nothing more than a set of “work arounds” at the front lines of international business, especially in high-risk areas.

However,  such a change of attitude is not going to be created through watching training videos, reading anti-bribery paperwork, signing stacks of affidavits,  or even by subscribing to anti-corruption news feeds (present company included); it needs to be more dramatic and impactful.

Compliance programs need to address incentives (benefits), clarity of sanctions (costs) and highlight controls (detection), but most importantly, be supported by a long term platform which addresses organizational, personal and societal attitudes concerning the tragic consequences of corruption. From my experience and perspective, by ignoring any of those variables, a company puts themselves, as well as their personnel, in great peril. This is not a menu whereby some but not all can be selected. Enforcement agencies have already