Among the more surprising results of the research for this article is the paucity of successful examples of global anti-bribery and corruption, as well as a lack of empirical evidence for interventions that are widely prescribed in business literature. As a consultant in this field for several years, I have learned a sort of “received wisdom” regarding the best and most pragmatic programs that are prescribed to firms to decrease their risk of exposure to bribery and corruption. Though one still finds these suggestions in the popular business press and, to a lesser degree, in the academic press, the evidence for these intuitive and common-sense measures widely prescribed is thin. Nonetheless, that does not mean that these measures are ineffective, only that there have not been sufficient studies to prove the claims made for them by their proponents. This article will approach the wide range of recommendations that are made to combat various forms of bribery and corruption and attempt to determine how well they are supported by statistically sound research.
Defining Corruption
Corruption seems like a concept that would be easy to define. However, upon closer inspection, it turns out not to yield easily to a set of necessary and sufficient conditions by which one can identify corruption. Even paradigmatic examples aren’t as useful as one might hope, particularly because of the differences between public/governmental and private/business classes of corruption. For this reason, it seems that legislative and regulatory bodies have begun their fights against international corruption with the more easily identifiable (and arguably more damaging) governmental corruption (Posadas, 2000). The 1977 U.S. Foreign Corrupt Practices Act, for example, was the first law of its kind in the world: it considered bribing foreign officials for business purposes to be illegal. Other countries were slow to follow.
"The FCPA...focus[es] only on foreign officials..ignoring private bribery."
One of the interesting features of the FCPA from today’s perspective is that if focused only on foreign officials. In addition to allowing what it termed “facilitation payments” (payments to speed a public service that would eventually be delivered), it completely ignored the issue of private bribery. In fact, the vast majority of legislative and regulatory activity that prohibits corruptions focuses only on public corruption. For example, both the 1999 Canadian CFPOA (Corruption of Foreign Public Officials Act) and the 2012 Law Against Corruption in Public Procurement (Ley Federal Anticorrupción en Contrataciones Públicas) contained no provisions for prosecuting commercial or private bribery (Alldridge, 2012).
The tide seems to be turning, however. At least the United Kingdom’s UK Bribery Act chose to focus on bribery in general, prohibiting any bribe regardless of whether the recipient is a government official or a private citizen. This applies to anyone from the United Kingdom, citizen or resident. More importantly, it applies to companies formed in the UK and companies that have a presence in the UK. Continuing its groundbreaking approach, the UK also introduced a new crime: the corporate offense of failing to prevent bribery (Slavin, 2010). In addition to national laws prohibiting both public and private bribery, international bodies such as the Organisation for Economic Co-operation and Development (OECD) (Recommendation of the Council for Further Combating Bribery of Foreign Public Officials in International Business Transactions, 2009) and the UN (United Nations Convention Against Corruption, 2003), in addition to widening the scope of prohibited activities for public officials, are beginning to include provisions prohibiting private bribery. However, it should be noted that, until recently, bribes were tax-deductible in several developed countries (e.g., Germany and France), so endemic to the nature of doing business was the giving of bribes(Rubin, 1998). Thus, we should assume that the global fight against corruption is far from over.
Combatting Corruption
Part of the difficulty with determining how to combat corruption is defining scope. As outlined above, at least part of the response to widespread corruption has been legislative, regulatory, and international. However, there are issues with approach (termed by Disch, Vigeland, & Sundet (2009) the “neo-patrimonial” approach) including state capture. According to Disch, et al, “In a neo-patrimonial system, politics and governance are oriented towards maintaining control and influence through personal, commercial or financial bonds (or directly through controlling the state’s repressive apparatus). State capture denotes a situation where business and political elites are able to influence policies and manipulate the state apparatus to their advantage.” This induces a spiral of corruption that doesn’t provide any incentive for the ruling government to reduce or eliminate corruption.
Ignoring for a moment the issues with state capture (which is primarily an issue in the developing countries but which can also be seen in the United States [see Citizen United (876, 2012; Avi-Yonah, 2010; Monks, 2013)]), the primary focus of anticorruption efforts has been enforcement on firms to prevent them from offering bribes. The remainder of this article will outline the principle policies, standards, and operational activities firms use to approach the problem of both public and private corruption.
