Combating corruption

Internal Auditor, June, 1997 by Stephen J. Burns

If only on paper, corporate business ethics programs exist in most large international companies. Unfortunately, many of these efforts would have to be regarded as meaningless.

A real-world scenario reinforces this point: Every four years, in a ceremony pompously named "Quadrennial Business Practices Review," employees in one organization gathered to hear canned speeches about the importance of ethical behavior. For 99 percent of those listening, the message was limited to "Don't cheat on your expense account." At the same time that the employees were receiving their every-fourth-year ethics lesson, top management was operating as it pleased, often at the expense of the stockholders. The corporation was eventually assessed two of the heaviest penalties ever levied by the U.S. federal government, one for tax evasion, and another for pollution.

Having served as an internal auditor and as financial director of operations in multiple parts of the world, I'm concerned about corruption and about internal audit's leadership role and responsibilities with regard to ethics. As a young internal auditor, I had no compunctions about expressing to senior management my views on the ineffectiveness of programs such as the one I've described; and my convictions haven't changed. Perhaps as a 'reward' for my frankness, I've been asked throughout my career to tackle these difficult issues. I no longer believe I can combat all the evils of the world; but I hold strong opinions on what's right and what's wrong, and I've been willing to take unpopular stands for what I believe.

Over time, I've developed five basic principles that have served me well: Learn to set limits; say no when it's necessary; set a visible example; communicate and re-communicate; and accept the consequences of doing the right thing. Although many of my own experiences reflect the perspective of a Westerner in other countries, these principles are also relevant from the converse perspective. The challenges of corruption are universal.

* Learn to Set Limits

In any work environment, I've tried to make it clear from the outset what I was and wasn't willing to do. For example, to curry favor with governmental officials who could set up potential roadblocks to accomplishing organizational ends, I worked from a "do" list that included quick business lunches; a formal dinner at holiday time; tickets to a local golf tournament, which were given to me; and other items of purely nominal value. On the "don't" list were payments of cash or equivalents, promises of favoritism of any sort, offers of employment, or any variation of the innumerable off-the-books transactions people are capable of inventing. I found myself constantly probed, cajoled, enticed; but I never wavered.

As one might expect, I not infrequently arrived at an impasse. When it seemed necessary, I moved up the bureaucratic hierarchy to solve my problem. My perception is that people at the bottom of the food chain are in the business of corruption just to make ends meet. People at the top, on the other hand, seem to believe that the payoffs of corruption are part of their entitlement or patrimony. Somewhere in the middle there are normal, hard working functionaries who are just trying to do their jobs, perhaps even actively wanting to improve. I've found that appealing to the common sense or patriotism of individuals at this level will often yield results.

In countries outside the West, I've invested the time to get to know my staff's interlocutors personally. For example, in one instance I had been experiencing difficulties with a particular government agency, for reasons I couldn't fathom. I had expended considerable effort to present our venture to the stubborn official at the bottleneck point. After considerable, and seemingly pointless, chit-chat at a casual lunch, it finally emerged that he had heard our company had a good after-hours English training course. Might he stop by from time to time? "Of course." Overnight, our problems disappeared.

* Say No When It's Necessary

In one situation, my corporation was desperate to have a PABX telecommunications switch installed so we could communicate with our head office. We found a local supplier who could provide us with the company-approved standard machine. We even took the precaution of verifying the supplier's customer list, which included several prominent international corporations. What a relief!

Soon after the contract was signed, the supplier's representative came into our office to ask for several thousand dollars extra, in cash. This was needed, he explained, to obtain the necessary "government permits."

What happened in the aftermath astonished me. I learned that everyone on his impressive list of customers had authorized, either explicitly or tacitly, under-the-table payments to the local telecommunications authorities. I learned that this step was required to obtain the obligatory license, as the vendor had not yet obtained the necessary blanket State regulatory approval.