In the recent years change in the market scenarios, environments, business models and increasing global competition and international marketing the issue of ethics is been raised seriously on how organizations should behave (Gilligan, 1996). Bribery is often a discussed problem in international market. There is no discussion in international business without the references and questions related to business practices. The pervasiveness of dishonesty and the need for engaging in such practices vary widely. On the other hand these differences in views have led to vital discussions.
"Bribery occurs where one person (the briber) provides an inducement to another person (the bribee) that is intended to be in exchange for the bribee doing, or not doing, something that would favor the briber and be contrary to the bribee's positional duty. One indication that bribery is a moral concept is evident from its definition as a violation of duty" -- Dunfee, Smith and Ross (1999).
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Analysis of bribery mainly focuses on the public officials violating their duties, participating in activities outside the commercial sphere for example paying to influence judges in criminal cases and so on. Therefore we can say that bribery can occur in both private sector or in a public sector organization irrespective of the organizational environment and conditions.
Before discussing about bribery here it is important to discuss about the major concepts like business ethics (or ethical behavior) and unfairness or legal (laws) in international marketing. Global market operations are very critical to handle and managers face ethical dilemmas in context of cultural sensitivity (Doole and Lowe, 2005). There are very few moral absolutes and actions where in one can provide justification. So managers need to think about ethics and be aware of ethics and should know the values, actions and ethical standards of different cultures as this will help them to understand their stakeholders and the organization that operates globally. Generally acceptable ethical codes, standards or practices are to be understood by the global managers especially those who are operating international marketing strategies. Therefore it is suggested that global managers should understand different cultures and should be able to challenge and look for the various perspectives of what is ethical and focus on the new ways of business perspectives (Doole and Lowe, 2005).
Gift Giving and Entertainment
Laws related to bribery have been well laid off especially in Western Europe and USA where in managers rely on direct and open communication (or in other sense formal and explicit) and are more legislative oriented. It is seen that in some cultures gift giving is considered as illegal bribery where in is some other cultures gift giving (sometimes pays off, bribes) are merely considered as cost of business.
Maintaining a relationship in marketing and selling is considered as an important foundation in performing business effectively (especially in marketing functions). In general in different cultures individuals believe in gift giving and providing entertainment to enrich their business purposes so here we can say that bribery takes the form of gift giving and entertainment (Dunfee, Smith and Ross, 1999). It is identified that United States has a gift giving and entertainment tradition in business relationships. Most industries encompass practices such as corporate parties including meals at fancy restaurants, special golf outings etc. For example General Motors introduced a policy that prohibits its employees from free meals, gifs from vendors, hockey tickets, golf outing etc. This was because General Motors feel that these gifts and entertainment were equivalent to bribery. Whereas the vendors expressed that this policy has restricted them from building better relationships that are necessary for building good social and business relationships. On the other hand gift giving and entertainment are considered as exchange of preferential treatment and further could be considered as an act of bribery (Dunfee, Smith and Ross, 1999). It is also seen that many cultures accept and encourage gifts
Bribery Issues and Marketing Ethics
According to Nichols (1997, p. 324) "Corruption and bribery cannot be claimed as accepted phenomena in any culture. These acts are condemned by each of the major moral and religious codes. They are criminalized by every country. And they are universally despised, particularly by those who endure corrupt governments."
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United States government has lobbied the business with the increasing importance of global marketing and has taken steps to prohibit transactional bribery. In the problem areas especially in global marketing bribery which involves marketing functions such as
Promotional expenses for purchasing agents
Entertainment at the time of negotiation process
Paying customs in channel of distribution
Hiring self described marketing agents
Exchange of gifts
"A company paid a $350,000 "consulting" fee to an official of a foreign country. In return, the official promised assistance in obtaining a contract, which should produce a $10 million profit for the contracting company."
When asked about their personal acceceptability on the above stated in one of the survey with over 2000 business executives in United States (Longenecker, McKinney, and Moore, 1988), it was said by most respondents that certain payments could not be considered as bribery as they could do justification for the work done or going to receive. Therefore justification of bribery could be based on the cultural differences in transactional bribery (Dunfee, Smith and Ross, 1999).
According to Lane and Simpson (1984), pragmatists believe international business as a game where there is no place for fair or naÃ¯ve idealist. When our competitors use bribing it is impossible of us to meet the standards and competitive practice and finally we may loose business ultimately resulting in loss of job. So it is an accepted business practices to say that "when you are in Rome you have to do as Romans do". On the other hand moralists believe that there is no excuse for unethical behavior in consideration to cultural relativity. Apart form this it is seen that bribery increases the product cost and often used to secure license for the products which are no longer allowed to sell in market. Such type of corruption practices are said to contribute to moral disintegration of individuals and ultimately individuals and society as well (Lane and Simpson, 1984).
