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Being less bad is not good

EthicsPaid a murky agent lately? Given away a red envelope stuffed with money in order to secure a contract? Cheated on your travel expenses? According to recent surveys many of us have. In May, the weekly magazine “Mandag Morgen” had an article on fraud and corruption. Sadly enough, it concludes that despite heavily focus on anti-corruption activities in global trade during the past years, little progress has been made. In fact, there is no progress at all.  Fraud and corruption flourish as ever before. One reason being  the financial crisis. Another one being the growth in emerging economies with a “different” (read: a higher acceptance level) corruption culture.

Fraud and corruption is detrimental. It is also very complex. For more than 10 years I worked in the development aid business. At one point in time, our company had $3 million outstanding in unpaid invoices. The clients delayed paying us. Sometimes 6 months, sometimes a year, sometimes even more…..  or to be more specific: “John” was waiting for us to pay him a” fee” to expedite the invoices.  We never paid him. But it hurt. Being low on cash made it difficult for a small company like ours.

So what about “John”? I guess he just did what he was expected to do. If you are a low paid bureaucrat in a developing country having to pay for your kids’ school, your sister’s surgery and your uncle’s funeral because everyone depends on you – what choices do you really have? And when CEOs and top politicians secure their families and friends, why shouldn’t you?

Of course, being equally bad is not good. Nor is being less bad. Zero tolerance is the only thing that works in the long run. Together with building a strong business ethics culture. The latter is about (1) policies, (2) norms and behavior, (3) top-level commitment and (4) consistent training. It is about knowing where “the shoe pinches” and act on it in a transparent way. And it is about being in the forefront. Some countries, like the UK,  is considered to lead the way. According to Transparency International, the new UK Bribery Act (effective on 1 July 2011), represents a step-change. A step change because companies now need to demonstrate that they have implemented policies and procedure to prevent corrupt practices. Any “failure to prevent” could be punished. Will the new Act have an impact? I do not know.  Let’s see in 10 years…. eradicating fraud and corruption is about changing human behavior. It will take time.

1 Comments Add your comment
Avatar Simon says:

It’s an interesting point you make about being ‘equally bad’ as I’ve sat with many executives who, when suggesting that they need to adopt a more robust approach to managing a specific risk, want to know what other companies do in the same situation and effectively resist doing anything different/spending more money than their competitors.

This is where I think the UK Bribery Act brings something positive because the first defence from corporates against failing to prevent is the existence if ‘adequate procedures’. Companies need to prove that they have recognised how their business activities expose them to the risk of fraud and corruption and, having recognised this, that they have responded appropriately. In addition to the points made by Anett I’d say that this means there will be evidence of a ‘plan, do, check, act’ based risk management system.

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