Andrew Kakabadse, professor of international management and advisor to corporations on leadership and ethical business practice, says 80% of deals outside Europe and the US are blighted by bribery, which is costing industry billions of pounds.
A sharp rise in international corruption and bribery is damaging business the world over. Not only are companies and economies suffering as a result, but the UK Government is complicit in promoting high-export markets where demand for back-handers has become commonplace.
In two-thirds of the world, business can’t be done unless a bribe is handed over. In the west it is called bribery, in other countries it is called a transactional cost. Brazil, Russia, India, China, Mexico, South Africa and Indonesia are all hotspots for financial ‘incentives’, bribes and favours. In Turkey, Greece, most of South America and across many Asian countries, some sort of transactional cost is likely to be incurred.
In Eastern Europe the situation has worsened dramatically since the economic crash. Corrupt contracts for new roads and infrastructure projects are commonplace. Ruling elites, middlemen and civil servants routinely demand cash and favours before allowing contracts to be signed. Sometimes they refuse to pay companies for goods and services, knowing local courts will often dismiss applications for compensation from foreign-owned businesses.
Recent news reports and investigations have unearthed a host of examples where these problems are illustrated:
- Three former Hewlett-Packard Co. managers were recently charged in Germany in a corruption investigation over improper payments made to win a €35 million sale of computers to Russia about nine years ago
- Siemens paid €330m (£261.4m) to the Greek government to settle a long-running bribery case. Greece had claimed that bribes paid by the company from the late 1990s to 2007 cost taxpayers €2bn in overpriced hospital buildings and defence contracts.
- A Calgary-based oil and gas company, Niko Resources, pleaded guilty last year to bribing a Bangladeshi cabinet minister, an offence for which it was fined nearly $10 million
- Ukraine's president, Viktor Yanukovych, has conceded that his country is in the grip of a corruption epidemic
- Walmart, the US retailer, is examining a report alleging that it bribed hundreds of Mexican public servants to win planning permission to open stores.
Companies and their leaders should be able to demonstrate adequate procedures that limit the risk of corruption within their organisations and with business associates. These should include policies defining what is acceptable and what is not. Approval processes should be clear on the subject of gifts, hospitality or other contributions, and regular communication and training should be supported by internal monitoring and systems which allow employees to raise any concerns over bribery.
Companies need to undertake a comprehensive strategic stakeholder mapping analysis in order to identify where risks to corporate reputation lie. The greatest concern of all is isolating senior general managers who hold front line positions negotiating with government officials, politicians and middlemen and through such exposure are vulnerable to prosecutions. Too much attention to procedures and protocols, and not enough focus on analysis of the risks of pursuing ambitious sales target, leaves corporations open to the charge of unacceptable corrupt practice.