Corruption and Integrity in Business - Case Study Example

CORRUPTION AND INTEGRITY IN BUSINESS When looking at the areas of corruption and integrity in business it is difficult because it is based on what someone perceives as "corrupt" versus how they perceive "integrity". For this paper it seems that we are to describe this information on the basis of what we as Americans would think these words mean. The challenge with this ideology is that Americans have a tendency to be very moral creatures when it comes to some issues but be very contradictory on other issues. As an example, Americans would say that torture and violence are wrong and we prosecute these things when they happen in the United States. However, the President of the United States sanctioned and therefore allowed torture and violence in the prisons of Abu Ghraib in the name of stopping terrorism. So, it is unclear as to what "standards" this writer should take to give meaning to corruption and integrity. A second issue that is important to this discussion is culture. The American culture is very different from those in Iraq, Pakistan, Mexico and other areas but we judge their cultures based on our own. This comparison is like apples to oranges because though they are countries, they are not like ours, so we really do not have the right to judge for them what is corrupt versus what falls within their integrity; it is obvious that these two areas are different for different cultures. This being said, it is the job of this writer to look at countries in terms of how they deal with these issues. For this paper the countries of Pakistan, Mexico, China and Germany have been selected. DEFINITION OF INTEGRITY VERSUS CORRUPTION In order to speak about these concepts it is necessary to define them so that we know what we are talking about and how we are comparing them. According to Transparency International, "corruption is operationally defined as the misuse of entrusted power for private gain" (Transparency International, n.d.). This definition basically has to do with bribes and there are two ways that bribes can be taken: 1) as a payment for preferential treatment or 2) as payment for a service that a person who accepts the bribe is not authorized to provide. According to Wikipedia, " Integrity is consistency of actions, values, methods, measures and principles" (Wikipedia, 2008). Therefore if we put these two definitions together, we are looking for those countries who have a high standard of ethics when they are doing business and who consistently work with everyone in an equal way. We are also looking for those countries who willingly take bribes for any reason. One other note is that the concept of corruption is basically a global perception of a particular countrys business dealings based on their behavior in the world. This is important because perceptions have a tendency to be subjective and difficult to trace. TRENDS IN CORRUPTION Pakistan (most corrupt/low integrity) In Pakistan corruption seems to be a way of life in business according to the Business Corruption Portal (n.d.), and it makes problems for people doing business in this country. Anyone who does business here whether they are in meetings with public officials or business meetings, people doing business will be confronted with bribes. According to this report 40% of all businesses in Pakistan say that bribes are a major concern when they are attempting to do business. Also, businesses who report bribery state that it is the "3rd most problematic factor for doing business in the country" (Business Corruption Portal, "Pakistan") and it is possibly due to "a poor infrastructure and inefficient government bureaucracy." (Business Corruption Portal, "Pakistan"). Most of the corruption comes from the police, the power sector and tax authorities. These three entities will demand that the business give bribes for regular services and the police are prone to "give out bogus fines." Companies that import-export here are susceptible to "corruption in tax and customs" (Business Corruption Portal, "Pakistan" ). In fact, foreign investors have to find local agents within the country to act on their behalf to get through the bureaucracy of the country. The challenge is that investors are also liable for the money that their agents give in bribes, so anyone doing business in this country is advised to do a due diligence study before they commit funds. Mexico (most corrupt/low integrity) Mexico represents a well developed infrastructure in their county that attracts foreign investment. The former president, Vicente Fox pursued aspects of the free market by "liberal regulatory regime and political commitment to improve the business climate" (Business Corruption Portal, "Mexico"). The biggest aspect of business for Mexico is private companies and the new president, Felipe Calderon has continued the friendly business policies that Fox started. There are still problems with drug related crime, and " disproportionate distribution of wealth" as well as high levels of corruption in other places that Mexico still has to deal with as strong challenges (Business Corruption Portal, "Mexico"). These areas stop them from being able to grow economically in the way they expect. Corruption is a major concern here and generally comes from illegal transactions that impede the development of business. Also, bureaucratic problems can delay the ability to do business which makes people susceptible to giving money for bribes to get their paperwork through the bureaucracy. Businesses report that they have to give bribes in order to get the needed services to run their businesses. Germany (less corrupt/high integrity) According to "The Local: Germanys News in