Corruption in International Businesses - Case Study Example

Corruption and Bribery in International Businesses In the current global scenario, particularly in the underdeveloped countries, curbing corruption has become an issue of paramount significance. The people of the underdeveloped countries lack good educational facilities and therefore they cannot excel in their life to claim authoritative posts in the governmental and administrative structures of the country, the ruling elite takes advantage of this and befools the people by doing legislation and forming laws which can be easily manipulated to facilitate corruption. Such a trend is not only detrimental for the socio economic life of the people living in the country; it also affects the stability of the both public as well as private institutions (Ginnochi). Corruption and bribery diminish the productivity of organizations and also affect the confidence of public in institutions and governmental setup. Curbing corruption therefore becomes imperative for economic progress of a country. Despite global efforts and legislation by countries in this regard, corruption stays at a very high level particularly in the underdeveloped world. This has very bad implications on international investment trends in poor countries. Moreover most of the organizations including some multinationals do not have strong code of ethics regarding corruption and are involved in paying bribes to the governmental officials in poor countries for securing contracts. So for the eradication of corruption steps will have to be taken on two levels; legislative and institutional reforms in the administrative setups of the countries to ensure least involvement of governmental officials in corruption and formulation of strong code of ethics against corrupt dealings and bribery by business organizations in order to minimize the chances of corruption (Eicher). Corrupt practices at international level can do more harm to poor countries than corrupt practices at local level because it affects the prospects of the development of international businesses in these countries. In international businesses usually a lot of capital is involved and most of the time it is derived from the public funds of the country therefore thousands of lives are at stake. Corruption significantly affects the prospects of growth which fair competition offers (Luo). When organizations get big contracts through unfair means this greatly affects the morale of the employees of honest organizations motivating them towards corruption. Corruption in business also discourages young entrepreneurs who can significantly contribute towards the economic development of underdeveloped countries (Wuthi-Udomlert). In this essay the issue of corruption and bribery Argentina and Ethiopia are discussed and a comparison of the situation in the two countries has been drawn. Corruption and Bribery in Business and Engineering in Argentina and Ethiopia: Current Issues Corruption has been an important issue of political debate in Argentina during recent years and the government has taken a few steps in order to remove corruption from governmental institutions. As a result of increasing demands from public and civil society organizations, it has been made mandatory for the public servants particularly the judges of the courts to declare their assets. This step will have very good implications on the businesses in Argentina because an honest judicial system will ensure the eradication of corruption from other institutions in the country as well. However issues still exist in judiciary, most important of which is related to law no. 26.376 which gives enormous powers to the executive with regards to appointment of judges. Since all the corruption cases are ultimately referred to the courts, therefore giving executive the exclusive authority to appoint judges will encourage them to make appointments according to their personal liking which will facilitate the corrupt leaders to in their wrongdoings. In such a scenario a productive environment for business cannot be created. The activities of the Argentine government do not indicate any goodwill when it comes to extermination of corruption because the government recently privatized state controlled railway company. This move turned out to be a failure as heavy bribes were paid by one of the bidding companies. The contract was ultimately awarded to that particular company but since the company lacked technical and managerial expertise to successfully run such a big enterprise, the railways system of the country collapsed. When the structure of basic utilities such as railway or electricity collapses in a country, it has direct implications on the businesses and engineering works in the country (Tulchin and Espach). The delays in trains arrivals and frequent breakdowns have paralyzed the goods transportation system of the country. In such a scenario new businesses are not likely to be set up in the country and the existing ones are planning to leave the country. The root cause of this mismanagement is the inherent corruption of the political leadership of the country. Another similar incident which depicts the prevailing corruption in the country also happened recently when the government instead of improving the condition of the present railway infrastructure in the country started new projects with no substantial logistic benefit to the nation or the businesses. Moreover the major contracts of these new projects were awarded to a French company Alstom which has been reported to have paid large sums of money to the corrupt authorities in Mexico, Venezuela, Brazil and Singapore to secure illegal contracts. Such a scenario is never encouraging for foreign investors because they feel insecure in investing in such countries. Moreover without the improvement of logistics, major engineering projects cannot be completed on time and businesses crash down. The corrupt authorities in Argentina also depicted fake statistics with regards to inflation rates in the country in order to restore the public confidence in governmental institutions, these statistics were not accepted by international monetary agencies resulting in substantial loss of confidence among the global community about the statistical accuracy of the Argentine government. Federal Ethics and Anti-Corruption Commission was established in Ethiopia recently after a long struggle by civil society organizations and is very active in investigating and reporting corruption incidents in the country. Moreover