How Managers Should Respond When Bribes Are Business as Usual – HBR
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Corporate bribery—that is, the practice of companies paying government officials for preferential treatment—is not only illegal  in dozens of countries. Studies show that it’s also counterproductive resulting in lower profit margins, return on equity, and employee morale; costly delays as players haggle over the size of the kickback; and poverty and poor governance in the markets where they’re paid. Yet, according to the World Bank, roughly one-third of firms around the world use kickbacks, paying an estimated total of $400 billion a year. Since 2006, hundreds of companies — including global brands like Novartis, Hewlett-Packard, and Rolls Royce — have reached settlements with U.S. authorities on charges of overseas bribery.

Why do kickbacks continue? According to my own research into dozens of bribery cases and five years of reporting on four continents, it’s because executives believe that  their competitors are using bribery as a tool to get ahead, so they must, too. “[Bribes] are like steroids,” one oil consultant told me. “Everybody’s doing it, and if you don’t do it, you fall behind.”

Of course, copying what your competitors do—especially when it is illegal and inefficient – is the opposite of innovative. How can companies kick this habit? After surveying corruption experts and business executives (including one who went to jail for bribery) I identified four strategies:

Have a resistance plan for bribe demands.

Build the cost of avoiding bribery into your business projections.

Identify “moon markets” and walk away.

Recalibrate performance-based targets and compensation relative to high risk.

In today’s world, a company that creates state-of-the-art products, and devises state-of-the-art strategies to sell them without bribes is not only innovative, but disruptive, helping to dismantle a centuries-old system that perpetuates poverty abroad and stifles creativity within.

David Montero is the author of Kickback:  Exposing the Global Corporate Bribery Network (Viking, 2018) and was formerly a correspondent for The Christian Science Monitor and a producer for the PBS series Frontline.

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