Sep 22, 2014

When Bribery Pays, People Bribe

As Alison Taylor (Senior Managing Director, Control Risks) stated in a recent Forbes Article, “Compliance and Risk: Clearing the Org Chart Hurdle, “the traditional preventative approach to risk management is proving inadequate in the face of regulatory complexity, volatility and an environment of constant change.” Indeed, based on recent reporting and enforcement issues with respect to foreign corruption, substantial compliance challenges remain for those who seek to maintain and grow their international business in public and state owned sectors. The recent GSK fine in China provides a relevant context, as reported by Andrew Ward in the Financial Times, when he wrote “the verdict and $488M fine brings an end to a 15-month investigation …that has plunged GSK’s Chinese business into turmoil and caused broader damage to the company’s reputation.”

In responding to the geo-political complexities and “new anti-corruption enforcement realities,” which Ms. Taylor discusses, multinationals should consider adopting a “holistic perspective that embeds consciousness of risk into every part of the business.” While she focuses upon five levels of organizational analysis as part of that platform, my attention is on the “interpersonal level,” as “understanding how employees are motivated and rewarded, and how these incentives are communicated and understood,” remain paramount.  Why start there? As stated in an article of the Association of Psychological Science (APS), “Honesty Requires Time (and Lack of Justifications)” by Shaul Shalvi, Ori Eldar and Yoella Bereby-Meyer, “several independent lines of research suggest that people’s automatic tendency is to serve their self-interest-even if doing so requires acting dishonestly.” In other words, as confirmed by the Shalvi piece, among others, and in my own experience, people will very much behave as they are compensated.

The “Interpersonal”

Thus, in this post, I will use a number of compelling academic articles relating to incentives and ethical behavior, as well as my own real-world perspective, in order to elevate the importance of Ms. Taylor’s “interpersonal,” when looking at corruption risk. As  US District Judge Rakoff once stated, “companies do not commit crimes; only their agents do” and when it comes to foreign bribery, at the front lines of international business, there is a bribe being paid by someone, who at some level, thinks that it is the “right thing to do.” Perhaps that decision is based on personal (profit) gain, or thinking that it provides “benefit to the company” by increased business, or perhaps both. But if we keep coming back to the default “people who bribe are not behaving within corporate or ethical norms, and are but rouge employees,” then we are never going to truly embrace Ms. Taylor’s holistic approach to anti-bribery compliance, for at the basic level, we are not attempting to understand the forces which might impact corrupt behaviors at the field level.  

How can the field of compliance hope to promote compliant behaviors to those who operate in high risk environments without first understanding the pressures which they face, and how they might react to those pressures? If the goal is to create and army of corporate citizens who can operate in regions with the worst reputations for integrity, while embracing a moral and professional revulsion to corruption, then isn’t it critical to understand what forces they might encounter, and what options they might consider as available in their responses?

As I always share in my posts, none of my perspectives are an attempt to justify bribery. When I engaged in bribery, I knew what I was doing was illegal, and offer no excuse. Ultimately, I paid the price for my conduct through the loss of liberty. Thus, my attempt here is to again elevate the thinking at the front lines of international business, which relate to emotions and temptations that I rarely see addressed in the “compliance debate.”

As Steve Kerr stated in his HBR articleDo Your Company’s Incentives Reward Bad Behavior,” “a company must determine what managers and employees believe they are being encouraged to do and not do.” Mr. Kerr also cautions companies to make sure you’re not “inadvertently providing rewards for behaviors you’re trying to discourage.” As I have shared before, when organizations speak to the “means” of anti-bribery compliance, while the bonus plans, especially in high risk areas, speak to a “win above all else” mentality, to those at the front lines, compliance becomes “bonus prevention.” When means and ends point to competing goals, compliance and bonus become a zero-sum game, as both cannot be delivered to management. When that occurs, those in the field now ponder “what does management really want, compliance or sales?”

