Challenges of Corruption

Answer: Bribery refers to the offering, giving, soliciting, or receiving of any item of value as a means of influencing the actions of an individual holding a public office. A kickback is a form of bribery wherein an illegal commission is paid to someone typically in exchange for preferential treatment. For example, a buyer receives kickbacks from a supplier in exchange for being issued a purchase order in preference over other suppliers whose goods or services may be of lower price or higher quality. Bribery may lead to lower profit margins, and returns, and lead to a decline in employee morale. Despite this, the World Bank reports that roughly one-third of firms around the world use kickbacks. Therefore, corporations must have a resistance plan in place to address this practice. Such a plan should be informed by the following:

• Anticipate bribery risk: Management must better understand what motivates the official seeking the backhander. They can then offer alternatives that are within their mandate and laws of the land.
• Account for the cost of avoiding bribery into projections: Denying bribes to the seeker may be as costly as offering it. It may lead to delays in delivery or even an outright failure to get a contract. Firms should calculate these costs in their business plan and also explain this to the investors.
• Identify new markets: Certain markets, often called ‘moon markets,’ are infamous for the lack of motivation to change. Corporations may choose to treat these markets as inaccessible and revise their ambitions. This may mean a contraction in profits in the short term, but in the long- run, it also means building a more resilient company.
• Gather intelligence: Firms must invest in gathering intelligence to identify moon markets and other costs associated with avoiding bribery. For instance, Coca-Cola uses data from Transparency International to build a map of its bribery risks and then determines where to focus its anti-corruption efforts.
• Recalibrating performance-based targets: In markets with high corruption risk, frontline employees have little incentive to refuse a kickback if it means failing to meet their targets and risking a significant portion of their compensation. Employees should not receive “a haircut” for saying no to corruption. For instance, after paying multi-million dollar fines for bribery, GlaxoSmithKline did away with sales targets. Also, Novartis capped its performance-based compensation, and representatives are now rated based on their values and behavior, and not sales quota.
• Reporting cases: A corporation must be transparent in its commitment against bribery and allied practices. They must report such instances through appropriate channels as they deem fit.

An enlightened management must rely upon its products and services rather than bribery and kickbacks. Companies that create state-of-the-art products and strategies to sell them without bribes will help dismantle this age-old system that perpetuates poverty abroad and stifles creativity within.