How to teach that bribery doesn’t pay

CORRUPTION is a bad thing. Widespread bribery can reduce a country’s GDP by up to 1 per cent, according to the World Bank. A trillion dollars is paid in bribes every year. A decade ago, a quarter of Africa’s GDP was paid in bribes. This isn’t just a problem for poor countries. A report by PricewaterhouseCoopers and market research company TNS-Enmid in 2007 found that German companies lost more than €6bn a year through corruption, embezzlement and fraud. In 2006, a quarter of UK companies thought they had lost a contract to a competitor who had paid a bribe in the previous five years, said a report by risk consultancy Control Risks.

Recently, the focus has been on India, with activist Anna Hazare going on hunger strike to protest against corruption in the country, where there has been a series of high-profile cases of corruption. According to anti-corruption watchdog Transparency International, India’s poorest 400m people pay a total of $200m a year. A total of $19bn a year seeps overseas from India’s economy due to bribery. In Russia, the figure is said to be $300bn – a quarter of the country’s GDP. That’s a problem in a country where the economy contracted by 7.9 per cent in 2009. And that really affects people’s lives. Corruption makes it harder for poor people to get out of poverty, because they have to pay a lot of their income in bribes, and prevents new businesses starting.

So what role can business schools play in helping to stamp out corruption? And, indeed, is that their job? Some certainly think so. At the Skolkovo business school, just outside Moscow, that has been running an MBA since 2009, anti-corruption is a strong theme. The school is connected to a technology park (the Russian Silicon Valley, say cheerleaders) which aims to improve the country’s woeful track-record in innovation. In general, after the financial collapse of 2008, business schools were stung by criticism that the ideology they pushed contributed to risk-taking. Since then, schools have been keen to talk about their ethical credentials, and an anti-corruption stance is part of that.

At America’s Tuck school, MBAs can attend “fireside chats” by convicted white-collar criminals, who explain how they got tempted and, importantly, how they were caught. (The speakers are provided by a public-speaking company called, wonderfully, The Pros and The Cons.) Professor Rick Shreve, who oversees the ethics courses at Tuck, says that the school has a serious commitment to producing “people with character” who wouldn’t consider corrupt activity. “If we have got students for two years, we have to at last think about whether we are a value-neutral or an inspirational institution,” says Shreve. Acting morally, then, is not about following a list of rules, but being constantly aware of the consequences of your actions and ethical questions they might raise. “The code of conduct is not just on the wall, it informs the culture,” he says.

Ethics is a big deal at the Spanish school IESE, which is partnered with numerous African business schools, and prides itself with its generally ethical and specifically anti-corruption ethos. IESE’s Professor Antonio Argandona says that an anti-corruption stance should infuse every class at a business school. Only by understanding the “cultural, political or economic reasons” for corruption, and the legal and other weapons to fight against it, such as proper accounting, honest marketing and good management, can corruption really be defeated.

CULTURE CLASH
It’s easy for Europeans to lecture people in other parts of the world where things are done differently. But is that naive? If kickbacks and bribes are the way of the world, well, shouldn’t we go along with it?

In some circumstances, corruption can appear to improve economic efficiency. There is often a reason that corruption exists beyond the venality of officials. In countries with weak market institutions and a bureaucratic culture that hinders business getting done, then a so-called “speed bribe” to jump the queue and get a form rubber-stamped obviously makes things move more smoothly. Can corruption be a good thing?

CORRUPTION COSTS
Douglas Webber, a professor at Insead, thinks such arguments are wrongheaded, simply because there are practical as well as moral questions to be considered. “Once a company becomes involved in corruption it establishes a reputation for itself as being amenable to bribery or blackmail, and you keep on paying,” he says. Furthermore, governments are increasingly bringing in anti-corruption legislation – such as the Bribery Act in the UK. In India, the zero-rupee movement hands the worthless notes out as a rebuke to those asking for bribes. There is a long-term move towards stamping out corruption. Until the late 1990s, bribes were actually tax-deductible expenses in Germany – no more. Webber thinks that the shift in culture is driven by the democratisation process that started with the end of the Cold War. In secretive, authoritarian regimes, it is easier to keep bribes secret than in democracies; and while in the past Western countries’ interests in African nations were restricted to keeping them on-side against the USSR, these days we are more concerned about development, which means stamping out corruption. Corruption abroad as well as at home is rapidly becoming unacceptable among respectable businesses.

And anyway, says IESE’s Argandona, corruption is not just illegal, or frowned-upon, or bad for reputation, but “a sign of the failure of the management of a company.” If a company’s executives allow corruption to go on, they are simply not doing their jobs properly. “A corrupt company is a company that is run poorly,” he says. It might be tempting to blame others – politicians, civil servants, or competitors who take bribes – but that is always an excuse for poor management. Reputable and successful companies simply do the right thing. If that’s true, then it’s not NGOs or governments or the World Bank that are in the front line against corruption and all its evils – but business schools.