Here there are two major aspects to be considered legal and ethical behavior. According to Howells, Micklitz and Wilhelmsson (2009), unfairness and various other concepts are found to be the major aspects of international marketing and are both subjective and are bound to culture. Therefore ethics can be said as a set of moral principles and values that act as a guide to an individual conduct. Whereas law represents a societies set of values and standards which are enforceable by the courts (Gilligan, 1996).
Therefore, one of the most important aspects of international marketing is commercial bribery (Dunfee, Smith and Ross, 1999). According to Noonan (1984), bribery is seen as a chronological account in the traces of moral concepts and found its origin back in 3000 B.C. In spite of this bribery has been practiced as a persistent corrupt practice in human affairs (Dunfee, Smith and Ross, 1999). It is seen in the form as slavery that has become outdated especially in the fundamental part of exchange of payment in official actions (Noonan, 1984). In United States bribery practices lists in the top for business executives and would be removed from the industry. Bribery is also seen as the most prominent feature listed in the code of conducts.
CLASSIFICATION OF BRIBERY AND FCPA
Now let us know few important terms related to bribery which are also considered as classification of bribes or payments or favors (for much information on various types of bribes and their classification please refer Appendices, Pg.17).
Bribery (B): Voluntarily offered payment by someone seeking unlawful advantage (Cateora and Graham, 2002).
Extortion (E): Payments which are extracted under duress by someone in authority from a person seeking only what they are lawfully entitled to (Cateora and Graham, 2002).
Lubrication (L): A relatively small sum of cash, a gift, or a service given to a low-ranking official in a country where such offerings are not prohibited by law (Cateora and Graham, 2002).
Subornation (S): Large sums of money, frequently not properly accounted for, designed to entice an official to commit an illegal act on behalf of the one offering the bribe (Cateora and Graham, 2002).
Foreign Corrupt Practices Act (FCPA) is an act enacted by Congress in 1977 and amended in 1988, which forbids individuals as well as businesses and their respective officers, directors, employees, or any stockholders acting on their behalf, from paying money or anything of value to a foreign official in order to influence any act or decision of such official in violation of his lawful duty. -- Klubes and Iraola (1996)
BRIBERY AND CORRUPTION
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According to Doole and Lowe (2005) one of the integral parts of conducting international business includes the practice of gift giving. In western countries such practices are considered as bribery and corruption and many tighter regulations have been formulated to regulate and control this issue. It is said that business gift giving (also referred to bribery by different viewers) if executed unacceptably could lead to stoppage of sensitive negotiations further ruining potential business relationships (Doole and Lowe, 2005). It is reported by Doole and Lowe (2005) that bribery and corruption has become a part of commercial transactions in many parts of countries such as Asia, Middle East and Africa. According to Global Counter-Corruption Watch dog Indonesia ranks the most corrupted country
However the concept of business gift giving in many cultures is considered as a vital part of persuasion. In a culture where bribery is an acceptable business practice the style of communication is said to be more reliant on hidden cues, implicit, non-verbal especially in context of personal relationship (Doole and Lowe, 2005). For example in Japan, gift giving practices exist more in highly developed and affluent societies especially in a business culture and refusing such gifts leads to misunderstandings and hard feeling between the business clients. It is often seen that financial incentives (bribery) are considered as important steps in bringing a person into the inner circle of business relationships or to strengthen the relationship between the buyer and seller (Doole and Lowe, 2005). http://books.google.ae/books?id=UU1yPY2UwhMC&pg=PA97&lpg=PA97&dq=are+considered+as+important+steps+in+bringing+a+person+into+the+inner+circle+of+business+relationships+or+to+strengthen+the+relationship+between+the+buyer+and+seller&source=bl&ots=O087oltcTd&sig=dpnZpcKW3Lu-VGze1efnP5uLvVc&hl=en&ei=yPVRS8yVNI7k7AOKi4SkCg&sa=X&oi=book_result&ct=result&resnum=4&ved=0CBYQ6AEwAw#v=onepage&q=&f=false
Mishandling the power and position of a person for personal benefits is called corruption. Corruption may be of two types - corruption "according to rule" and corruption "against the rule". Paying bribe to get things done early or illegally (for example processing a license application officially) constitute "according to rule" corruption. And paying bribe to get things done that are not permitted consists of corruption "against the rule" (e.g. a policeman ignoring a crime or approving a student's examination paper reveal) (Venckute, 2006).
Because of many reasons like defects in legal system, inefficient democratic society and political responsibility, social and economic problems, and low wages for public service employees the trend of corruption has evolved and is still increasing. The influence of corruption has affected many lives and in some horrible cases it also takes lives. And in many other cases corruption has also taken away people's health, wealth, or also freedom. In recent years because of rapid globalization and increasing international trade corruption is now a worldwide problem (Venckute, 2006).
According to Transparency International (TI - an international organization that is working against corruption) controlling corruption is possible only when the government, business and the general public work together and form a set of standards they should all agree and follow. Though corruption affect people in many ways it also has some benefits (Venckute, 2006).
