No EXcuses! - Alliance For Integrity

No. 2 I didn’t do it for me,I did it for my organisation!This excuse is often used by employees whopromise, offer or actually give an undueadvantage to a client.7 Employees may findthemselves in a situation where they haveto compete against perceived corrupt competitors, or where they face a solicitationrequest from a counterparty. In such situations, employees may feel that the onlyway to achieve their business objectives,for example to win a contract, is throughcorruption.Such employees will need an excuse tojustify such unethical behaviour, so thatthey can still consider themselves as goodpeople, and maintain their sense of selfworth. Such justification cannot admitselfish interests, such as the fear of losinga business opportunity which directlyimpacts their own remuneration. A morealtruistic excuse is often sought. In thiscase, the employees convince themselvesthat they actually acted in the interestof their business or organisation, to helpachieve its objectives, and so avoid negativeconsequences such as the laying off of peercolleagues.7 Such business partners include national public officials,foreign public officials, officials of public internationalorganizations or representatives from a private sector entity.8XNo e cuses – Facing the facts!Corruption is illegal, irrespective of theunderlying intention: Major anti-corruption codes, such as the United NationsConvention against Corruption, or theOECD Convention on Combating Briberyof Foreign Public Officials in InternationalBusiness Transactions, leave no roomfor consideration of motive. Prominentnational laws, like the United StatesForeign Corrupt Practices Act, the UnitedKingdom Bribery Act 2010, the BrazilianClean Companies Act and Ghana’sCriminal Code, 1960 (Act 29) likewisehave no such provisions.The underlying motive is alwaysemployee benefit: Perceived motives,whether generous, heroic or noble, tohelp the business, turn out to be lessaltruistic upon closer inspection. Even ifthe employee does not receive a directfinancial gain, such as a bonus or highersalary, from using illegal acts to win acontract, there may be a motive forindirect gains. These could include anelevated status for getting the job doneor a promotion, or greater job security.

The entire business is put at risk:Seeking to obtain an undue advantagefrom a public official or a businesspartner, even if perceived to have thebest or most noble intentions, carriesenormous risks. Such employees putthemselves at risk of punishment, individually. In addition, legal, commercialand reputational penalties8 often applyto an entire business and its management. As a result, naively good intentionscan be disastrous. For example, an entirebusiness might be banned from a lucrative market, ultimately even leadingto staff cuts, as the business is forcedto cut costs.“Doing it for the business” may be perceived by some employees as a noblemotive for conducting a corruptive act.However, such altruistic behaviour is oftenonly a cover, to make the employee feel lessguilty. And even when corruption is usedwith the best intentions, it is still an illegalact and will be prosecuted, regardless. Corruption can have severe negative effectsfor the individual employee and the entirebusiness.8 A comprehensive overview of legal, commercial andreputational penalties can be obtained from HUMBOLDTVIADRINA Governance Platform, “Motivating businessto counter corruption: A Practitioner Handbook onAnti-Corruption Incentives and Sanctions”, 2013.9

