Individual Reflection: Corruption and Corporate Social Responsibility - Essay Example

Individual Reflection: Corruption and Corporate Social Responsibility Student’s Name: Course: Tutor’s Name: Date: Corruption and Corporate Social Responsibility The global financial crisis that started in 2007-2008 has been attributed to diverse factors by economists and social analysts. Brammer, Jackson and Matten (2012, p.19) are among some of the authors who strongly believe that the financial crisis was as a result of “synergistic corruption in the world of finance”. Although corporate social responsibility (CSR) was entrenched in most organisations at the time, the management therein still used investors’ money to engage in too many risk-taking activities. Arguably, the genesis of the 2008/2009 global financial crisis is a reflection that voluntary CSR is not well equipped to balance the interest of the profit-making institutions, investors and management. According to Garriga and Melè (2004), CSR is described variably by different theorists, with some classifying is a means to profit-making; a means to enhancing the political powers that corporations have; a means of satisfying social demands by the corporations; and a means for corporations to meet their ethical responsibilities to various stakeholders. The various classifications of CSR notwithstanding, it is agreeable across the board that CSR’s main premise is that companies should go beyond profit-seeking and address social problems that pervade their areas of operations. If Brammer et al.’s (2012) argument that the 2008/2009 financial crisis was caused by synergistic corruption among players in the world of finance, then it would be clear that CSR does not adequately ensure that corporations are managed in a manner that cares for different stakeholders. On its part, corruption has been described as a devastating phenomenon that cuts across social, economic, cultural and political spheres. According to Brammer et al. (2012), some corporations insist that upholding transparency and accountability serves to reduce corruption. However, Aguilera and Vadera (2008) argue that corruption is more complex and reducing or eliminating it depends on understanding the form it takes. For example, Aguilera and Vadera (2008) observe that procedural corruption occurs where there are no rules to guide ethical behaviour or when the rules are transgressed for personal gain. Schematic corruption on the other hand occurs where the entire organisation adopts corrupt practices ostensibly to benefit the organisation. On its part, categorical corruption occurs in specific departments in the organisations for purposes of addressing specific situations (Aguilera & Vadera 2008). From the foregoing, it is evident that some corporations accept specific types of corruption by justifying the same – albeit not publicly – with the argument that it is important for business continuity. According to Carr and Outhwaite (2009), some organisations engage in corrupt practices to obtain illegal licenses, take up illegitimate contracts, benefit from tax concessions, rig bids, or fix prices. All such practices benefit the ‘corrupt’ firms, but are usually unfair to other stakeholders. Indeed, Dillon et al. (2006) are right in arguing that CSR practitioners are working on a shaky foundation if they do not treat corruption as a prerequisite. Experts on CSR acknowledge that corruption “distorts market competition, breeds cynicism among citizens, undermines the rule of law, damages government legitimacy, and corrodes the integrity of the private sector” (Rao 2006, p. 8). Yet, like in most other activities, it takes two to tangle in corruption. As such, for corruption to occur in the public service, a private sector player who wishes to hasten the procedure of getting something from the public sector is involved. Even where the public sector is not involved, partnership in corruption occurs in the private sector like was the case during the 2008/2009 global financial crisis. One therefore wonders, do some of the corporations involved in corruption forget about their responsibility to the society as indicated in CSR in instances where they want to hasten or benefit unfairly? Does corruption even correspond with CSR? The question of corruption and CSR is important because it touches on morals and legal ethics. While corruption is publicly perceived as morally wrong in most societies regardless of the cultural differentials as indicated by Dion (2010), it is clear that it is still globally prevalent. Even some developed countries where one would expect to find lesser forms of corruption have what one would refer to as sophisticated forms of corruption. Unlike the obvious kind of corruption characterised by bribing, the 2008/2009 financial crisis referred to in the introductory part of this reflection paper is an indication that the vice can involve several parties, all whose theme is underscored by a selfish need to benefit unfairly. Ethically, and in line with the CSR concept, organisations are supposed to illustrate ethical leadership by issuing codes of conduct that would ideally regulate employee behaviours towards an anti-corruption theme (Mullerat 2007). While this looks good on paper, it is clear that only firms that genuinely have an anti-corruption stance can successfully implement such codes of conduct. Firms whose management still perceive corruption as a means of gaining an unfair competitive advantage would still participate in the same corrupt activities for as long as their practices are hidden from the authorities and from public knowledge. Commenting on the same issue, Mullerat (2007) observes that the effectiveness of codes that are contained in CSR to fight corrupt practices depends on the perceived anti- or pro-corruption stance that leaders who advocate for them take. In some cases, the corrupt activities are ‘packaged’ in acceptable form, as was the case with the risk-taking that was apparently approved by some shareholders during the build-up to the 2008/2009 financial crisis. So far, this reflection essay has established that CSR and the anti-corruption provisions therein may not be powerful enough tools in enhancing ethical decision-making by employees. Additionally, it would appear that the management appears to have a pivotal role in determining whether employees abide by the ethical legality of situations, and consider the ethical morality of the same. Mullerat (2007, p. 5) found out that anti-corruption guidelines that were contained within codes of conduct were largely ineffective because “they