"Why Bribes?"

Bribery by companies from the worlds export giants is still common, despite
the existence of international anti-bribery laws criminalising this practice.

By Christos Papoutsy

Can bribes be avoided ?

I believe that bribery cannot be completely avoided. Greed is a very powerful human weakness and will always tempt many of today’s professional managers. The most significant temptation for bribery and corruption I believe is rooted in the global stock markets. The New York Stock Exchange market value is approximately 70 percent above its book value of five to six trillion dollars. This disparity between the market value and book value is both significant and alarming. I believe that this is the most tempting target for the majority of bribery, corruption and unethical behavior in the global world business arena, and I have only made reference to one stock market and not spoken about all of the other stock markets located around the world that have similar histories and ratios with much less oversight and transparency . The follow the money theory to greed not only tempts bribery but corrupts many that deal directly or indirectly with the markets. Greed by the non-owner professional managers of public corporations will do just about anything including supporting corruption by their sales personnel to offer bribes to their customers as techniques to increase sales and profits to maintain or increase the market value of their company’s public stock price. According to many capitalists in the global market, detachment by managers who are not owners with none of their own equity at risk supposedly result in better decision making. Their theory advances the notion that non-owner managers are better educated and trained to act as professional stewards of others capital and thus make decisions that generate the best returns all the time, with emphasis on the short term goal of meeting or beating the next quarterly earnings report to be released to the owners and potential buyers of stock in public corporations.

The United States congress passed the Foreign Corrupt Practice Act of 1977 requiring any company that has publicly traded stock to maintain records that accurately and fairly represent the company’s transactions. The act was amended in 1998 by the International Anti-bribery Act of 1998 which was designed to implement the anti-bribery convections of the Organization for Economics Corporation and Development (OCED). The anti-bribery provisions of the FCPA make it unlawful for a U.S. person, and certain foreign issuers of securities, to make a payment to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person. This begs the question, can anti-bribery be mandated? One solution to significantly reduce bribery and extortion is to adopt a common-sense approach.

The is also an old saying in the business community that if you let someone steal from you because of shoddy controls and procedures, then you are almost as guilty as the thief. (Lets Lock it Up)

Corporation and public contract agencies must have solid business practices embedded into its entire operations. “An ounce of effective checks and balances can equal a pound of solid ethical operations.”

The Devil is in the Detail

Accountability and oversight of purchasing departments are imperative to eliminate and/or reduce bribery and corruption. The purchasing departments are the extortion legs of potential bribery and corruption. The sales department is the other leg thus demanding proper training, oversight and transparency of sales personnel.

Extort: To get money from someone by force or threats

The sales personnel selling products and services extend bribes voluntary to obtain the sale which will be financially favorable to their company and themselves. These bribes are offered by the sellers. On the other hand, buyers of products or services, at times apply extortion techniques in an attempt to receive personal bribes under the table in exchange for the sought after order.

The Chicken – Egg Theory: Which comes first, the extortionist or the bribes? Or is it just one aspect of a corruption in systems going bad?

Do businessmen try?

The profile of today’s businessman in the globalized business arena is one of the non-owner managers in the form of the highly qualified professional. A significant number of these so called highly skilled scientific orientated professional managers come to the global business community from their business-graduate schools armed with their M.B.A. During the past few decades, there has been an explosion of graduates entering the business work force with great expectations of making a pile of money. The M.B.A. originated in the United States with encouragement and pressure from the corporations to train, produce and graduate a new type of professional manager. A manager that would seek a more scientific approach in managing the global business community of the future. Entering their careers with a new theory that the business plan was more important than the business, people and the community. These new highly trained managers were and still are entering the arena of the global world business community, pressured to increase and inflate revenue and earnings at any cost.

Many of the infamous executives indicted or in prison were in responsible positions with M.B.As at Enron, Tyco, World Com, Arthur Anderson, to name a few.

Yes businessmen do try operating in a complex globalized business systems in an environment and background when morality, self restrain is frequently abused.

Adam Smith’s 1723-1790 treaties, An Inquiry into the Nature and Causes of the Wealth of Nations, which originally framed Smith’s theory of The Invisible Hand only worked when people operate with restrains on self-interest and in cooperation with others under the prescript of justice. Smith’s Invisible Hand theory was based on a foundation of morality, law and justice with good will, prudence and self-restraint. The Invisible Hand is in effect the people’s need to remain in the community that provides moral constraints and the moral compass for businessmen that can succeed in doing the right ethical thing. Many businessmen do try with the aide of the Invisible Hand oversight.

Do companies care?

Companies do care and support the theory that moral capitalism is possible and that it is within the reach of every business, although it can be a difficult journey. Companies are increasingly aware that moral capitalism and social justice are the dividends yielded by companies that care and treat all of their stakeholders with respect and fairness.

Companies now have new laws and regulations which have new laws and regulations which act as an increased incentive to care. Laws and regulations such as the Sarbanes - Oxley Act of 2002, a comprehensive wide-ranging law that affects nearly every aspect of the corporate governance of publicly held U.S. companies and their foreign subsidiaries. This new law adopted by the U.S. congress has instituted a requirement obligating CEO’s and CFO’s of public companies to certify legally that the financial statements and reports are accurate and not misleading – exposing these executives to possible criminal charges if their numbers turnout to be bogus. Yes! Companies do care and are raising the ethical bar of business morality as they modify and improve their operations to operate ethically in all arenas of globalization enhancing the good and eliminate the bad and ugly.

The author Christos Papoutsy is the founder of the Christos and Mary Papoutsy Distinguished Chair in Ethics at Southern New Hampshire University, Manchester, NH. 03106. For more information on the chair in ethics log on to http://www.helleniccomserve.com

See Also:

Corporate Social Responsibility: Is Moral Capitalism Possible?

Business Institutionalization Promotes Excellence, Combats Corruption

(Posting date 24 July 2007)

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