Global Risk: Corruption
Governments and corporations across the world have realized the role of corruption and its impact on people's economic well-being. Corruption raises not only the risks but also the cost of doing business. As documented in the US Department of State (2001), "Corruption has a corrosive impact on both market opportunities overseas and broader business climate" (pp.3). It affects critical areas such as foreign investment, sustainable development, and price dynamics in a country. Corruption negatively implicates the judicial system of a country. Policymakers have identified corruption as a barrier to international business transactions. Despite the widespread nature of corruption, no single definition has been developed to capture the vice. Corruption can be viewed as the illicit payment of a public officer to gain undue private benefits. Some quarters have also defined corruption as the abuse of office for one's gain or benefits of a few individuals (Cuervo-Cazurra, 2016). Different forms of corruption exist, including bribery, nepotism, cronyism, and patronage. The impact of the vice on the economy has seen many jurisdictions classify it as an economic crime. The report by in US Department of State (2001) documents the widespread existence of corruption in the world. As illustrated by the author, between 1994 and 1999, the US government reported 294 cases of bribery by foreign firms. Most of the companies dished out bribes to secure contracts (US Department of State). Therefore, this demonstrates the extent to which integrity lacks in the global business arena.
Countries Associated with the Problem
Although corruption occurs worldwide, corruption has been placed on developing countries due to the severity of the problem. Throughout history, corruption has resulted in governments' downfall, such as Brazil, Ecuador, India, and Italy (Elliott, 1997). Following the Watergate Scandal in the United States, the Congress corresponded by forming the Foreign Corrupt Practice Act (FCPA). Countries of Sub-Saharan Africa register the highest levels of corruption. In a study by Hoinaru et al. (2020), the authors conclude by saying, "The countries from Sub-Saharan Africa register the highest sizes of financial crimes under the form of corruption and shadow economy" (p.7). The risk of corruption, therefore, occurs in both developed and developing countries.
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Risk for Countries
The effects of corruption are broad and have far-reaching impacts. The cost of corruption in a country depends on the specific and unique underlying factors within the nation's structure. Countries with widespread corruption have difficulties with functioning efficiently and record poor economic performance. The overall impact is the suffering of society as a whole. Although no country has managed to eradicate corruption in its entirety, emerging markets have the most significant impacts. Generally, countries in Australia, Western Europe, and North America have low corruption perceptions (Mirzayev, 2020). In emerging countries such as China, the emergence of monopolies and oligopolies is a result of corruption. Reportedly, business owners use their connections and finances to bribe government officials to manipulate market dynamics. Through their interventions, they become the sole provider of the goods and services in a particular jurisdiction (Zhu, 2018). The emergence of cartel operations, especially in Sub-Saharan countries, also boils down to the practice of corruption. Mexico is also an emerging economy known for its high prevalence of corruption. Cases of kickbacks and misappropriation of funds are rampant both at the business and government levels (Morris, 2009). The faulty tender award processes see the least qualified entities receiving the projects, which they repay using kickbacks.
Ethical Decision-Making
In the wake of corruption, organizations must respond by developing complex ethical systems and guidelines. Based on the definition, corruption mainly involves persons occupying powerful or influential positions. The ethical decisions of a leader directly impact organizational performance and reputation (Selart & Johansen, 2011). Therefore, organizations must come up with an ethical decision-making model in a bid to curb the economic crime in an organization. Organizations must make choices out of alternatives during the ethical decision-making process based on the underlying ethical principles. Corruption is inherently wrong, regardless of the objectives it aims to achieve. Corruption affects business performance in various ways. First, it promotes mediocrity by associating businesses with the least qualified professionals, supply chains, and tenderpreneurs. Secondly, corruption affects the market dynamics of demand and supply by narrowing the market through monopolies and oligopolies. It is also an illegal process as it affects business efficiency and flexibility regarding entering foreign markets (Bahoo, Alon, & Paltrinieri, 2019). From an ethical perspective, corruption has negative implications on honesty, justice, and an organization's integrity or firm. Organizations must respond by employing the tenets of ethical decision-making when confronted with a corruption-related dilemma.
The ethical decision-making model provides organizational leaders to think critically and develop sound solutions for ethical dilemmas. The overall aim is to come up with an ethical decision. The model primarily has six steps that organizational stakeholders must follow to act ethically. The first stage encompasses identifying the ethical problem or dilemma (Selart & Johansen, 2011). In most cases, organizations or leaders resort to corruption when they want to benefit unduly or circumvent the applicable laws and policies. Although the vice guarantees shortcuts and short-term benefits, the long-term economic, legal, and reputational benefits are at stake (Bahoo, Alon, & Paltrinieri, 2019). The ethical dilemma in corruption centers on the conflict between short-term benefits and long-term consequences for the organization. The second stage of the ethical decision-making model encompasses collecting information regarding the issue to make an informed decision. The information collection leads to the third stage, where the decision-maker comes with alternative options (Selart & Johansen, 2011). Besides corruption, alternative choices such as due process, due diligence, and a competitive tendering process, etc. can be used to evade corruption. The decision-maker will also need to apply sound ethical principles such as justice, value ethics, and beneficence. After making the decision based on the ethical guidelines, the stakeholders will begin working on the implementation.