No. 3 No one gets hurt,it is actually a Win-Win!The argument that corruption can be a“victimless crime” makes an especiallyappealing excuse. The notion that it can bebeneficial for all parties, in this way, isprimarily heard from employees using activebribery to obtain an undue advantage froma public official or business partner. Forexample, an employee may face an especially tortuous bureaucratic process, suchas applying for a work permit. In such asituation, the employee may prefer to paya public official to speed up the process,often referred to as “greasing the wheel”.The nature of such so-called facilitationpayments is that they are often rather small,and therefore perceived not to impact thebusiness’ bottom line. In addition, as theexcuse goes, the payments may actually bebeneficial to the perceived, underpaid publicofficial counterparty. The payments maytherefore be seen merely as a tip, donation,or altruistic payment.However, such an attitude can escalate tomore substantial payments or arrangements,to win or conclude business deals. In thiscase, the employee may collude with thecustomer, granting some kind of undueadvantage under the contract terms, to winthe deal. The advantage – whether financialor other – is often not paid out directly fromthe business’ resources, but is rather anti cipated and directly calculated into thebusiness transaction. The employee wins thecontract without paying additional costs,10while the customer obtains their undueadvantage. Both sides feel that “no one gothurt”, and that their arrangement was therefore beneficial for both parties.XNo e cuses – Facing the facts!Facilitation payments essentially“sand the wheels”: Let’s start with theperception that there is no victim whenemployees use small, improper, unofficialpayments to speed up bureaucraticprocesses. The popular belief is thatthese payments “grease the wheel”, evenassisting under-resourced public institutions. But evidence points in the oppositedirection.9 They are illegal: No matter how small,facilitation payments are bribes, andtherefore prohibited under most nationallaws. The laws must be enforced. They are unjustified: It is true that insome countries they may still be considered normal practice, or even necessaryto do business. It may also be true thatpublic officials in many parts of the worldare indeed poorly paid. However, they arenot legally entitled to request extra,unrecorded money. These payments provide an extra source of earnings, depriving9 For example Pierre-Guillaume Méon and Khalid Sekkat,“Does corruption grease or sand the wheels of growth?”,Public choice 122.1-2, pages 69-97, 2005; or DanielKaufmann and Shang-Jin Wei, “Does “grease money”speed up the wheels of commerce?”, National bureau ofeconomic research - No. w7093, 1999.

the country of much needed income taxrevenues. They do not speed up bureaucratic processes: Through such payments, officials are motivated to introduce additional, unnecessary steps or delays inpublic processes, to solicit more money.Gradually, ever more “grease” is neededto obtain permits and licenses. They are not small: While such payments are perceived as insignificant eachtime they are paid, and even beneficialgiven the services that they provide, suchas reduced waiting times, they can addup to a significant burden on the businessover time. For example, in the documented case of Westinghouse Air BrakeTech-nologies Corp.’s Indian subsidiary,Pioneer Friction Ltd., such individual payments were as small as 31.50 permonth, but totalled more than 40,000 inone year.10 They aggravate over time. When tolerated, facilitation payments undermine aculture of zero-tolerance for corruptionwithin an organisation, and may ultimately lead to a perception that briberyis acceptable, regardless of its size. They are harmful for the business environment, and for the overall economy:Eventually, on the national scale, suchpayments erode standards in public officeand in business, creating a spawningground for much larger public sectorbribery and state theft.There is also no win-win in large scalecorruption: In the case of larger pay10 Taken from Transparency International UK, AdequateProcedures – Guidance to the UK Bribery Act 2010, 2010.ments, the absence of a perceived, directvictim may again mislead the employeeand theircustomer to believe that this isbeneficial for all sides. But there is avictim: the general public. If the “wrong”supplier is chosen, taxpayers get lessvalue for public expenditure. Even if the“right” supplier is selected, the cost canbe above the market price. The countryends up either getting a poor deal, orspending too much on products and services. And there can be further, negativeknock-on effects for society, includingpolitical instability, widening inequality,and mistrust in public institutions. Theeconomy can also suffer if unfair competition discourages private investment,ultimately leading to lower growth.11Corruption is not a victimless crime. Bothlarge-scale and petty corruption has acorrosive effect on everyday life, and ona business’ operations and ultimately itsbottom-line. To counter corruption effectively,businesses must go further than simply prohibiting corruption according to their rulebook, for example their Code of Conduct. Employees must be persuaded. And this startswith appealing to “hearts and minds” throughtwo key messages: countering corruptionmust be done and can be done.1211 For example Mohsin Habib and Leon Zurawicki, “Corruptionand foreign direct investment”, Journal of internationalbusiness studies, pages 291-307, 2002; or Peter Egger andHannes Winner, “How corruption influences foreign directinvestment: A panel data study”, Economic Developmentand Cultural Change 54.2, pages 459-486, 2006.12 There are tangible solution approaches on how businessescan counter corruption. For example TransparencyInternational UK, “Countering Small Bribes”, 2014; orUnited Nations Global Compact / World Economic Forum(PACI), International Chamber of Commerce / TransparencyInternational, “Resisting Extortion and Solicitation inInternational Transactions”, 2011.11