English," Germany is now number 14th in the list of least corrupt countries. This article quotes the information from Transparency International. In this position, Germany is showing the world that at least they are doing something about the corruption. In recent news there are several cases of scandals in the country where top executives are on trial for their corruption activities. These activities have created a global warning to Germany to stop the corruption wherever possible in as quickly an amount of time as possible. According to Dougherty (2007), corruption here may be coming from the lack of strong policies within the companies against corruption. They quote the "1997 treaty against foreign bribery by private companies" (Dougherty, 2007, p. 1) as the reason why some of the cases have come to fruition; many are brought by the United States. This seems to indicate that Germanys corruption is most prosecuted by the government than in other countries. Sweden (least corrupt/high integrity) According to Transparency Internationals Survey, Sweden is on of the least corrupt countries for business dealings and it is largely due to the fact that Sweden and other countries like it have put together several anti-corruption always and sanctions. As an example, the Swedish International Development Cooperation Agency (SIDA) has adopted a zero tolerance policy both within their own ranks and with their work with partners internationally (Business Anti-corruption Portal, n.d., "Swedish"). This agency has been created as a sort of "watchdog" to any corruption they may find in the private or public sectors and employees are expected to report any they see. The way that Sweden is handling their fight against corruption is seen as a positive step towards keeping corruption out of their country. Differences Between Corrupt and Ethical Countries/Actions that Help The greatest difference in these four countries is the fact that those that have less corruption have a stronger infrastructure for their government. According to Moyer and Farrell (2008) there are several reasons why there are discrepancies between the countries. Poverty and infighting with the government plays as large part as to whether bribes become a lucrative business. Also, whether a country has a stable economy and whether the government has a strong infrastructure will also play apart. Using the countries listed here the countries that are the least corrupt have a strong economy and they have wealth. The government is also stable. The most corrupt countries are at war, usually there is political oppression that stops them from getting the help they need and there is a situation where no one is looking at what goes on which indicates problems with the infrastructure of the government. Also according to Moyer and Ferrell, the countries that are the most corrupt have are considered by the World Bank as being low income (Moyer and Ferrell, 2008, p. 1). With a weak government, people who are poor, and natural resources that are abundant in the area it is easy to see why the country would be corrupt. In some of these countries, the governments are the problem in terms of taking and enforcing bribes. They make minimal attempts to stop what is going on because they are in the middle of taking money for services. Ethical countries actively work towards stopping corruption. They put policies in place to stop corruption and they enforce these policies. The governments have cleaned up their "act" so to speak by making sure that employees within the governmental programs report anything they see that may not be ethical. As an example, Sweden with all of their policies that they enforce. Their motto, " Never accept! Always act! Always inform!" creates a way for people to be upfront about what they are seeing and helps their employees remember what they need to do (Business Anti-corruption Portal, "Sweden"). In order to stop corruption, which it seems impossible to do, the most corrupt countries would have to put into law policies against corruption and they would have to take this seriously. According to Transparency International some countries have changed their rankings and this is largely due to them performing a due diligence within their states. They also have enforced policies and received assistance in creating a stronger infrastructure to their government. In essence it seems that the country will have to take seriously the idea that their country is corrupt and do something about the situation. Culture and Corruption There seems to be two ways to look at culture in discussion this situation. First, in each of these countries that are the most corrupt, a "culture of corruption" has been created that is very difficult to stop. This has been going on for many years without anyone really watching. It has been allowed to just happen. As an example, in many articles read about this subject, when researchers did surveys about how corruption was perceived, they found that most business people "expected" to have to pay bribes in certain countries in order to get to do business. In Pakistan it is known by most people that if they are going to do anything quickly, they will need to pay bribes. This culture of corruption has given a deaf ear and a blind eye to what is going on. Its as though they think , as long as no one is looking on a global level, this action will stay the same. The second aspect of culture is the actions within the country that makes up ethnicity and how they see the world. This also is an aspect that must be taken into consideration when looking at this issue. According to Mallinger, Rossy and Singel (2008) cultures disagree on how they look at corruption and they have different tolerances for