Impact of Business Ethics on Stakeholder Relationships
Businesses do not exist in isolation. They depend on their internal and external stakeholders to survive. Some of the common stakeholders in an organization include customers, employees, shareholders, suppliers, and the community. The application of ethics with an organization determines the relationship that a business develops with its stakeholders. For instance, when a business has strong ethical principles against environmental pollution, it develops a positive relationship with society. The ethical practice also calls on the organization to create an organization premised on the tenets of honesty, justice, integrity, and values (Ferrell, 2004). The organization develops a favorable condition upon which employees can thrive and achieve organizational goals. Today, consumers want to be associated with companies that employ the ethical business practice. The modern consumer is increasingly aware and more informed than ever before. They are increasingly affiliated with firms that practice environmental sustainability and green economy. Besides the customers, the supply chain management remains a critical part of an organization (Ferrell, 2004). Companies want to be associated with supply chains that best represent their image and corporate strategy. Therefore, firms are more likely to form stable and meaningful relationships with supply chain members that act ethically.
Ethics Program, Training, and Compliance Auditing
Corruption is an ethical issue in organizational management and governance. Developing an ethical program ensures that stakeholders act morally and follow the underlying guidelines, codes, and laws. Transparency International regards corruption as the abuse of power and office for individual gain. It is illegal and dishonest behavior that can easily define an organization's culture (Dindi et al., 2018). An ethics program within an organization will redefine the culture and promote the best practice guided by theoretical perspectives. The utilitarianism model, for instance, looks at issues that benefit the greatest number of people. However, as previously discussed, corruption only benefits a selected few in positions of authority. The virtue ethics perspective focuses on several fundamental attributes that guarantee happiness. Examples of values required in an organization include integrity, honesty, and truthfulness (Dindi et al., 2018). The existence of these attributes enables the organization to act virtuously and avoid vices such as corruption. Therefore, organizations must respond to develop a well-crafted code of ethics that defines the ethical principles and the expectations of the leaders and subordinates.
Managers cannot underestimate the importance of training an organization. Training enables the organization to create value by building skills, attributes, and knowledge. Despite the ubiquity of ethical guidelines in organizations and government institutions, many individuals are aware of the underlying principles, policies, and guidelines. Through training, the organization builds capacity by directing the employees on how to solve ethical dilemmas. Besides the ethical perspective, the employees understand that corruption is an economic crime with legal ramifications. The training process should be continuous by including it as part of the organizational culture. As illustrated by Collins (2009), "Raising moral awareness should be a never-ending activity, particularly in our ever-changing work environment" (p.146). The organization's training endeavors should focus on clarifying the ethical expectations and placing role models strategically within an organization. Training also achieved additional aspects, such as improving employees' decision-making ability and bolstering their abilities to resolve dilemmas ethically. Employees will understand that corruption is inherently wrong and does not have a position in the organization's culture.
Upon setting the ethical guidelines and training the organizational members, the firm will shift focus to a compliance audit. Through a compliance audit, the company will assess the extent to which it adheres to external and internal rules, guidelines, and laws (Slobodianyk, Shymon and Adam, 2018). Essentially, a compliance audit is a performance indicator of how a company performs on its identified objectives. Corruption is an issue that is both subject to internal and external factors within an organization. The management can perform compliance auditing using several strategies. First, performance appraisals will gather much-needed information on the company's ability to adhere to the code of ethics against corruption. Confidential or anonymous surveys and questionnaires will provide a general outlook of the compliance environment by collecting adequate data. The organization can also empirically evaluate data on the organization's recent corruption cases (Slobodianyk, Shymon, & Adam, 2018). A compliance audit provides the company with a framework for improvement. It also demonstrates the effectiveness of the policies undertaken by the company to solve a particular problem. Therefore, the audit process should be holistic and all-encompassing to provide the much-needed outcome.
Training Program
The training program will run for three months (12 weeks) at the company's social hall. The primary reason behind the training is to improve ethical considerations and leverage social responsibility regarding the issue of corruption. Some of the training stakeholders include organizational leaders, employees, supply chain managers, government officials, and resource personnel.
Goals of the Training Program
The organization will seek to improve ethical decision-making in the organization when confronted with corruption-related dilemmas.
Through training, the management hopes to create awareness and establish a long-lasting solution to corruption.
The company hopes to establish individual awareness and promote consciousness on the issue of corruption.