were viewed by management as documents to be produced, publicised and then ignored”. Practically therefore, such codes were unable to enhance ethical conduct among organisational members in different matters, including corruption. Based on the above observations, it is clear that corruption remains a vice that is prevalent in organisations doing business in both developed and developing countries. Yet, corruption is a selfish act that often benefits an individual at the expense of different stakeholders and/or the society at large. For as long as it continues being the norm- either in its sophisticated form or the obvious form, CSR by beneficiary organisations will continue being a public relations exercise whose major role will be analogically tantamount to ‘giving back to the community’ with one hand, and stealing from the same community with the other hand. Transparency and enhanced internal loyalty are according to me, the major themes that CSR practitioners should underscore in future. Specifically, such practitioners need to underscore the importance of transparency in conducting business dealings. Only then can corruption be minimised or even eliminated since different stakeholders will have a chance to scrutinise contracts and other business dealings that organisations engage in. While I am aware that some business deals cannot be open to scrutiny by everyone due to the sensitive nature of the trade information contained therein, it is clear that there should at least be some trust vested to internal auditors whose role should be to ensure that a business entity does not engage in corruption. Regardless of its form or justifications, corruption should attract high legal, financial and reputational risks. Such risks would then act to dissuade people in organisational settings, especially those at the management level, to uphold integrity and transparency as part of the everyday business culture. In conclusion, it is important to highlight the need for CSR to address competitive disadvantage which arises as a result of honest parties losing out to dishonest and corrupt businesses. As has been noted by Arafa (2011) and Donaldson and Dufee (1999, p. 59), honest businesses are caught up in a prisoner’s dilemma where remaining incorruptible leads to a loss in business, and joining the corruption bandwagon is ethically wrong. The latter becomes an option through the self-justifying rhetoric that accessing business opportunities requires the business to do what others are doing. Overall, if anti-corruption measures are to be part of the voluntary initiatives that complement CSR initiatives, there is a need for organisations to appreciate and learn to practise integrity and transparency. As indicated herein, corruption creates business inequalities among the non-corrupt and corrupt parties. However, fairness demands that every party should enhance their competitive positions via honest means. The management in all organisations appear to have a major role to play in dissuading the use of corruption by their subordinates, but must do so by modelling the right behaviour rather than publishing codes of conduct, which they do not follow. If all else fails, CSR practitioners should make the cost of being corrupt extremely high. As indicated in this paper, the cost should include financial, reputational and legal risks. Perhaps then the perpetrators would reconsider the potential gains from corrupt practices against the possible risks if the corrupt practices are ever revealed. References Aguilera, R & Vadera, A 2008, ‘The dark side of authority: Antecedents, mechanisms, and outcomes of organisational corruption’, Journal of Business Ethics, vol. 77, pp. 431-49. Arafa, M A 2011, ‘Battling corruption within a corporate social responsibility strategy’, pp. 1-24, viewed 21 May 2013, Brammer, S, Jackson, G & Matten, D 2012, ‘Corporate social responsibility and institutional theory: New perspectives on private governance’, Socio-economic Review, no. 10, pp. 3-28. Carr, I & Outhwaite, O 2009, ‘Investigating the impact of anti-corruption strategies on international business: an interim report’, University of Surrey, viewed 21 May 2013, . Dion, M 2010, ‘Corruption and ethical relativism: what is at stake?’Journal of Finance Crime, vol.17, no.2, pp. 240-250. Donalson, T & Dunfee, T.W 1999, ‘When ethics travel: the promise and peril of global business ethics’, California Management Review, vol. 41, no.4, pp. 45-63. Garriga, E & Melè, D 2004, ‘Corporate social responsibility theories: Mapping the territory’, Journal of Business Ethics, Vol. 53, pp. 51-71. Mullerat, R 2007, ‘Self-regulation: The codes of conduct’, viewed 21 May 2013, . Rao, B 2006, ‘A multi-lateral initiative to combat corruption’, Hindu Business Line, October Issue, p. 8. Bibliography Aguilera, R & Vadera, A 2008, ‘The dark side of authority: Antecedents, mechanisms, and outcomes of organisational corruption’, Journal of Business Ethics, vol. 77, pp. 431-49. Arafa, M A 2011, ‘Battling corruption within a corporate social responsibility strategy’, pp. 1-24. Brammer, S, Jackson, G & Matten, D 2012, ‘Corporate social responsibility and institutional theory: New perspectives on private governance’, Socio-economic Review, no. 10, pp. 3-28. Carr, I & Outhwaite, O 2009, ‘Investigating the impact of anti-corruption strategies on international business: an interim report’, University of Surrey, viewed 21 May 2013, . Dion, M 2010, ‘Corruption and ethical relativism: what is at stake?’Journal of Finance Crime, vol.17, no.2, pp. 240-250. Donaldson, T & Dunfee, T W 1999, ‘When ethics travel: the promise and peril of global business ethics’, California Management Review, vol. 41, no.4, pp. 45-63. Garriga, E & Melè, D 2004, ‘Corporate social responsibility theories: Mapping the territory’, Journal of Business Ethics, Vol. 53, pp. 51-71. McCormick, J.T & Paterson, N 2006, ‘The threat posed by transnational political corruption to global commercial and development banking’, Journal of Financial Crime, vol. 13, no. 2, pp. 183-94. Mullerat, R 2007, ‘Self-regulation: The codes of conduct’, viewed 21 May 2013, . Peterson, D.K 2003, ‘The relationship between ethical pressure, relativistic moral beliefs and organizational commitment’, Journal of Managerial Psychology, vol. 18, no. 6, pp. 557-72. Rao, B 2006, ‘A multi-lateral initiative to combat corruption’, Hindu Business Line, October Issue, p. 8. Tsalikis, J & Nwachukwu, O 1991, ‘A comparison of Nigerian to American views of bribery and extortion in international commerce’, Journal of Business Ethics, vol. 10, no. 2, pp. 85-98. Read More

