An agency theory approach
Fabian Maximilian Johannes Teichmann
Board of Directors, Teichmann International AG, St. Gallen, Switzerland
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
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 study’sﬁndings 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 identiﬁcation of the potential role of incentive systems in
compliance mechanisms is meant to provide compliance ofﬁcers and legislators with valuable
insights into why the current prevention schemes are ineffective. This can help to both improve
Originality/value –While the empirical ﬁndings are based in Europe, the results could be applied
Keywords Corruption, Incentives, Bribery, Compliance
Paper type Research paper
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 ofﬁcial was still considered
normal and acceptable behavior in some parts the world (D’Souza, 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 ﬁght 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 company’s 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
Received12 March 2018
Revised6 June 2018
Accepted10 July 2018
Journalof Financial Regulation
Vol.27 No. 2, 2019
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