Corollaries of corruption and bribery on international business

Author:Charles A. Malgwi
Position:Department of Accountancy, Bentley University, Waltham, Massachusetts, USA
Pages:948-964
SUMMARY

Purpose The purpose of this paper is threefold: it examines and analyzes the extent to which corruption and bribery have become the quintessential problem of international business and economies; analyzes the effect of corruption and bribery on international business at the macro level; and recommends specific action-oriented sustainable initiatives to help mitigate corruption and bribery.... (see full summary)

 
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Corollaries of corruption and
bribery on international business
Charles A. Malgwi
Department of Accountancy, Bentley University, Waltham,
Massachusetts, USA
Abstract
Purpose – The purpose of this paper is threefold: it examines and analyzes the extent to which
corruption and bribery have become the quintessential problem of international business and
economies; analyzes the effect of corruption and bribery on international business at the macro level;
and recommends specic action-oriented sustainable initiatives to help mitigate corruption and bribery.
Design/methodology/approach – This paper has conducted an in-depth global analysis of extant
literature on corruption and bribery affecting international business.
Findings – This paper provides a succinct analysis of corruption and bribery relevant and critical to
international business. It shows that corruption undermines democracy and the rule of law; leads to
violations of human rights; distorts markets; erodes the quality of life; and allows organized crime, terrorism
and other threats to human security.
Research limitations/implications – This paper realizes that not all corruption and bribery have the
same degree of impact on all countries and economies. This issue is not discussed, as it is outside the scope
of the paper.
Practical implications – This paper serves as a good reference for international business community,
anti-corruption agencies, law enforcement and for pedagogy in the classroom.
Originality/value – Provides a concise macro level of pertinent corruption and bribery issues useful as a
learning material for international business, trade and development and corporate social responsibility.
Keywords Governance, International business, Corruption, Transparency, Bribery
Paper type Literature review
Introduction
The fundamental objective of the tenth principle of the United Nations Global Compact
(UNGC) has been the requirement of all participants to not only avoid corruption such as
bribery, extortion and other forms of corruption, but also to develop policies and concrete
programs to address it (UNGC, 2014). This is a noble clarion call of civil society, essential for
a more transparent global economy. The principles of the UNGC have attracted a
tremendous voluntary support by organizations globally in advancing the adoption and
promotion of these values and principles. Corruption is not quite easy to dene because of its
complexity. However, this paper considers the denition by Transparency International (TI)
as “the abuse of entrusted power for private gain” (www.transparency.org/whatwedo). This
denition is not limited to only nancial gain, but also non-nancial advantages such as
conict of interest. Similarly, TI’s Business Principles for Countering Bribery denes
bribery as:
An offer or receipt of any gift, loan, fee, reward or other advantage to or from any person as an
inducement to do something which is dishonest, illegal or a breach of trust, in the conduct of
the enterprise’s business.
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm
JFC
23,4
948
Journalof Financial Crime
Vol.23 No. 4, 2016
pp.948-964
©Emerald Group Publishing Limited
1359-0790
DOI 10.1108/JFC-04-2015-0019
In the same token, the Organization of Economic Cooperation and Development (OECD)
Guidelines for Multinational Enterprises dene extortion as:
The solicitation of bribes is the act of asking or enticing another to commit bribery. It becomes
extortion when this demand is accompanied by threats that endanger the personal integrity or
the life of the private actors involved (www.transparency.org/).
Corruption is considered as one of the biggest global issues of our time and the world’s
most talked about problem (Prevention, 2003;World Bank, 2001;Hearn, 1999;www.
transparency.org.uk/corruption/), hindering international business. For example, more
than two-thirds (69 per cent) of the 177 countries and territories surveyed by TI, ranked
in the 2013 Index score below 50 on a scale from 0 (perceived to be highly corrupt) to 100
(perceived to be very clean), where Brazil (scored 42), China (40), India (36) and Russia
(28) are clear examples. At the same time, the Arab spring countries continue to score
poorly (Yemen, 18; Syria, 17 and Libya, 15), underscoring the need for comprehensive
reform in those countries (Transparency International, 2013). Its effects are so pervasive
that in Europe, it is noted as “breathtaking” which costs the European Union (EU)
economy over €120bn (£99bn) annually (Juncker, 2014). Similarly, in Africa, the United
Nations disclosed that over $50bn is being stolen annually (Compact, UN Global, 2014;
Olatunji and Daniel, 2014). This indicates that corruption is perceived to be well
entrenched in the public sector in most countries.
The good examples from less corrupt economies by OECD countries,
notwithstanding, the USA scored 73 in its 2012 ranking, considerably lower than many
other OECD countries including Australia, Germany, the UK and Japan. The US
government was one of the rst countries to be proactive in dealing with corrupt
business practices by creating the US Foreign Corrupt Practices Act (FCPA) and has
aggressively stepped up the prosecutions of individual executives and organizations
that commit such crimes. In an effort to combat corrupt business practices, a number of
international organizations such as, the OECD, the International Monetary Fund and TI
are teaming up with the UN in their resolve to combat corruption and bribery. A
formidable tool against corruption is the creation of the United Nations Convention
against Corruption (UNCAC) in 2003 and its underlying legal instrument for the tenth
principle against corruption that came into effect on December 14, 2005.
The next section of the paper examines the extant literature on the nature and
magnitude of the fundamental global problem of corruption and bribery that continues
to hamper international business and economies. This is followed by an in-depth
examination of the effect and consequences of corruption and bribery on international
business, at both the micro and macro levels. Finally, as corruption and bribery has been
linked to poverty and its characterization as a human rights violation, the paper offers
specic action-oriented sustainable strategies to help mitigate against corruption and
bribery, thereby promoting international business and economic growth and
development beyond the Millennium Development Goals of 2015.
Review of extant literature
Pervasiveness of corruption
Business and corruption do not mix and one classic exemplar of corruption is bribery.
Corruption distorts investment climates, undermines competition and fair trade, inates
business costs and public contracts, discourages companies from entering new markets
949
Corruption
and bribery

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