Businesses’ Responses to Laws Prohibiting Corruption
"[In the early 1970s] nearly all multinational firms...maintained 'slush funds'...to bribe foreign officals"
An unexpected outcome of the United States Watergate investigation was the revelation that nearly all the multinational firms based in the United States maintained “slush funds” which they used to bribe foreign officials (Public Broadcasting Company, 2009). This was, until that time, considered a legal, ethical, and necessary part of business. After the fallout of the Watergate scandal led, in part, to the enactment of the FCPA in 1977, firms were faced with not only changing the way they did business, but also enacting controls and other measures to prevent what was, essentially, standard operating procedure.
The standard way of enacting these controls prior to the 1992 Department of Justice Federal Sentencing Guidelines (Ferrell, Leclair, Ferrell, & Leclair, 2015; Murphy et al., n.d.) was to issue a corporate policy or standard and hope for compliance, perhaps auditing to the standard on occasion (Feller, 1982). Since 1992, the Federal Sentencing Guidelines have recommended the central document of compliance for companies be the Code of Ethics (or Code of Conduct). Many firms have integrated their anti-bribery policies into their Codes of Ethics, with varying degrees of effectiveness (Gordon & Miyake, 2001; Miyake, 2001).
As pointed out by Gordon & Miyake, the relative ineffectiveness of the Code of Ethics as a vehicle for decreasing bribery and corruption has led businesses to develop other strategies. For example, the use of bribery-specific codes was proven to decrease bribery and corruption.
Financial Record Keeping
One of the primary requirements of the FCPA is record keeping and many firms focus on this as a prime weapon in the arsenal against bribery (Abbott & Snidal, 2002; Pitman & Sanford, 1994). Because financial control is a mature business discipline, using record keeping, accounting, and auditing has been, in practice, an effective measure against bribery. The principal shortcoming with using record keeping and financial controls is that, although some controls are preventative, most are detective, corrective, or recovery-oriented. These can help the firm develop a culture of anti-bribery over time, but they are ex post facto and do nothing prevent bribery. Directive and preventative controls are a priori and should be the focus of much of the energy for anti-bribery programs (Weiss, Davis-or, Giffen, & James, 2009).
Whistleblowing Facilities
Another common organizational feature used to combat international bribery is the development of systems to encourage and protect “whistleblowers” (Lewis, 2008; Lewis & Vandekerckhove, 2011). Whistleblowing is one of the more fraught activities an employee can engage in and, in firms that are not properly organized to support it, can have severe adverse effects on the professional and personal lives of the whistleblowers (Cherrington, 2002). However, in firms that effectively institute whistleblowing systems, such as anonymous hotlines and websites, the effect is both preventative and detective (Kang & Frey, 2014).
Training
Perhaps the most widely used bribery countermeasure is training (Weber, 2007). Surprisingly, there seems to be little empirical evidence for the effectiveness of training as an international bribery control or disincentive. This is the most surprising finding of my research; I’ve worked with 3 of the major suppliers of training for business ethics as either an employee or a consultant. The vast majority of the money spent by firms we consulted with was on training; they ignored (or nearly ignored) many of the other ethics programs suggested by both best practice and legislative and regulatory regimes. I have been unable to find empirical research that bolstered the claim that training makes an appreciable difference in the behavior of employees. I can imagine many reasons this might be the case: methodological challenges, lack of company cooperation and senior management support. However, when an entire industry has emerged to address this aspect of deterrence, it is surprising to see how little research seems to have been done. While training seems an intuitively effective tool, its effectiveness could be mitigated or negated by countervailing incentives or cultural expectations.
Third Party Due Diligence
Much of the liability for bribery in developing countries stems from third party actors. Under many legislative and regulatory regimes, organizations may be held liable for corruption by their third parties such as their agents, consultants, suppliers, distributors, joint-venture partners, or any other entity that has a business relationship with the firm. Due diligence on third parties is now expected in signatory firms of the United Nations Convention Against Corruption or the OECD Anti-Bribery Convention (PACI, 2013). Again, like training, there seems to have been little study on the efficacy of systems of due diligence. In this case, this may be because it’s a relatively recent requirement, emerging in force only within the last decade, specifically as part of the UK Bribery Act.
Conclusion
This article has only been able to touch on the definitional, methodological, practical, and empirical challenges faced when determining the effectiveness antibribery countermeasures. Some of the more difficult challenges, such as cultural differences, have been excluded in the interest of space. While there is no question that international bribery and corruption are among the most significant issues faced by ethics and compliance professionals, it is also clear that in needs additional empirical study.
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Capital and Conscience 