Corporate Finance, DeFi, Blockchain, Web3 News
Corporate Finance, DeFi, Blockchain News

Let's not confuse and complicate the globalized Corruption.

Western cultures are built on transactions, governance rules like accountability and transparency. In other part of the world relationship, trust and loyalty are essential cultural elements. People and enterprises in the 'west' support and trust in our rule-based institutions while other nations trust their friends and family.

Porbunderwalla Kersi
Porbunderwalla Kersi
Cultivating strong relationships and networking are an established global component in all countries of the world. There are several ways of achieving just that based on the cultural values of the continent that are cultivated thru centuries of developing relationships.

Transaction or relationship oriented
Westerners tend to associate nepotism automatically with laziness, idleness and often related to an incompetent relative of the boss. In performing this view we forget the distinct advantages in a Confucian or an oriental culture, where faith, trust and loyalty to the family is paramount.

While a Western grandfather would often like to be a friend and a partner with his grandson, an oriental grandfather expects respect and approval from his siblings. He may be able to obtain more work from family members than from anyone else because the family understands the strength and weakness of its members and therefore can hand over the responsibilities to take advantage based on the individual skills.

Simple nepotism becomes corruption when elders do not exercise enough attention in placing their relatives in the right box. Responsible nepotism, however, can be a legitimate reason for a company in the right cultural environment to ensure continuity.

A brown envelope is not a token of gratitude
The same goes for networking. A procurement agent in Europe may award a contract to an old friend or someone from his network, rather than the lowest bidder because the friend can be trusted to deliver a quality product on time. That kind of responsible networking cronyism is a cornerstone of business throughout the western world. It becomes illegal only when the agent favors friends simply because they are friends, rather than because they can be trusted to do the job right.

Gifts to officials can play a crucial role in relationship building relationships. This we know only too well in the western world. However an oriental businessman who has just settled a meeting with a prominent official may bring a brown envelope as a token of his gratitude. Like in the west he may even send the official a generous gift in observance of a wedding, or in condolence.

Zero Tolerance
There is usually no issue as long as the gratitude is within limits, and the gift merely signals a commitment to the relationship. Personal connections of this type have historically helped to unite the strong family firms and therefore they have been a key to the economic success throughout the world.

Therefore it is a pity that the primary focuses of the UK Bribery Act and EU directions on Bribery, Fraud and Corruption (BFC) are on avoiding the small facilitation payments. This excessive attention to one immaterial part of the act results in corporations missing the bigger picture by paying undue attention to the processes that govern small tips or facilitation payments.

Corruption is an activity that corrupts
There is a constant temptation to cheat or take shortcuts. That is corruption, no less than it is bribery. Its effects are amply illustrated by the recent crisis in the Western financial system, when a few irresponsible players precipitated a global credit freeze. However we should keep in mind the following cultural differences that avoided the financial crisis in the orient, when implementing or moving towards a zero tolerance approach without paying attention to the root causes of the BFC dilemma;
• Culturally appropriate gift-giving should not slip into quid-pro-quo bribery
• Side payments should not be a constant temptation in a relationship-based system
• Brown envelopes are not a shortcut to the slow and laborious process of building relationships based on trust
• Bestowing gifts and favors a patronage system; In certain cultures it is also a form of rational economic redistribution
• With the increasing reliance on rules and transparency, the power of relationships and personal authority in development of a globalised culture should not be weakened
• When the legal supervision is relatively soft in some countries, the system relies primarily on voluntary compliance with ethical and legal norms based on true motivation aspects.

The corruption in similar situation is obvious enough. Yet when business processes are practiced around the world, it is often not so clear what is corrupt and what is not. We typically identify corruption with side payments, cronyism and nepotism, but all those activities can be entirely legitimate when practiced responsibly in the appropriate cultural context, like we do it in the west and call it networking.

In the same context let there be no doubt: corruption is an activity that corrupts. It undermines the process in which it occurs and is detrimental to the economy of any country of corporate where it occurs.

Kersi Porbunderwalla is the founder and CEO of Riskability®, Copenhagen Compliance® and Copenhagen Charter®.
After his early retirement from ExxonMobil, Kersi has been involved in several Global Good Governance, Risk Management and Compliance (GRC) Projects for multinationals like IBM, Shell, BP, Volvo and others.
He continues to implement GRC journeys for a variety of clients to develop custom tailored GRC folder that includes methodologies, roadmaps, and specific solutions to assignments, training and certification.
Kersi conducts workshops, seminars and conferences that focus on developing and implementing GRC applications & frameworks into operational environments.
He is a consultant, instructor, researcher, commentator and practitioner on 4 continents.

Jeudi 7 Novembre 2013