Tuck International Forum

Confronting Corruption in Global Business

If you have never had to decide whether to condone bribery, kickbacks, gifts, or "charitable" contributions, especially when doing business in the developing world, you're lucky. Many Tuck School of Business alumni face difficult decisions repeatedly. There's no substitute for experience when dealing with such situations, but preparation is valuable. Thus, students exploring the ethics of corporate behavior showed a lively interest at the Tuck International Forum on Confronting Corruption in Global Business held in April. The event was sponsored by Tuck's Center for International Business, the Allwin Initiative for Corporate Citizenship, and the Tuck International Club.

In fact, corruption has bedeviled some Tuck students even before matriculation. At the panel discussion on "Perspectives from the front lines—what corporations can do to combat corruption," moderated by Frank Vogl, co-founder and board member of Transparency International, a Brazilian student related that he had been hired by a reputable company which had an excellent compliance manual. But six months later he learned the company had bribed key politicians. When he disputed the practice, his boss said the payments had been approved by headquarters, and he was fired. "How does one do adequate ethical due diligence?" he asked panelists.

"Ask people in the company to describe past cases of whistle blowing," advised Marisa Lago, global head of compliance for Citigroup markets and banking. What were the outcomes in those cases? Look for multiple channels for whistle blowing, because a single channel won't work if it is corrupt. "Talk to people in the place where you will work," added Howard O. Weissman, VP and associate general counsel, international, at Lockheed Martin Corp. Look at policies on paper, but concentrate on what kind of place it is. Beware if the answer to your questions is, "Don't ask." And "Ask how the company responds to challenges in countries known to be difficult ones," said Jacqueline M. Beckett, senior corporate counsel for Newmont Mining Corp. Newmont can't choose where to find gold, but the company still walked away from Turkey.

Corruption proved an especially complex and controversial issue. All agree that corruption, as defined in the West, can cause misallocation of capital and other resources, and may yield results suboptimum at best and disastrous at worst.

But challengers asked: Are different definitions of corruption in other cultures necessarily wrong? Might there be cases when yielding to local custom is the lesser evil? If a morally pure company refuses to work in a country where "gifts" cement trust, might its absence from the scene make it easier for reactionary and damaging enterprises to thrive? Is it possible that more people will suffer as a result of its absence than would if the company accepted local customs? Might local ways of forming networks actually be more flexible and efficient than time consuming negotiation of complex formal contracts? How do you account for countries where enduring or even rising corruption have been compatible with growth--for instance, Russia and China? And aren't anti-corruption drives little more than Western cultural imperialism?

Still, Vogl and his panelists argued that the business risk of engaging in corrupt practices is simply too great. It's not the fines that hurt in the long run, but the cost of damage to reputation. "I live in fear of rogue traders," said Lago, adding that Citigroup's second area of risk is money laundering, "the sister of bribery."

Lockheed, said Weissman, is committed to the principle that "compliance with our policy is more important than any loss of business," and the company will not pay bribes, maintain or pay into anonymous bank accounts, or engage in sham transactions.

At Newmont, said Beckett, "Our social license to operate depends on our reputation," and as a major land holder, the company is especially careful when transacting interests in land.

Panelists agreed that firms intent on avoiding corruption must select employees carefully, train them well and often, teach them to ask questions and seek advice, and monitor employee behavior. But most importantly, top business leaders—not just legal and compliance departments—must set excellent examples and insist on emulation.

Corruption is only the most recent issue addressed by Tuck and the Center for International Business, which are committed to covering a wide range of problems that affect business leaders in the global economy. On earlier occasions, the Tuck International Forum covered country-specific and regional issues and global human resources issues.