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What’s Behind the Endemic Nature of Bribery: Poverty

Matt Kelly | August 31, 2015

Building an ethics & compliance program is no easy task under the best of circumstances, and let’s be honest—when building them in emerging markets, you are nowhere near the best of circumstances.

That thought struck me as I read a short item earlier today on the FCPA Blog written by Aaron Bornstein, an economic development specialist who spent several years trying to foster anti-corruption programs in Cambodia. Aptly titled, “Was my anti-bribery fight just dust in the wind?” he neatly captures the sense of frustration many chief compliance officers feel. Companies spend immense amounts of time and money trying to build anti-corruption programs, and nobody doubts that these programs are crucial to improving the lot of impoverished people around the world—yet bribes still seem to happen all the time. Why?

Bornstein skims across one reason when he talks about truckers throwing cash at policemen to bribe their way across bridges, and children needing to bribe their teachers to go to school (practices I have seen myself in Cambodia). “Neither teachers nor police were paid a living wage,” he writes, “so the system more or less was constructed on the necessity of bribes.”

Contemplate that sentence, because it speaks volumes about the challenge that globalized compliance programs truly face. It’s a big one.

Start by comparing Cambodia to that other extreme of governance in Southeast Asia, where corruption is not rampant: Singapore. In Cambodia, the government bureaucrat is paid only, say, $10,000 a year. So you bribe him with another $100,000 to approve a purchasing contract worth $10 million that the country doesn’t really need. In Singapore, meanwhile, the bureaucrat is paid $150,000. He rejects the bribe, and the government saves $10 million on that unnecessary contract he never approves.

To be clear: I picked those amounts at random just to illustrate my point, and I know that others factors contribute to Singapore’s clean government beyond high salaries. But good salaries are important. Good salaries give bureaucrats the ability to reject a bribe, because they don’t need to take the money. Good salaries neutralize Bornstein’s observation that the system is constructed on the necessity of taking bribes.

The compliance community doesn’t talk often enough about the ugly fact that poverty drives bribery and corruption in emerging markets: either its existence in your life, or the fear that it might be visited upon you if you don’t engage in bribery. Years ago I had to pay a bribe myself, to a border crossing officer in Bolivia. His office was a mud-walled hut at an altitude of 11,000 feet, with a pit toilet out back for bathroom facilities. He shook me down for an $10 to get a four-day pass into the country that I had already paid for. I can’t say I blame him.

Training might be helpful around the edges of the problem, but all the training in the world doesn’t make an impoverished person any less poor. Prosperity does.

Hence I sometimes question the compliance community’s focus on ethics training in emerging markets. I’ve never met a national from emerging markets who likes soliciting or paying bribes, as if the thought that bribery is wrong had never occurred to him. Rather, they see bribes as necessary, and are just as eager to avoid them as compliance officers are; they simply can’t. Training might be helpful around the edges of the problem, but all the training in the world doesn’t make an impoverished person any less poor. Prosperity does.

Unfortunately, creating that economic prosperity and channeling it in the proper ways to reduce corruption—that’s hard. That’s not something a chief compliance officer can do alone, no matter how hard you try or how large your budget is. It requires support and incredible discipline to avoid corruption among corporations, which is getting better; and support and incredible discipline from governments in emerging markets, which isn’t.

It requires us to accept truths that go against Western political sensibilities: Singapore has low corruption because one autocrat, Lee Kuan Yew, imposed clean government by force; you don’t need democracy to reduce corruption. It requires us to ask awkward questions about culture: If lifting people out of poverty reduces corruption, why has China’s rise out of poverty not helped?

Compliance officers can, and should, ruminate on those points for a long while, because they have huge implications for anti-bribery efforts. Training programs help; FCPA resource guides are great. Compliance officers do have plenty of operational challenges to running a global compliance program that are always worth discussing. But we cannot forget the larger realities that people in emerging markets face. They get to that root question—Why is bribery so hard to eradicate?—and we ignore them at our peril.

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