As Mr. Kerr shares in his book Reward Systems, Does Your Company Measure Up (2009, Harvard Business Press), “when designing a competent measurement system, one must often choose between attributes that are desirable but inherently contradictory.” And as Mr. Kerr states, when you get those rewards wrong it almost “always produces expensive, and unwanted results.” As Ms. Taylor shares, when rewards and desired behaviors, especially in the context of anti-bribery efforts, are not in alignment, the implicit modus operandi can become “do the deal, and fend the compliance team off with a tick the box approach.” When that occurs, “risk tends to be within a silo, and the metaphor of the blind man and the elephant applies.” For those at the front lines who face this dilemma, and for those who are responsible for helping them to manage risk, this is a strategy executed with great peril.

Where does it all start?

An airplane does not take off from a runway without first starting at the terminal, so perhaps looking at the chronology of corrupt thinking might be useful.

As Francesca Gino (with Lisa D. Ordonez, and David Welsh) stated in a recent HBR article  “How Unethical Behavior Becomes Habit,” when looking at recent business scandals, both on an individual and collective basis, they concluded, “the ethical behavior of those involved eroded over time.” From my perspective, when you have front line international sales teams in highly corrupt regions, where small bribes are prevalent and where compensation is linked to aggressive growth forecasts, you have a environment ripe for rationalizing bribery, albeit slowly but surely. As Gino, et al maintain “rationalizing minor indiscretions inevitably influences how they (employees) view progressively worse behaviors and may lead them to commit bigger offenses.” In addition, as they state, and worthy of emphasis “people who are faced with growing opportunities to behave unethically are much more likely to rationalize this conduct than those who are presented with an abrupt change.” Add to this dynamic the Shalvi, et al, research that “people cheat to the extent that they can justify their unethical behavior to themselves, ” and again, it is an environment ripe for the evolution and the  rationalization of corrupt behavior. But it all starts somewhere, and from my perspective, it often starts small.

Organizations that ignore these perils, and keep the “rotten apple” script in the top desk draw for when the crisis hits, are not doing anything to help those in the field who are confronting risk, and who may be struggling to reconcile their bonus structures and compliance training. As Susan S. Silbey shares in a Sloan MIT Faculty Newsletter, “Rotten Apples or a Rotting Barrel,” ”professional and corporate misconduct derives, at least in part, from features of the organizations and social settings in which they take place.” Thus, when you have international teams in high-risk areas, who face a myriad of corruption risk, including the proliferation of requests for small bribes, and whose compensation is tied to individual financial performance, as Ms. Silbey states “those situations and settings provide both the opportunities and incentives for misconduct.”

As Shalvi states, “in tempting situations, people’s automatic tendency is to serve their self interest, even when such behavior requires lying” but with the addition that “only with time to deliberate can people correct this tendency.” In fact, as he concludes “people can behave in an ethical way-they just need time (and lack of justifications).” So, how do we get there? Perhaps a re-think of aggressive quarterly forecasts in high risk regions, linked to lucrative incentive plans,  might be warranted,  as to give front line personnel “time to deliberate” when confronted with corruption.  Perhaps the C-Suite should yield to Shalvi’s research, by providing their front line business teams with  ample time to engage with compliance personnel when confronted with bribery,  and to realize that “yielding to temptation” is no longer in their self-interest or necessary for corporate survival.

In conclusion, as Gino (I already ordered her book Sidetracked) states “unfortunately, the assumption that unethical workplace behavior is the product of a few bad apples has blinded many organizations to the fact that we all can be negatively influenced by situational forces.” As I think all of the authors referenced in this post agree upon, and to quote Gino “environments that nudge employees in the right direction, and managers who immediately identify and address problems, can stop ethical breaches before they spiral out of control.” As Ms. Taylor states, while the current compliance norm might be broken,  and what should replace “it is not yet clear,” her “holistic perspective” with a focus on behavioral models as represented in this post,  is indeed both warranted and timely.

One comment


  1. True true.

    I guess just like the rat who is thrown into a boiling pot will hop out immediately, if the heat is turn up slowly, eventually the rat diess…as it does not know truly how hot the water is. The same goes for those who deal with the ‘reality’ our there when conducting business…the more you see it (and even get used to it), the more it does seem OK and justified.

    Just check out the Bribe-Payers Index of Transparency International to get a sense of those more likely to pay a bribe than other countries.

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