Corruption

Economist.com

Schumpeter

The corruption eruption

Apr 29th 2010

From The Economist print edition

Saying “no” to corruption makes commercial as well as ethical sense

IT IS 15 years since Moisés Naím coined the memorable phrase “corruption eruption”. But there is no sign of the

eruption dying down. Indeed, there is so much molten lava and sulphurous ash around that some of the world’s

biggest companies have been covered in it. Siemens and Daimler have recently been forced to pay gargantuan

fines. BHP Billiton, a giant mining company, has admitted that it may have been involved in bribery. America’s

Department of Justice is investigating some 150 companies, targeting oil and drugs firms in particular.

The ethical case against corruption is too obvious to need spelling out. But many companies still believe that, in

this respect at least, there is a regrettable tension between the dictates of ethics and the logic of business. Bribery

is the price that you must pay to enter some of the world’s most difficult markets (the “when in Rome” argument).

Bribery can also speed up the otherwise glacial pace of bureaucracy (the “efficient grease” hypothesis). And why

not? The chances of being caught are small while the rewards for bending the rules can be big and immediate.

When in Rome, behave like a Swede

But do you really have to behave like a Roman to thrive in Rome? Philip Nichols, of the Wharton School, points out

that plenty of Western firms have prospered in emerging markets without getting their hands dirty, including

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Reebok, Google and Novo Nordisk. IKEA has gone to great lengths to fight corruption in Russia, including

threatening to halt its expansion in the country, firing managers who pay bribes and buying generators to get

around grasping officials holding up grid connections. What is more, Mr Nichols...