No. 4You don’t understandhow business is done here This excuse is often used by employeesoperating in business environments wherecorruption is perceived to be deeply embedded or endemic in daily life. Employeeswill argue that the “rules of the game” aredifferent, and businesses have no choice butto accept them. An employee may apply thisexcuse across a range of situations andbehaviours, including client expectations forgifts or hospitality; regulations encouragingthe use of local partners; offset arrangements; and the handling of security issues.Employees using this excuse may resort tothe label, “culture of corruption”, to conveythat it is impossible to operate in any otherway, in a particular sector or jurisdiction.The implication is that local corrupt practices are so deeply embedded in how peoplethink and act that it is impossible for anindividual to change anything. For example,employees working abroad may feel thatmoral values and codes of conduct in“far-away” corporate headquarters are notapplicable to or realistic for them.Employees at businesses with a strong anticorruption culture may try and buck thetrend, and argue against corruption, whendealing with local business partners inhigh-risk areas. They may also be confrontedwith this excuse. When they counter theexcuse, they may even be accused of tryingto impose “western standards”.12XNo e cuses – Facing the facts!Corruption is illegal, irrespective ofthe jurisdiction: Businesses seeking tooperate in high-risk countries are oftentorn between two extremes. Operating insuch environments often yields higherreturns. But this may come with a pricetag in the form of higher risks, includingcorruption. Such businesses must acceptthat corruption is not an option, and mustembrace the task of avoiding it. The international legal framework does not differentiate between corruption in low-riskand high-risk countries. Corruption isillegal, and culpable employees, alongside their businesses and management,will be punished.The fight against corruption is universal: The United Nations Conventionagainst Corruption (UNCAC) embodies theprinciple that corruption must not betolerated. More than 170 countries haveratified the UNCAC. The principle thatcorruption is wrong therefore applies tobusinesses and their employees operating in the vast majority of countriesworldwide.

The structures are to blame, not thepeople: Using the label “culture of corruption” may attempt to imply that aparticular country is somehow intrinsically more corrupt. This can be a powerfulexcuse, because it adds to the impressionof individual powerlessness. How couldanyone change the national character ofa whole country? However, in fact, humanvalues are the same everywhere. Integrityforms the basis for education, regardlessof the country. Regardless of the countryor culture, it is unacceptable to use acommon fund for personal gain. Corruption prospers not as a result of a difference in national values, but a lack ofaccountability and transparency, as aresult of weak government or excessiveconcentration of power among certainofficials.Everyone can make a difference: Thereare many inspiring examples where businesses adhere to the highest standardsof integrity and still successfully conductbusiness in high-risk business environments. Success starts with establishingan anti-corruption programme within abusiness’ own operations, followed bysincere engagement with local businesspartners. But this is not enough. Regardless of their size, power or influence,businesses should also collectivelyengage with peers and other stakeholdersto address issues of systematic governance failures. Collective action can serveas a practical long-term approach (seealso excuse No. 6: “We cannot make adifference on our own.”).Businesses have a responsibility to act:Fixing a systemic failure of governancerequires both private initiatives andstrong government action. Even in theabsence of the latter, however, businesses cannot simply “sit and wait”.Adherence to principles of corporateresponsibility assist the orderly functioning of markets, so vital for economicgrowth and development, and thereforefor business opportunities. The OECDPrinciples of Corporate Governance andGuidelines for Multinational Enterprisesare a good example.Corruption is not a matter of nationalculture. Nor is countering corruption a“western standard”. Businesses that seek todo business in high-risk environments, perhaps anticipating a higher rate of return compared with other markets, must also sincerelyaddress the risk of corruption. Falling into astate of paralysis, waiting until everythinggets better, is unacceptable. Every businesshas a responsibility to shape its businessenvironment. Proven approaches, including initiatives for collective action, show thattaking responsibility can yield successfulresults.13

