Corruption across cultures

Corruption can be defined simply as behavior that corrupts. It tends to subvert the

cultural system in which it occurs. This means that one cannot recognize corruption in a particular society without knowing something about how that society works.

The West tends to be universalist in its outlook: every society works, or should work,

essentially the same way. Its business practices, for example, should be based on a

market system that is characterized by transparency and regulated by laws that apply

equally to all players. A country that fails to conform to this model is viewed as

underdeveloped or dysfunctional. It follows that corruption is basically the same,

whether one does business in Sweden or Sudan.

The reality, however, is that different cultures use radically different systems to get things done. Whereas Western cultures are primarily rule-based, most of the world’s cultures are relationship-based. Western business people trust the system, while people elsewhere trust their friends and family. Westerners organize their business around discrete deals that are drawn up as written contracts and enforced by a legal system. Others organize their business around personal relationships that are cemented by personal honor, friendship, or long-term mutual obligation. Loyalty to cronies is suspect behavior in Western business but represents high moral character in much of the world.

The distinction of rule-based and relationship-based systems is only one of many cultural differences, but it already creates different ethical norms.

Since cultural systems operate differently, business practices that are corrupting in the

West may be acceptable elsewhere, even obligatory. Practices that are acceptable to

Westerners may be corrupting elsewhere. And finally, practices that are corrupting both

in the West and elsewhere may be corrupting for very different reasons. Each of these

three possibilities may be illustrated as follows.

What is corrupt in the West may be acceptable elsewhere. The classic example of the

purchasing agent illustrates this point. The Western purchasing agent is expected to

award contracts based on the quality of bids and transparently available financial

information about the bidders. An agent who favors personal friends is viewed as

corrupt, because cronyism subverts this transparency-based system. It creates a conflict

of interest: a choice that is good for the agent and his or her cronies may not be good for

the company.

In much of the world, however, cronyism is a foundation for trust. A purchasing agent

does business with friends because friends can be trusted. He or she may not even ask to

see the company financials, since this could insult the other’s honor. It is assumed that

cronies will follow through on the deal, not because they fear a lawsuit, but because they do not wish to sacrifice a valuable relationship in an economy where relationships are the key to business. In such a system it is in the company’s interest for the agent to do business with friends, and cronyism therefore presents no conflict of interest.

What is acceptable in the West may be corrupt elsewhere. Lawsuits provide an example

of this. In the West, which relies on rules and individual responsibility, lawsuits are

routine and necessary. In Japan, however, they are corrupting. Japan is a strongly

relationship-based culture in which interpersonal relations are based on maintaining

harmony. Harmony is preserved by elaborate courtesies, humility, deference to

superiors, and avoidance of confrontation. Lawsuits have no place in this system because they promote confrontation. Thus if a plane crashes, the victims’ families normally do not file suit; rather, the airline’s CEO personally apologizes to them. The apology does not indicate personal guilt as in the West but is intended to restore harmony. A dramatic illustration of this principle is provided by Shohei Nozawa’s tearful apology to employees and stockholders shortly after Yamaichi Securities declared bankruptcy.

Nozawa was not admitting guilt and in fact had just assumed his position as CEO in order to clean up a mess left by others. His aim was to restore harmony among the

stakeholders.

What is corrupt both in the West and elsewhere may be corrupt for different reasons.

Bribery, for example, is corrupting in the West because it induces people to depart from

established rules and procedures. Furthermore, if bribes become common enough, people in general may lose faith in the system and flout the rules routinely.

Bribery is also corrupting in most Confucian cultures, but for a different reason: it shortcircuits the building of relationships. China and Taiwan, for example, rely on the stability provided by long-term relationships of mutual obligation (guānxì). A bribe

“buys” a relationship that lasts only until the next bribe is required.

Since there is a fine line between legitimate guānxì relationships and quid-pro-quo

bribery, bribery tends to be more common in Confucian countries than in some Western

countries. An Western analogue would be litigiousness, or overuse of the legal system,

since there is an equally fine line between legitimate lawsuits and nuisance lawsuits.

Litigiousness is a form of corruption that is particularly prevalent in the United States.