the Commission has also undertaken educational and awareness programs with regards to the long term implications of corruption in order to increase awareness in general public and also in politicians. However the biggest concern over commission’s performance is its dependence on the government as all the funds to the commission are provided by the federal government and the appointments are also made by the executive. Under these circumstances the commission can do very little about the corruption committed by the politicians who are very often involved in it. The Civil Society Organizations and international as well as local NGOs have played an exemplary role in eradicating corruption from Ethiopia. Since majority of the politicians and leaders in the country are corrupt, the improving situation of corruption an bribery in the country is a very alarming situation for them. Thus for limiting the activities of NGOs and Civil Society Organizations, the ministry of law recently enforced a regulatory framework which bars the international NGOs, charity organizations and other volunteer organizations from carrying out their activities independently. Such restrictions have also been imposed on local organizations which derive more than 10 percent of their findings from international charity bodies. Now the situation has become very bad in Ethiopia because there are no institutions or private sector organizations to check the corrupt dealings of politicians (Plummer). The mineral resource base in Ethiopia is very large and the international investors want to positively exploit the opportunity it offers however the government awards contracts to companies of their own choices as the governmental officers and politicians are more concerned about increasing their own wealth rather than the well being of the people. An example of the bad practices which have taken place in Ethiopia due to prevalent corruption is the governmental institutions is the recent corruption case in which the authorities of the National Bank of Ethiopia bought almost 500 kg of gold from a local mining company, the gold later turned out to be gold plated iron. In this way large sums of public funds were wasted because of the corruption of the politicians. This diffidence of the international community also has very bad implications on the businesses in Argentina because the government’s inability to provide reliable statistics means that investors and large business operators will have to conduct their own surveys for analyzing the economic potential of the country and this whole exercise will drive the foreign investors away from the country. Corruption and Bribery in Business and Engineering in Argentina and Ethiopia: Future Outlook The prevalent corrupt political culture in Argentina is the biggest hurdle in the economic growth of the country. International investment is greatly affected and the incompetent companies are encouraged to get contracts in the country by paying bribes to the governmental officials (Weitzal and Berns). Such a system does not only affect the economic growth but also deteriorates the organizational culture. In order to establish their business in Ethiopia the large multinational enterprises have to establish their offices in the capital of the country, however acquiring land in the capital of Ethiopia is almost impossible without paying a bribe to civil servants. Leading companies in engineering and technology strongly implement professional code of ethics according to which paying of bribes is not allowed under any circumstances. Thus competent companies will not establish business in such corrupt countries which will result in reduced economic growth. The economic and technological scenario in Ethiopia is certainly not encouraging for the international investors and businesses and the development of ethical sense among engineers and employees of local organizations is very difficult. Comparison between the Two Countries and Summary The situation in Argentina is somewhat better as compared to Ethiopia because the people are political and social more aware and empowered enough to challenge the wrong doings of the government. Moreover the effect of corruption and bribery on economy is more pronounced in Ethiopia than in Argentina because of the fact that Ethiopia is largely dependent on international investment for its economic progress therefore the economic growth is very slow as good international businesses do not want to work in corrupt environments. Moreover because of lack of education the people of Ethiopia are less aware of the consequences of their corrupt doings. However the situation in both countries is not encouraging at all and a lot of work needs to be done in order to eradicate corruption and bribery from the two countries. In order to ensure economic progress and progress of businesses and technology, a productive and healthy work environment is mandatory (Sanyal). Corruption is certainly a big hurdle in the economic progress of various countries and also for the ethical development of organizations. Therefore work needs to be done on two levels, firstly strong legislation should be done for the eradication of corruption, moreover businesses and organizations should strongly implement the professional code of ethics in order to exterminate professional and social evils such as bribery. Works Cited Eicher, Sheron. Corruption in International Business: The Challenge of Cultural and Legal Diversity. N.p.: Gower Publishing Limited, 2009. Print. Ginnochi, Leonard. Corruption and Management in International Business. N.p.: VDM Verlag, 2008. Print. Luo, Yadong. "Political Behavior, Social Responsibility, and Perceived Corruption: A Structuration Perspective." Journal of International Business Studies 36.6 (2006): 747 66. Print. Plummer, Janelle. Diagnosing Corruption in Ethiopia: Perceptions, Realities, and the Way Forward for Key Sectors. N.p.: World Bank, 2012. Print. Saniyal, Rajib. "Determinants of Bribery in International Business: The Cultural and Economic Factors." Journal of International Business Studies 59.1 (2005): 139 - 145. Print. Tulchin, Joseph, and Ralph Espach. Combating Corruption in Latin America. N.p.: Woodrow Wilson Centre Press, 2000. Print. Weitzel, Ultz, and Sjors Berns. "Cross-Border Takeovers, Corruption, and Related Aspects of Governance." Journal of International Business Studies 37.6 (2006): 786 - 806. Print. Wuthi-Udomlert, Vee. Corruption in International Business Transactions. N.p.: GRIN Verlag, 2007. Print. Read More