“Corruption: Misunderstanding the Impact.”
As I have shared in prior blogs, from the vantage point of business class and inner city hotels, there is an unhealthy distance and an often ethical unawareness from front lines of international business, when it comes to the victims of bribery. I have written about the field level illusion, which I too embraced, that bribery has no victims, or worse, that corruption can be a win-win, as those engaged in overseas bribery rationalize that “no one is getting hurt here.”
While there is no shortage of information that academically and practically addresses the impact of corruption upon governance, standards of living and human rights, (and I would recommend a start with Transparency International for more information), the Carnegie Endowment for International Peace has published a work titled Corruption: The Unrecognized Threat to International Security which elevates this issue and which deserves advancement and discussion in the compliance community. On page three, I found the header, appropriately captioned “Corruption: Misunderstanding the Impact,” and hence, the title of this blog post.
As someone who has confronted corruption, and who rationalized that no one was “getting hurt,” I hope that the Carnegie paper can make it into the required reading of those who operate overseas. This publication provides an important focal point on how any engagement in bribery, including small bribes, “enables” those who use government “to capture specific revenue streams.” In addition, the work points to such conduct as contributing “to other international security threats, such as symbiotic relationships between states and transnational organized crime networks, facilitation for terrorist organizations, permeable international security regimes and acute economic disruptions.” For those at the front lines of business, and those who help them with compliance issues, as someone who has been through real-world bribery and consequences, take notice: there is yet another layer to corruption risk which has implications far beyond international bribery laws.
A White House Initiative
As the paper states, “systemic corruption has an unrecognized bearing on international security,” adding that “Western decision makers need to be clear sighted about the ways actors in their own communities are facilitating corrupt behavior or contributing to incentive structures that select for it.” The report continues, “When every government function is up for sale to the highest bidder…violations of international as well as domestic law become the norm.” The White House amplified this dynamic in President Obama’s “The U.S. Global Anticorruption Agenda,” (link here) which isolates corruption as “a growing threat to national security for our country and allies around the world.” The President makes very clear that “pervasive corruption siphons revenue away from the public budget and undermines the rule of law and the confidence of citizens in their governments, facilitates human rights abuses and organized crime, empowers authoritarian rulers, and can threaten the stability of entire regions.”
The Carnegie paper maintains “to insure impunity, kleptocratic networks typically co-opt the judicial function.” In addition, in such areas “control over legislative systems further guarantees corrupt networks ability to achieve their directives.” While that might appear to address only the few who rule, the report adds that “petty bribes, with a percentage demanded by superiors up the chain, is also a key element.” In other words, even small bribes, as part of the chain of command, where corruption exists throughout the instruments of state, “when added up, proves not to be petty at all and can represent a significant revenue stream.” Where those bribes intersect with global security, as the report well states, are the illicit fund flows that often start with corrupt regimes, where leaders “behave in criminal ways,” and “violations of international and domestic law become the norm.”
Bribes are the air that corrupt systems need for continued sustenance, and enable “the personal enrichment of the ruling network.” As such, front line business personnel need to be reminded of the real consequences to national security when corrupt governments become failed states, which triggers instability, and allows terrorism to flourish. Does anyone remember how the Arab Spring started? It started when a young fruit and vegetable seller in Tunisia had his wares confiscated after he refused to pay bribes to local police.
Now the US has a substantial military presence in Liberia and a budget of $750 million to match, in order to combat Ebola. While US and other partners work to contain and treat the disease, with great risk to their own health, “some of the teams sent to retrieve bodies of suspected Ebola victims are collecting cash instead.” These bribes, according to the Wall Street Journal (Heidi Vogt reporting), are solicited and paid “to issue death certificates to families saying their loved ones died of other causes” which allows the bodies to be collected by the families and hence, “to become a major source of contagion.” As Andrew Medina-Marino, an epidemiologist at South Africa’s University of Pretoria stated in the WSJ article “low-level corruption has a high level impact.”
A problem that can’t be ignored
A recent article in the Harvard Business Review, “When Your Company Has a Problem It Can’t Ignore” by Malachi O’Connor and Barry Dornfeld has great relevancy to the Carnegie work. As the Authors state, “there are critical times in the life of every organization when it faces challenges that can not be sidestepped.” In addition, as the Authors continue “good leaders recognize unignorable moments as opportunities to have unprecedented influence.” Clearly, the Carnegie report has helped to make the challenge of international corruption as a global security issue, as one of those moments. If it seems a stretch as opposed to a ”moment,” consider the White House when it states “The United States continues to use law enforcement and administrative tools to hold corrupt actors accountable and to retrieve the proceeds of corruption hidden in the U.S. financial system.” As I look at my own conduct in the field while I was engaging in corrupt behavior, global security was the furthest issue from my own field of vision, yet for those on the front lines today, the potential for bribery to facilitate and enable other more serious transnational crime and instability should be taken quite seriously.
While maybe this linkage between bribery and global security has not yet hit the compliance headlines, as the HBR article states, often a crisis is “months, or even years, in the making-but when it explodes, it does so spectacularly.” Thus, the Carnegie report along with the White House Initiative, provides C-Suite personnel with a relevant opportunity to address this issue before “it explodes.” Compliance professionals now have occasion to provide yet another demonstration that bribery has many victims, among them: international stability. Accordingly, the Carnegie work and the White House Initiative, in combination, provide business leaders, as the HBR article states, with ample “opportunities to have unprecedented influence.”
Coca-Cola, the “pause that refreshes.”
The report provides numerous policy recommendations, as in the Appendix “Recommended Approaches.” Nonetheless, the conclusion remains that “the role of corruption in catalyzing significant international security hazards is now undeniable.” As to the power of example, one unexpected source came to my attention last week: Coca-Cola. As Pia Adolphsen, Associate Manager of Marketing Content Strategy at The Network wrote in a recent article “Anti-Bribery Training from Coca-Cola: What I learned About Bribery, Corruption and Responsibly Entering Underdeveloped Markets,” there are indeed ways that business can commit to not be an enabler. It starts with corporate clarity: “Coca-Cola does not bribe. Coca-Cola’s vendors and suppliers do not bribe.”
Furthermore, Coca-Cola, which certainly operates in high-risk, low integrity regions, has another policy, “if Coca-Cola finds out that a vendor or supplier has paid a bribe, they will be put on a black list.” That means, no more business. No more Coca-Cola for you! In fact, Ms. Adolphsen points to a specific example of Coca-Cola being “pressured” to pay and play with respect to opening a factory on time in an overseas market. Coca-Cola said “no,” and demonstrated not only to the foreign officials, but also to its own employees (even more importantly), that “our values matter more than opening on time.” Thus, as opposed to being an enabler, Coca-Cola demonstrated that it was willing to walk business back before walking compliance back. Clearly, the leadership there decided that no risk is acceptable when it comes to engaging in bribery, and playing a role at any level, in the corruption ecosystem.
In sum, where front line overseas personnel engage with what might seem low level officials, using third parties and intermediaries to engage corruptly, they are now part of the economic network that supports international instability, crime and terrorism. Does a recreational drug user think that he or she is personally gunning down law enforcement agents involved in drug interdiction? Of course not, but are they a part of that network? Absolutely. Did I think about transnational crime and global instability when I was in the field engaging in corrupt behavior? No. Does it seem obvious to me now, and should others who confront corruption risk in their work consider the consequences of being an “enabler”? Absolutely.