By: Edwin Fuller
Founder and President of Laguna Strategic Advisors
Corruption has been with us since the first Pelican swooped into the ocean to bag his first fish dinner about 30 million or more years ago. In other words, since the beginning of time.
You’ll find references to its evils in the Greek and Roman classics, the writings of Confucius and throughout the Bible’s old and new testaments. Today, China’s Communist Party General Secretary Xi Jinping has mounted a countrywide offensive against corruption. In India, Prime Minister Narenda Modi’s efforts to bring his country into the 21st century continue to be frustrated by corruption. At the end of his second term in office in 1796, President George Washington, in his Farewell Address to the American People, warned against self-interested politicians who put their personal interests ahead of the country’s general good.
Nevertheless, when Transparency International (TI), a highly respected Berlin-based non-governmental organization, asked respondents in a 2013 global survey whether they had ever paid a bribe, 7% of those in the US said they had.
Small wonder then that, in the 2015 TI annual survey of global corruption (with #1 as least corrupt), the US ranked 16th behind countries like Denmark (#1), Singapore (#8), Canada (#9) and Germany (#10) and ahead of countries like Japan (#18), the UAE and France (#23), Saudi Arabia (#48), China (#83) and Mexico (#95). North Korea and Somalia (#167) ranked last as the most corrupt countries in the world.
Corruption is usually associated with developing countries. Remember Haiti under Duvalier, the Philippines under Marcos, Uganda under Idi Amin to name just a few in recent history. But, truth be told, no country or culture is immune. In fact, in some countries, the local culture is rooted in corruption. When generations of off-spring see their parents pay bribes to get favored treatment for housing, jobs and the like, how could they not come to believe that, to do well, they, too, must pay-off the powers that be. Is it any wonder then that, in time, corruption becomes ingrained in the culture. Greasing the wheels becomes how things get done.
Whether we’re talking about fraud, embezzlement, theft, bribery, kickbacks and the like, the misuse of public power for personal gain is not only not ethical, it is costly financially and, ultimately, it negatively impacts everyone’s quality of life.
The World Bank estimates that more than $1 trillion is paid in bribes annually throughout the world and the World Economic Forum puts the annual global cost of corruption at more than 5% of the world’s total GDP.
Here in the U.S., corruption tends to involve lobbying, bribery and bought elections. Who can forget the 1960 Kennedy-Nixon election, won by Mr. Kennedy, where it is generally accepted that more people voted than were registered to vote, most notably in Illinois and Texas. But, US corruption can also include influence peddling where no money actually changes hands. Instead, favors are given and received that benefit one or both parties to the exclusion of the general public.
Everyone loses when corruption is part of the game and local taxpayers and the poor are the biggest losers. Funds and resources are misallocated, labor markets are distorted, business investment is put on hold and income distribution is skewed. Needed schools, hospitals and essential infrastructure are not built and, if they are, the projects often come in with massive, unexplained cost over-runs. Eventually, the general population accepts that the inevitable increase in local crime, deteriorating health and educational services as well as inadequate food and housing programs are simply the way things are. Soon, a certain malaise sets in and a downward spiral begins that sucks the life out of the community.
During my Army experience in the Vietnam War, I saw first-hand how US aid was misappropriated by corrupt local officials rather than being made available to the local people for whom it was meant.
More recently, Americans sent tens of millions of dollars and governments from around the world gave billions to help the 1.5 million Haitians who were displaced by the 2010 earthquake that devastated their country. Five years later, 95% who ended up living in camps following the tragedy still did not have permanent housing and at least 200,000 were living in new hillside slums where no running water, electricity or sanitation was available.
Earlier this year, a respected German daily newspaper revealed the existence of 11.5 million documents detailing financial and attorney-client information for more than 214,000 offshore companies associated with a Panamanian law firm and corporate service provider called Mossack Fonseca. The initial 149 documents released named scores of government officials from around the world, international sports federation heads, entertainers and business people from 35 companies. Disclosures focused on efforts to avoid taxes as well as broken foreign exchange laws and trade or political sanction violations.
Does it have to be this way? I don’t think so.
Led by organizations like TI, a coordinated global effort to rid the world of corruption has been underway since the mid-1990s. It has focused on three areas: societies in which the people play an active role in rooting out corruption, encouraging a country’s political leaders to fight corruption and developing a proactive private sector that accepts its responsibility to operate corruption-free.
As a start, the 34 member countries of the Organization for Economic Cooperation and Development (OECD) have passed anti-bribery laws that prohibit their private companies from paying bribes in other countries. Sadly, this effort has produced mixed results at best over the years.
It’s clear that we have a long way to go before the scourge of corruption is rooted out completely. I believe we can strengthen current attempts by focusing on leaders at all levels of society and by emphasizing ethical practices and conduct throughout our educational curricula globally.
As you know, I’ve spent the better part of my life in the corporate world where I’m convinced corruption begins at the top. It behooves the senior leadership of any enterprise to ensure everyone in the organization understands what’s expected of them ethically. Marriott International is a good case in point. When I was with the company, Bill Marriott made clear that corruption would not be tolerated. He even made a video about it, telling all our associates, “How you do business is more important than the business you do.” Believe me, as we globalized our operations, it was a rare senior staff meeting where an element of the US Foreign Corrupt Practices Act of 1977 was not discussed.
Contrast this with Siemens that in 2008 paid a $1.6 billion fine for bribery. Their story of how bribery on a global scale helped build their company and cost it the largest fine in modern corporate history is detailed in a New York Times article headlined: “At Siemens, bribery was just a line item.” It’s a good read.
Concurrently, our educational system from kindergarten to post-graduate should be required to teach ethics as an integral component of their curricula. I, for one, teach two MBA classes at the University of California, Irvine in which I devote a significant amount of time to discussions about ethical decision-making and practices.
Corruption will not be eradicated anytime soon. But, if each of us makes it our mission to lead by example by conducting ourselves ethically in our daily lives, we will have taken the first step to making corruption unacceptable. Like pebbles dropped in the water, we each will make ripples that, in time, will turn the tide.