Corporate Bribery Report: Factors, Impact, Challenges, and Solutions

This report delves into the multifaceted issue of corporate bribery, exploring its origins, impacts, and potential remedies. The study investigates the factors that contribute to bribery, including greed, poor ethical environments, and lack of education. It examines the detrimental effects of bribery on organizational performance, referencing real-world examples like the Odebrecht and Siemens scandals, which highlight the erosion of trust and financial instability. The research outlines the challenges organizations face in combating bribery and proposes solutions such as fostering integrity, promoting merit-based systems, and strengthening governance. The report covers literature reviews, research methodologies, results, and analysis, culminating in conclusions and recommendations for mitigating the risks and consequences of corporate bribery. The report emphasizes the importance of ethical practices and the need for transparency and accountability in the corporate sector to prevent economic instability and maintain public trust.

Corporate scandal: Bribery
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Abstract
Bribery is the act of offering incentives or valuables to a party in expectations of reciprocation in
the form of tangible or intangible favors. Corporate corruption often takes place for personal or
professional gains. It may be a result of several socio-economic factors, but it is evident that
corporate bribery has long-lasting effects on the nation and its economy, along with the two or
more parties involved.

Table of Contents
Chapter 1: Introduction........................................................................................................5
1.1 Background of the study............................................................................................5
1.2 Problem statement.....................................................................................................5
1.3 Research aims and objectives....................................................................................6
1.4 Research questions.....................................................................................................7
1.5 Research rationale......................................................................................................7
1.6 Structure of the study.................................................................................................8
Chapter 2: Literature review................................................................................................9
Chapter 3: Research methodology.....................................................................................19
Research Design and Methodology...............................................................................19
6.1 Research philosophy................................................................................................19
6.2 Research Approach..................................................................................................19
6.3 Research Design......................................................................................................19
6.4 Data collection and analysis process.......................................................................20
7. Research Limitations.................................................................................................20
8. Time Schedule...........................................................................................................20
Chapter 4: Results and analysis.........................................................................................22
4.1 Qualitative analysis..................................................................................................22
4.2 Thematic analysis....................................................................................................24

Chapter 5: Conclusion and recommendations...................................................................28
5.1 Conclusion...............................................................................................................28
5.2 Recommendations....................................................................................................28
References......................................................................................................................30

Chapter 1: Introduction
1.1 Background of the study
The original meaning of "Bribe" lies in the Old French language, meaning rob or extort,
(as a noun) theft or stolen goods. Today Bribery can be defined as the act of offering, promising
or giving someone something of value to persuade him/her to do something favorable in return.
Bribery is often done illegally between two or more government or nongovernment
organizations. Bribery was the most common practice in the judicial system, wherein judges
were persuaded with the help of bribes to make biased decisions in exchange for favorable
rulings. Corporate bribery is one in which potential buyers or agents are influenced in one's favor
using promises to provide something in return.
The happenings of bribery have been around for several decades. However, it is seen
in the last two decades that corporate bribery is emerging as a global pandemic. Research states
that corporate bribery most commonly takes place in four sectors, namely: Construction, IT and
Telecommunications, Transportation, and Extraction. According to the International Monetary
Fund, around $2 trillion are spent on corruption and bribery. This accounts for about 2 percent of
the world's GDP. The Organization of Economic Co-operation and Development (OECD) stated
after studying over 400 cases that almost everyone in two convicted bribery cases involved
officials from countries with high to very high HDI (Human Development Index). This shows
that corporate bribery is independent of a nation's developmental status.
1.2 Problem statement
The primary causes of bribery, specifically corporate bribery, are greed for profits and
other personal gains, poor moral and ethical environment, economic environment, traditions,