Bribery can also flourish in Western countries, of course, particularly when political

upheaval or oppression break down the traditional rule-based mechanisms.

Bribery Around the World

While on the subject of bribery, it is useful to survey briefly the state of affairs in several countries. The brief summaries given here do not reflect the subtlety and complexity of local situations, which should be researched thoroughly before doing business there.

China and Taiwan. As already mentioned, bribery is common in these countries and is

corrupting because it undermines more stable forms of relationship. In China particularly, the central government strongly discourages bribery, which erodes its power.

The penalty for some types of bribery can be severe (e.g., death).

Japan. Bribery scandals periodically come to light in Japan and may result in a flurry of

prosecution and punishment. Bribery is corrupting primarily because it undermines

group solidarity, the primary mechanism for social cohesion. Group solidarity is

maintained by a careful process of cultivating loyalty and maintaining harmony, not by

side payments.

Singapore. Bribery is strictly forbidden in Singapore and is not practiced.

India. Bribery and skimming are common in India, and facilitating payments are

ubiquitous. The latter are small, routine payments made to obtain services to which one

is already entitled. They are arguably functional in that they supplement the inadequate

salaries of bureaucrats. On the other hand, bribery in the sense of influence peddling is

both unnecessary and dysfunctional. It is unnecessary because Indian business and

politics are based primarily on skilled networking and family connections, not bribes. It

is dysfunctional because it corrupts India’s quasi-Western public administration.

Although bribery is common, the system operates despite it, not because of it. It is

therefore corrupting and should be avoided.

Russia and Eastern Europe. Bribery is a way of life in many of these countries and is an

unmitigated evil. It is a symptom of system breakdown, due to a recent history of

political oppression or instability. It is best to rely on corporate clout, connections, and

pro bono activities, and to maintain a clean reputation.

Arab countries. These present a complex picture, due to regional variations and mixing

of cultures. Kickbacks are other relationship-based practices are common, but their

tendency to corrupt depends on the local situation.

Turkey. Bribes and facilitating payments are very common in both business and public

administration, and Turks find them quite irritating. Bribes that circumvent the law

undermine the country’s quasi-Western administration and should be avoided. Some

small payments may be unavoidable, as when settling a traffic ticket, getting children intoschool, or clearing customs.

Sub-Saharan Africa. Bribery in much of central and southern Africa is out of control,

and it cripples the economy. It represents the total corruption of an ancient patronage

system that once held rulers accountable. It is a symptom of social breakdown that stems from Africa’s encounter with Western powers and a radically different economic system.

Companies should use any means available to avoid paying bribes. They can often exert

the necessary influence through the potential economic benefits of their operations and

their willingness to fund infrastructure.

Latin America. Bribery is common in Latin America but not ubiquitous. It is widely

regarded as immoral, in many cases even by those who demand bribes. Bribery seems to be a holdover from a turbulent past and is arguably inessential for a system that can rely on other kinds of relationships. It in fact seems to be on the wane in some countries, such as Mexico. Business people should cultivate personal connections and avoid paying bribes. They should make it known that they work only with locals who play it clean.

Ethics and Human Nature

The ethical norms discussed here ultimately reflect different interpretations of human

nature. In the West, for example, human beings are viewed as autonomous rational

individuals, whence the central role of equality and emphasis on individual responsibility.

In a Confucian system, human beings surrender much of their autonomy to parents,

ancestors, or rulers. Personhood is defined primarily by relationships with others rather

than existence as an individual. This gives rise to the central role of authority and saving

face, and it places responsibility on the ruler rather than the individual.

A prevalent African view, which is shared by many other traditional cultures, is that the

basic unit of human existence is the community. People do not distinguish their

individual welfare from the collective welfare, and the economy is based on sharing of

resources.

The Hindu/Buddhist world view likewise declines to see human beings as separate

entities but interprets them as manifestations of a single consciousness (atman). This

highlights the connectedness of all life but assigns no role to egalitarianism.

Each of these viewpoints supports a sophisticated ethical philosophy. Those of us who

operate across cultures owe them respect not only for their own sake, but because they

teach crucial insights that may be absent from our own traditions.

teach crucial insights that may be absent from our own traditions.