Corruption and Fraud News
Let's not complicate the globalized Corruption
Western cultures are built on governance rules and transparency. In other part of the world relationships are an essential cultural element. People and enterprises in the ‘West’ have trust in their rule-based institutions while other nations trust their friends and family.
Cultivating strong relationships and networking is a common international factor 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.
Westerners tend to associate nepotism automatically with indolence, idleness and often related to an incompetent relative of the boss. In performing this focus we forget the definite advantages in a Confucian or a oriental culture, where loyalty to the family is paramount.
While a Western grandfather would best like to be a friend and a partner with his grandson, an Indian or Chinese grandfather expects respect and authority from his siblings. He may be able to extract more work from family members than from anyone else. The grandfather knows their strengths and weaknesses intimately and can assign them duties that take advantage of their particular skills.
Nepotism becomes corruption when elders don't exercise enough care in placing their relatives. Responsible nepotism, however, can be perfectly legitimate for a company in the right cultural setting.
The same goes for cronyism. A procurement agent in Bangalore or Chengdu may award a contract to an old friend rather than the lowest bidder because the friend can be trusted to deliver a good product. That kind of responsible cronyism has been a foundation of business in Asia for centuries. It becomes corrupt 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 an important 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 an important 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.
There is often no issue as long as the gratitude is within limits, and the gift merely signals a commitment to the relationship. Personal connections of this kind have historically helped to align the powerful family firms and thus they have been a key to the economic success throughout the world.
There is a constant temptation to cheat or take shortcuts. That is corruption, no less than 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 when implementing a zero tolerance approach.
- 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 redistribution.
- With the increasing reliance on rules and transparency, the power of relationships and personal authority in the globalised culture should not be weakened
- When the legal supervision is relatively soft in some countries, the system relies largely on voluntary compliance with ethical and legal norms.
The corruption in that situation is obvious enough. Yet when you look at how business is practiced around the world, it's 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 right cultural context. Corruption is activity that corrupts. It undermines the system in which it occurs. Because business systems can work very differently, different kinds of activity corrupt them.
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