values and habits, religion, and lack of quality education. Greed for profits and power is one of
the leading causes of bribery. Many multinational corporations are found in practicing illegal
methods of bribing government and other officials to secure contracts in various fields. It is also
evident that bribing an official to get work done gives the company an edge against its
competitors. This leads to a false sense of power in otherwise undeserving entities. Various
socio-economic and environmental factors can also lead to a feeling that a particular task cannot
be accomplished without the means of bribery. This often happens due to a history of events that
have been wrongly nurtured in the system. Religion and religious practices are also a leading
cause in corporate bribery and corruption, due to which people of seemingly backward religions
need to pave their way into the system through bribery. Lack of education is, however, the most
important cause of corruption in the corporate world. It is evident that a person brought up in an
environment that promotes integrity and openness would not practice in any illegal activities
such as bribing. One should be taught from early childhood to work purely on the grounds of
merit and promote the same in future generations.
1.3 Research aims and objectives
The study aims to understand the factors responsible for corporate scandal: Bribery and
analyse its impact on performance of the company.
The objectives are as followed.
 To understand the factors responsible for corporate scandal: Bribery
 To find out the impact of corporate scandal: Bribery on organisational
performance
 To analyse the challenges faced by organisations for corporate scandal: Bribery

 To recommend solutions for overcoming the challenges
1.4 Research questions
The research questions are as followed
 What are the factors responsible for corporate scandal: Bribery?
 What is the impact of corporate scandal: Bribery on organisational performance?
 What are the challenges faced by organisations for corporate scandal: Bribery?
 How the challenges can be overcome?
1.5 Research rationale
Corporate bribery scandals not only affect the reputation of the involved parties but may
also have an impact on the economy of a country as a whole. Gains obtained illegally have
driven many countries into a state of economic instability. It is found that bribery often leads to
an increase in transaction costs and makes the economically insecure. It can be seen that bribery
leads to money being allocated for unnecessary projects, especially regarding construction and
infrastructure often acquired by undeserving executives and officials. It is because of this
inefficient allocation of resources that funds cannot be allocated to the sectors in real need such
as rural development, education, and awareness. Due to this, the Government is unable to
generate merit-based employment, which in turn decreases the tax revenue of the country. It is
therefore inevitable that the country's tax prices are ever rising, giving birth to a vicious cycle of
an unstable economy.
Corporate bribery is not limited to two or more companies; it also extends itself into the
government. It is the large industries and industrialists that have a large chunk in the campaign
funding of politicians. Political parties often bend the legislation in favor of large multinational

corporations as a token of reciprocation for such bribes. An unfortunate effect of this is the
elected leadership is often unable to govern the country, which takes a toll on the nation's
reputation as well as its economy. Policies in favor of these corrupt industrialists are often made
by these politicians, which may benefit the company in the form of profits, but in the long term
are found to have numerous ill effects.
1.6 Structure of the study
The research covers introduction, literature review, research methodology, results and
findings and conclusion as well as recommendations.

Chapter 2: Literature review
2.1 Overview of the research topic
Bribery is one of the most significant ethical challenges in the corporate world.
According to David-Barrett et al. (2017), one out of four people has participated in paying
bribes. The Transparency International Survey of 2011 indicated that public officials and people
occupying managerial positions in the business world faced greater likelihoods of engaging in
bribery particularly in Africa and Asia. Ideally, Button, Shepherd, and Blackbourn (2018)
explain that the acts of corruption are committed at the interface of private and public sectors
with variations in the degrees of pervasiveness. Considering the position occupied by bribery as
one of the most severe forms of corruption, global institutions such as the International Chamber
of Commerce, the United Nations, and Organization for Economic Corporation and
Development have incorporated various standards and policies aimed at fostering the public's
awareness of corruption. For instance, Wu, Chandramohan, and Bali (2016) explain that the
United States of America goes to record as the first economy to consider bribery as a crime in
1977. Corruption occurs when an entity opts for the avoidance of cost or pain in its pursuits of
obtaining certain benefits and may impose detrimental effects on the legitimacy, efficiency, and
fairness of a corporate institution.
2.1 Theoretical background
The principle-agent theory is one of the most useful frameworks of neo-
institutional economics applied in the study of the effects of unfair conduct in the corporate
world. According to Schipani, Lui, and Xu (2016), the principal-agent theory explains the
potential impact of the bad manners of two corporate players (principal and agent) who involved
in the processes of exchanging resources. The researchers describe that the problem of

