* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.
Companies that are used to corruption at home, are more likely to export it abroad
In talking to people about corruption, the topic of culture often comes up. Is corruption part of culture? Are certain societies more predisposed to being corrupt? For some, linking it to culture is an excuse to let corruption run its course: it’s always been there, it’s always been part of doing business.
Yet, while the idea that corruption is a cultural phenomenon is debatable, it’s hard to dispute that corruption can become part of daily culture. This is often referred to as institutionalized corruption – corruption that permeates every aspect of daily life, interactions with public officials, and doing business. For many, institutionalized corruption in distant countries may not seem like a big deal, but it is.
The long-awaited recently-released survey from Transparency International – not their regular Corruption Perception Index (CPI) but a less known and a less frequently conducted Bribe Payers Index (BPI) – is a perfect reminder that institutionalized corruption is not simply a problem of countries where it occurs, it’s a global problem.
BPI measures the likeliness that companies will resort to bribery in business transactions overseas. It is a ranking based on surveys of business executives of 28 large economies that represent nearly 80% of the global flow of goods, services, and investments. As Elena Panfilova, the head of Transparency International-Russia put it, the index is a good measure of the export market of corruption.
To summarize the report: companies from countries generally known for high levels of corruption and poor governance are more likely to pay bribes when doing business overseas. At the bottom of the index are the likeliest bribe-payers: Russia, China, Mexico, and Indonesia. Countries with stronger governance standards boast companies that are less likely to engage in bribery in foreign transactions – Netherlands, Switzerland, Belgium, and Germany.
Interestingly, in engaging in corruption in other countries, companies are just as likely to be caught in small-scale bribes as in grand corruption. Private to private corruption is just as a common occurrence as private to public bribery. Public procurement, utilities, and real estate transactions are the most corrupt sectors, while corruption pressures are much lower in agriculture and light manufacturing.
The index is a reminder that companies are often a product of the institutional environment in which they operate. If corruption is the name of the game in town, you are less likely to behave transparently elsewhere because, oftentimes, corruption is how you become competitive in the first place.
The findings are also a reminder that as multinationals from emerging markets are changing the dynamics of the global economy, one should not assume that those changes are necessarily positive. And it is bad news for multinationals that want to do business transparently and face pressures to comply with the Foreign Corrupt Practices Act (FCPA) or the UK Bribery Act – it’s much more difficult to compete with those that can ignore transparency and honest dealings.
In many ways, anti-corruption work for multinationals has been tied to improving compliance. Compliance is important, but not enough.
BPI is a reminder that institutionalized corruption is not a local, but a global phenomenon. And in creating competitive markets, companies should not only seek to improve their own compliance programs, but also find ways to help clean up the institutional climate in highly corrupt countries. It is not only a good thing to do; there is a compelling business case for them to fight corruption if they want to remain competitive and if they want to stop the global export of corruption.