No. 5If we don’t do it,someone else will This is a common excuse for corruptionamong sales staff and their managers. Theroot cause can be a pressured environmentto seal business deals in the face of fierce,and perhaps, perceived unfair competition.Significant business opportunities can beprotracted affairs, subject to cancellation,delay and renegotiation, with much at stake.The process of bidding for a large, international contract can take years, where failureis therefore all the more costly, since thenext opportunity could be far off. Such acompetitive environment creates enormouspressure to succeed, with a “win big, losebig mentality” at the front line. Linking ofsalaries and bonus schemes to demandingperformance targets may fuel a perceptionthat the business’ anti-corruption policy either does not apply, or else is secondary,and simply “out of touch with reality”.Although most managers disapprove ofcorrupt practices today, there can be aperception that following the business’policies will jeopardise short-term opportunities, and that corruption is simply anecessary part of doing business. Perpetrators may justify using bribery to win a business deal by referencing a “culturally” or“historically” corrupt environment. They mayargue that their rivals routinely flout ethicalvalues, and so they must either do the same,or else go out of business.These rationalisations are not theoretical:they reflect what sales managers actuallyreport when doing business. Corruption isstill endemic in parts of today’s businessworld. And globalisation is driving everstiffer competition. “A sales person tryingto make a living in a high-risk region who’slooking for an excuse to pay a bribe neverhas to look too far.”13This excuse becomes even more powerfulwhen combined with the altruistic excuseNo 2: “I didn’t do it for me; I did it for myorganisation”. Combined with the feeling ofhaving no real alternative, this is a dangerous combination which employees mayfeel justifies illegal behaviour.XNo e cuses – Facing the facts!Everyone is put at risk: Employeesshould be constantly reminded that winning contracts through corrupt means isillegal almost everywhere. The shortterm benefits of winning business dealsillegally are an illusion. Corrupt behaviourburdens a business, its management andemployees with significant legal, commercial and reputational risks. The hopethat these negative consequences maynever materialise, because of a perceived13 Richard Bistrong, “When corruption becomes normal”,FCPA Blog, 30 June 2015.14

low risk of getting caught, is increasinglymisplaced (see Excuse No. 9).There are solutions on the “supply side”of corrupt payments: Sales people oftenvoice the perception that they have tocompete on an “un-level playing field”.Their competitors may offer an expensivegift or other advantages to a client, tosecure a deal. The problem of competingagainst unfair peers may be a reality. Thegood news is that more and more frontline staff disapprove of corrupt practices.The bad news is that they are oftenunsure whether anything can be done.Such employees need to be persuaded,not only of the potentially severe, negative consequences of corruption, but alsoof practical and proven solutions. Collective action initiatives may serve asinspiring examples, where many convincing success stories already exist.14Such initiatives demonstrate how cooperation between businesses and governments can significantly reduce the riskof corruption.Solutions also exist to address the“demand side”: Businesses may not onlycompete against corrupt competitors.Bribery solicitation and extortion also represent serious concerns in many parts ofthe world. In such situations, businessesmay feel that they have to “give in to suchrequests”, or otherwise face serious shortterm consequences, for example losing adeal. Again, businesses have positive14 For more information please refer to the InternationalCentre for Collective Action (ICCA) Initiatives athttp://www.collective-action.com. opportunities for tackling solicitation andextortion. For example, so-called highlevel rep

No eX cuses! Countering the 10 most Common eXCuses for Corrupt behaviour a pocket guide for business practitioners. alliance for integrity The Alliance for Integrity is a global initiative bringing together all relevant stakeholders in