opportunism exists between these two parties. Ideally, the two parties strive towards attaining
their self-interests by ensuring that they maximize their wealth. By considering the rationales
mentioned above, it means that the opportunistic traits of the agent encourage the parties to
pursue self-interest while incorporating dishonest deeds such as stealing and lying. Chiu and
Donovan (2017) explain that the dishonest dimension of management refers to an arbitrator’s
intentional cover-up of the unethical and irresponsible performances.
As a consequence, the organization’s board adopts the role of a controlling and
monitoring its processes as a way of managing the agency problem depicted between the
shareholders and the administrative arm of the institution in question. According to Lord, and
Broad (2018), the board of directors controls the opportunistic pursuits of the managers while
ensuring that the managers work to ensure that the wealth of the shareholders attains a positive
growth. However, Schipani, Lui, and Xu (2016) reckon that the agency problem is one of the
issues of concern for institutional governance in instances where members of board adopt
opportunistic behaviors as a way of deteriorating the system of management of a given firm.
According to Chiu, and Donovan (2017) board opportunism develops in instances where selected
members of board play the role of self-interest seekers while taking advantage of the powers and
positions bestowed.
Multiple real-life cases attributed to the issue of board opportunism exist.
According to Sebhatu, and Pei-lin (2016), such activities reveal the opportunist trait of
administrative arms where board members were found to be guilty of using their positions of
influence to accept kickbacks from corporate managers, and other members of the supply chain
such as vendors to favor their wants against the interests of the shareholders. For instance,
Jensen, Hall, and Malesky (2018) present a case where two pharmacy directors at Costco

undertook the professional misconduct of accepting kickbacks from drug manufacturers to get
their products stocked in the company's retail chain.
Consistent with the proposals of Schipani, Lui, and Xu (2016), there are
tendencies that people who undertake opportunistic activities may misuse the resources provided
by their organizations for their benefits while hiding crucial pieces of data from the face of the
observers. According to Chiu, and Donovan (2017), such a scenario drives the agency problem
along with the issues of information asymmetry. The researchers explain that corporate who
engage in opportunistic activities could be exposed to challenges such as reduced levels of
transparency, under-exposure to investment opportunities, and poor quality governance.
2.3 Impact of corporate bribery:
Brazil-based construction company, Odebrecht is an example of this phenomenon.
Oderbrecht is the company responsible for the construction of the large infrastructures of the
2014 FIFA World Cup, the 2016 Rio Olympics, the public metro system in Caracas, along with
several other dams and airport terminals in several countries. It was found that Oderbrecht paid
bribes amounting to approximately $788 million in exchange for construction contracts in around
12 countries. Odebrecht admitted to bribing politicians, law officials, lawyers, bankers,
government enterprises, etc. to secure agreements in Brazil as well as abroad. Due to
Odebrecht's conviction, several investigations against government officials and other associates
went into gear. Due to this, the economy of Brazil and Peru were adversely affected.
Construction projects worth millions of dollars were put to a halt due to the investigations.
Hundreds of companies went bankrupt, leaving the country's construction sector virtually
paralyzed for long periods.

A company's valuation depends largely on trust and credit. A bribery scandal may
very well break the confidence of investors and could potentially ruin the company's judgment in
the market. It can be seen in various chapters of commercial history that companies have
declared bankruptcy after bribery scandals. Close to a decade ago, Siemens, a well-known
electrical engineering company was convicted for what was the biggest corruption scandal in the
world. Before the conviction, Siemens had an impeccable reputation for its advanced technology
products and services in the fields of telecommunications, power, medical equipment, etc. It was
often that Siemens emerged into remote markets, with high-quality products, leaving behind its
competitors. For years, the company had portrayed an image of abiding by high ethical and
moral standards, ensuring utmost transparency with its customers. However, reality painted a
different picture. It was later found that since the early 1990s, Siemens had created a global
network of corruption to acquire a significant market share alongside its competitors.
The company could primarily do this because of the loopholes in the judicial systems of
several countries, including Germany. The company systematically conducted corrupt deals
through pseudo consultants, hidden bank accounts and several intermediaries under the name of
"useful expenditures," internally known as bribes. Bribery was not an anomaly in the functioning
of the organization, but a popular business strategy. This goes to show that without proper
intervention, corporate bribery is accepted as the norm in several business practices. Bribery, if
not corrected appropriately will spread itself like a virus in the system.
At the micro level, it is observed that corporate bribery affects the morale of
employees, along with the parties involved. It is found that bribery is often an aid to nepotism,
and can decrease the confidence of other employees. Bribery leads to the selection of
undeserving candidates, while selection based on merit takes a back seat. Knowing that the