Objectives of the Training Program
The company will seek to improve transparency and accountability by eliminating dubious processes, procedures, and behaviors within an organization.
Through capacity building, the organization will seek to redefine an organizational culture based on integrity and honesty.
The program will allow the employees to understand both the legal and ethical landscape of corruption and the overall economic impacts on society.
Learning Methods
The learning process will be a mixture of three different methods. The first session will encompass a direct engagement between the instructors and organizational stakeholders. The conventional teaching method will involve instructing the stakeholders based on the predetermined course objectives. Additional audio-visual elements will be used in the process, including computers, pamphlets, and radio presentations. Secondly, the session will also incorporate practical methods that will happen within the organizational setting. Dindi et al. (2018) assert that corruption is a practical process within the organizational premises. The practical methods aim to empower employees and leaders to detect corrupt behaviors visually and through the audit process. The third method of training will capitalize on the benchmarking outside the company. The instructors will take the company's stakeholders to some of the corruption-free organization. Members of the company will be required to observe and interact with their counterparts to learn. The combination of classroom interaction, practical approaches, and outdoor activities will have impacted the stakeholders holistically, leading to a competent individual.
Evaluation
The success of the training will be evaluated in several ways. First, the organization will conduct a survey or questionnaire to test the employee's knowledge based on the instructions acquired. Secondly, following the training session, the company will develop key performance indicators (KPIs). Some of the common KPIs for corruption include revenue collected, tendering processes, and recruitment strategies. Every process in the organization must remain in line with the identified KPIs. Failure to achieve predetermined goals means that the training session did not achieve the required level of success.
Training
The training process will be highly integrative. The classroom session will pay close attention to the interaction between the learners and the instructors. The model will encompass the question and answer sessions between the two parties. The stakeholders will be required to take down notes for future reference. The practical part will include demonstrations and mimicry to try and recreate a real-life situation in the organization. The benchmarking process will not have any structure. Stakeholders will be required to walk freely, interact, and pose questions to their counterparts.
Compliance Auditing
Compliance auditing will assess the new practices and approaches taken by the company. The process will be more or less similar to the evaluation where questionnaires and surveys will gather compliance information. Performance appraisal will also assess the company's adherence to the predetermined objectives. Reflecting on the KPIs will also form a critical part of the auditing process.
Summary
International bodies across the world, such as Transparency International, have regarded corruption as cancer. Countries in the developed and developing world continue to suffer economically, thanks to the vice. Corporate and political leaders must fight tirelessly to end corruption by promoting ethical guidelines in an organization. The literature review has demonstrated the invaluable nature of ethics in a company as a deterrent to corruption. However, the success of the ethical considerations relies on effective training and capacity building.
References
Bahoo, S., Alon, I., & Paltrinieri, A. (2019). Corruption in international business: A review and research agenda. International Business Review, 101660. doi:10.1016/j.ibusrev.2019.101660
Collins, D. (2009). Essentials of business ethics: Creating an organization of high integrity and superior performance (Vol. 47). John Wiley & Sons.
Cuervo-Cazurra, A. (2016). Corruption in international business. Journal of World Business , 51 (1), 35-49.
Dindi, A. M., Munala, G., Alkizim, A., Kivaa, T., & Gichure, C. P. (2018). Ethics as a solution to Corruption: a case study of the construction industry in Kenya. Journal of Ethics in Construction
Elliott, K. A. (1997). Corruption as an international policy problem: Overview and recommendations. Corruption and the Global Economy , 175 , 177.
Ferrell, O. C. (2004). Business ethics and customer stakeholders. Academy of Management Perspectives , 18 (2), 126-129.
Hoinaru, R., Buda, D., Borlea, S. N., Văidean, V. L., & Achim, M. V. (2020). The Impact of Corruption and Shadow Economy on the Economic and Sustainable Development. Do They “Sand the Wheels” or “Grease the Wheels”?. Sustainability , 12 (2), 481.
Mirzayev, E. (2020). How Corruption Affects Emerging Economies. Investopedia https://www.investopedia.com/articles/investing/012215/how-corruption-affects-emerging-economies.asp
Morris, S. D. (2009). Political corruption in Mexico: The impact of democratization . Boulder: Lynne Rienner Publishers.
Selart, M., & Johansen, S. T. (2011). Ethical decision making in organizations: The role of leadership stress. Journal of Business Ethics , 99 (2), 129-143.
Slobodianyk, Y., Shymon, S., & Adam, V. (2018). Compliance auditing in public administration: Ukrainian perspectives. Baltic Journal of Economic Studies , 4 (5), 320-331.
US Department of State. (, 2001). Fighting global corruption: Business risk management. Department of State Publication No. , (10731).
Zhu, J. (2018). Corruption in reform Era: A multidisciplinary review. The SAGE Handbook of Contemporary China. SAGE Publications Ltd , 302-323.