Schematic corruption on the other hand occurs where the entire organisation adopts corrupt practices ostensibly to benefit the organisation. On its part, categorical corruption occurs in specific departments in the organisations for purposes of addressing specific situations (Aguilera & Vadera 2008). From the foregoing, it is evident that some corporations accept specific types of corruption by justifying the same – albeit not publicly – with the argument that it is important for business continuity.

According to Carr and Outhwaite (2009), some organisations engage in corrupt practices to obtain illegal licenses, take up illegitimate contracts, benefit from tax concessions, rig bids, or fix prices. All such practices benefit the ‘corrupt’ firms, but are usually unfair to other stakeholders. Indeed, Dillon et al. (2006) are right in arguing that CSR practitioners are working on a shaky foundation if they do not treat corruption as a prerequisite. Experts on CSR acknowledge that corruption “distorts market competition, breeds cynicism among citizens, undermines the rule of law, damages government legitimacy, and corrodes the integrity of the private sector” (Rao 2006, p. 8). Yet, like in most other activities, it takes two to tangle in corruption.

As such, for corruption to occur in the public service, a private sector player who wishes to hasten the procedure of getting something from the public sector is involved. Even where the public sector is not involved, partnership in corruption occurs in the private sector like was the case during the 2008/2009 global financial crisis. One therefore wonders, do some of the corporations involved in corruption forget about their responsibility to the society as indicated in CSR in instances where they want to hasten or benefit unfairly?

Does corruption even correspond with CSR? The question of corruption and CSR is important because it touches on morals and legal ethics. While corruption is publicly perceived as morally wrong in most societies regardless of the cultural differentials as indicated by Dion (2010), it is clear that it is still globally prevalent. Even some developed countries where one would expect to find lesser forms of corruption have what one would refer to as sophisticated forms of corruption. Unlike the obvious kind of corruption characterised by bribing, the 2008/2009 financial crisis referred to in the introductory part of this reflection paper is an indication that the vice can involve several parties, all whose theme is underscored by a selfish need to benefit unfairly.

Ethically, and in line with the CSR concept, organisations are supposed to illustrate ethical leadership by issuing codes of conduct that would ideally regulate employee behaviours towards an anti-corruption theme (Mullerat 2007). While this looks good on paper, it is clear that only firms that genuinely have an anti-corruption stance can successfully implement such codes of conduct. Firms whose management still perceive corruption as a means of gaining an unfair competitive advantage would still participate in the same corrupt activities for as long as their practices are hidden from the authorities and from public knowledge.

Commenting on the same issue, Mullerat (2007) observes that the effectiveness of codes that are contained in CSR to fight corrupt practices depends on the perceived anti- or pro-corruption stance that leaders who advocate for them take. In some cases, the corrupt activities are ‘packaged’ in acceptable form, as was the case with the risk-taking that was apparently approved by some shareholders during the build-up to the 2008/2009 financial crisis. So far, this reflection essay has established that CSR and the anti-corruption provisions therein may not be powerful enough tools in enhancing ethical decision-making by employees.

Additionally, it would appear that the management appears to have a pivotal role in determining whether employees abide by the ethical legality of situations, and consider the ethical morality of the same.

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