it. Some may see bribes as "consultation fees" and not look at them in the way that the less corrupt countries would see them (Malinger, Rossy, et. al. p. 1). In a country that may see this as an okay "fee" they may feel that it is necessary for them to charge this as a cost of doing business. In the study they did, they found that there was most issue within cultures of something they called, "uncertainty avoidance". In this situation an individual or members within a society work towards avoiding uncertainty by "relying on established social norms, rituals and bureaucratic practices" (Malinger, Rossy, et. al., p. 1). This meant that when a society had strong rules for conduct, there was less corruption. The study further suggested that corruption became a substitute for fair business practices when the legal environment wasnt well enforced (Malinger, Rossy, et. al, p. 2). In looking at this information as a researcher to write this paper it is apparent that some cultures have lived under this type of corrupt situation for so long that it would be very difficult to change the way they do business. They do not seem to see this as an ethical matter because it is part of who they are and what they do. They do not fear repercussions from government so it becomes something they can do to enhance their own economic welfare. This of course creates problems for poor people who do not have the opportunity to take bribes. They will be impacted in some ways because poverty always keeps someone behind and under oppression when others who are wealthier are in power. Comparison of United States This is a very difficult comparison in lieu of the current economic events in the United States. What seems important is that many countries look to the United States to be the ethical arm of business. However, when you look at the fact that the FBI is checking into the problems that encouraged the $700 buyout to see whether there were any signs of corruption, it is difficult to say exactly where the United States stands at this time. According to Transparency Internationals Corruption report, The United States ranks 20th in the "least corrupt states" (Transparency International as quoted in Moyer and Ferrell 2008) which is up from 17th in their last report. There are other reports that actually looked at specific states in the United States to see how they ranked in terms of corruption. As an example, the Corporate Crime Reporters Report did a report based on the amount of convictions for corruption in business each state had and ranked them. Among the top 10 are Alaska (which may be backed by the current problems that vice presidential hopeful Palin is going through now), Florida (where speculation of corruption in the last two elections has been scrutinized), Mississippi and Illinois (Corporate Crime Reporter, 2004, p. 6). Those that were on the list of least corrupt included Colorado, Iowa, Minnesota and Wisconsin (Corporate Crime Reporter, 2004, p. 7). The report also pointed out that it was difficult to really talk about where Washington, DC fell in this report because they prosecute most of the cases at the federal level). It seems as though the United States could be placed somewhere in the middle of the two groups. The Nation is watching though and there is a lot of speculation on the Internet as to where our corruption will eventually fall. With the current economic crisis we also know that the United States is being watched on a Global level; this could create an avenue for more corruption in the United States due to the shakiness of our economic system and the availability of funds from other countries. This could meet with negative and far reaching results because of the fear of local business. Only time will tell. References Business Anti-corruption Portal. Germany country profile. Retrieved September 27, 2008 from http://www.business-anti-corruption.com/normal.asp?pageid=464. Business Anti-corruption Portal. Mexico country profile. Retrieved September 27, 2008 from http://www.business-anti-corruption.com/normal.asp?pageid=464. Business Anti-corruption Portal. Pakistan country profile. Retrieved September 27, 2008 from http://www.business-anti-corruption.com/normal.asp?pageid=464. Business Anti-corruption Portal. Swedish Anti-Corruption Initiatives. Retrieved September 27, 2008 from http://www.business-anti-corruption.com/ normal.asp?pageid=464. Dougherty, C. (2007). Prosecutions of business corruption soar in Germany. International Herald Tribune. Retrieved September 26, 2008 from http://www.iht.com/ articles/2007/02/15/business/deutsch.php. Germany ranks 14th among least corrupt countries (n.d.). The Local: Germanys News in English. Retrieved September 26, 2008 from http://www.thelocal.de/ 14481/20080923/. Integrity. (2008, September 26). In Wikipedia, The Free Encyclopedia. Retrieved September 26, 2008, from http://en.wikipedia.org/w/index.php?title =Integrity&oldid=241073758 . Mallinger, M., Rossy, G. and Singel, D. (2008). Corruption Across Borders: What are the challenges for the global manager? Graziadio Business Report. Pepperdine University. Retrieved September 27, 2008 from http://gbr.pepperdine.edu/ 052/corruption.html. Moyer, L. and Farrell, A. (2008). Special Report: The Best Countries For Business. The Worlds Most Corrupt Countries. Forbes Magazine [Online]. Retrieved September 23, 2008 from http://www.forbes.com/2008/06/26/somalia-myanmar- corruption-bizcountries08-biz-cx_af_lm_0626bizcountries_corruptcountries.html. Transparency International: The Global Coalition Against Corruption (n.d.)."Frequently asked questions about corruption." (n.d.). Retrieved September 24, 2008 from http://www.transparency.org/news_room/faq/corruption_faq. Read More