An agency theory approach towards bribery

Author:Fabian Maximilian Johannes Teichmann
Position:Board of Directors, Teichmann International AG, St. Gallen, Switzerland
Pages:160-168
SUMMARY

Purpose This paper aims to discuss the role of agency theory in combatting bribery in multinational corporations. It is shown how a combination of bonus and malus payments could help to create the right incentives for agency. Design/methodology/approach Based on the analysis of 15 formal and 15 informal expert interviews with both prevention experts and corrupt individuals,... (see full summary)

 
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An agency theory approach
towards bribery
Fabian Maximilian Johannes Teichmann
Board of Directors, Teichmann International AG, St. Gallen, Switzerland
Abstract
Purpose This paper aims to discuss the role of agency theory in combatting bribery in multinational
corporations. It is shown how a combination of bonus and malus payments could help to create the right
incentivesfor agency.
Design/methodology/approach Based on the analysisof 15 formal and 15 informal expert interviews
with both prevention expertsand corrupt individuals, concrete ways of more effectively combattingbribery
have been developed.
Findings As a result, it is suggestedthat matrix systems could help to adjust incentives systemsto take
complianceissues into account. It is found that multinationalcorporations should eliminate.
Research limitations/implications This studysndings are limited to the perspectives of 30
interviewees. Hence, it is possiblethat a study with a larger sample conducted in different countries or at a
differenttime would have led to different results.
Practical implications The identication of the potential role of incentive systems in
compliance mechanisms is meant to provide compliance ofcers and legislators with valuable
insights into why the current prevention schemes are ineffective. This can help to both improve
compliance mechanisms.
Originality/value While the empirical ndings are based in Europe, the results could be applied
globally.
Keywords Corruption, Incentives, Bribery, Compliance
Paper type Research paper
1. Introduction
Bribery continues to be an obstacle to economic growth in countries all around the world.
Until the end of the 1990s, paying a bribe to a foreign public ofcial was still considered
normal and acceptable behavior in some parts the world (DSouza, 2012, p. 74). Nowadays,
bribery has been outlawed in most countries. Hence, multinational corporations need to
make sure that their employees do not pay bribes. Resultingly, a large number of
mechanisms have beenintroduced to ensure that employees comply with all applicablerules
and regulations.Those mechanisms are commonly known as compliance systems.
Multiple different approaches have been taken in the ght against corruption. Some of
them include the publication of internal compliance handbooks and seminars on ethics.
However, it has not been investigated yet whether adjustments of incentive systems could
help to reduce briberyin multinational corporations.
Investigating the relationship between bribery and incentives is particularly important
to ensure that employees act in the companys interest. Hence, an agency theory approach
will be taken in this paper. Paradoxically,under current compliance and incentive systems,
employees could maximize their utility by paying bribes. Therefore, this study will show
why and how incentive systems should be adjusted to more effectively combat bribery in
multinational corporations.
JFRC
27,2
160
Received12 March 2018
Revised6 June 2018
Accepted10 July 2018
Journalof Financial Regulation
andCompliance
Vol.27 No. 2, 2019
pp. 160-168
© Emerald Publishing Limited
1358-1988
DOI 10.1108/JFRC-03-2018-0041
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1358-1988.htm

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