BRIBERY - PROPOSED THEORIES
Researchers have proposed social contract theory as it clearly corresponds to the central exchange relationship with that of marketing thought and practice. It is seen that the normative theory provides assistance in evaluating ethical issues especially in marketing. The issues of social contracts and marketing ethics are clearly explained using this theory. Thus the ISC theory (Donaldson, 1994; Dunfee, 1995; Dunfee and Donaldson 1995) has been introduced to facilitate and supports fair and ethical decision making especially bribery issues in international marketing.
According to Dunfee, Smith and Ross (1999) Integrative Social Contracts Theory (ISCT) provides a coherent framework for resolving ethical issues arising between different communities and is therefore particularly appropriate because marketers frequently engage in boundary-spanning relationships and cross cultural activities.
It is seen that international marketing is undergoing unethical conducts and apart from this many businesses view marketing as the worst offender of the business functions (LeClair, Ferrell, and Ferrell 1997; Tsalikis and Fritzsche 1989). Therefore the Social Contract Theory is seen evolving as one of the major alternatives in approaching business ethics. The literature review on marketing ethics (especially in consideration to international marketing) is been differentiated with two types of approaches, where in the first being the normative approach (normative marketing ethics) which is concerned with what managers ought to do when they face an ethical problem and identifies the moral principles and moral reasoning's that justifies what is wrong and what is right and the second approach being the descriptive approach (descriptive marketing ethics) attempts to describe the models of ethical decision making. Most empirical researches on ethical attitudes and behavior of individuals have been done on people such as sales persons, marketing researchers etc.).
Bribery has been defined by Philips (1984, p. 625-26) as "P is bribed by R if and only if (1) P accepts payment from R to act on R's behalf, (2) P's act on R's behalf consists in violating some rule or understanding constitutive of a practice in which P is engaged, and (3) either P's violation is a violation of some official duty P has by virtue of his participation in that practice or P's violation significantly affects the interests of persons or organizations whose interests are typically connected to that practice". http://www.jstor.org/pss/2380321
FACTORS ENCOURAGING CORRUPTION
In many organizations many of the officials deny to provide services to the common people without bribing them. So, people don't have a choice in such conditions and also in many other adverse economic, social or technical conditions. In countries where corruption is in all levels of organizations public cannot escape from bribery. Otherwise they have to bear financial, or health, or even justice losses according to their requirement (Venckute, 2006).
Foreign companies also cannot escape from bribery if they invest in countries full of corruption. Otherwise they may not have good conditions for their development. For this reason many companies of Northern countries (where corruption is at low rate) carry out bribery in the south (where corruption rate is high). This stands as an example for weak political and democratic society (Venckute, 2006).
As the level of corruption in some countries is very high, bribery from foreign investors cannot be controlled in the international way. This can be made clear by observing the number of cases that are being investigated under the OECD Convention on fighting bribery of Foreign Public Servants. In most of the OECD countries political support is absent to take legal action against many bribery cases (Venckute, 2006).
Many public servants get accustomed to corruption because of their low wages which is called "survival corruption". Otherwise they cannot survive in this costly world. In such conditions bribery is saving the public administration from falling down by giving encouragement to get things done quickly. This happening because of poor economic conditions and policies of government of a country (Venckute, 2006).
The political and economic conditions of the countries also affect the foreign investors. So without solving the problem of corruption within the country, foreign companies cannot be blamed for higher levels of corruption (Venckute, 2006).
Terms and conditions vary from place to place. Giving and taking gifts is a habit and practice in many non-western societies. In some other countries this custom is a part of cooperation and strengthening relationships. So it is not correct on the part of western countries to blame developing countries that they are helplessly adjusting with corruption (Venckute, 2006).
FACTORS INFLUENCING CORRUPTION REDUCTION
As the civilians are the bottom line in this whole system they only can play the important role in reducing corruption. So, first they have to stop bribing the officials or take proper action against those who are corrupted. But people who have a necessity to bribe become a part of the problem. Therefore, we cannot just blame officials for taking bribery but the people who can afford are encouraging bribery for their personal benefit. For example recently in Kenya there are great developments after the common people are influencing the change in a positive way (Venckute, 2006).
Bribery is a serious offense that cannot be excused because it weakens the principles of democracy and also damage the economy resulting in poorer people from the poor. But when there are political and moral weaknesses some take the advantage from this disadvantage. Many officials bribe their authorities or politicians to buy their position or to develop their existing position and in turn they take bribe from the civilians to compensate their loss in achieving their position (Venckute, 2006).
The companies of northern countries that bribe the officials of the south are also responsible for this corruption. They take the advantage of the developing economy and pay less, which is still good for the south. And also the interests of share holders at home are deviated in to the accounts of foreign officials. Hence the country of that particular company should consider bribing the foreign officials as a crime and should bring out all the payments related to foreign transactions (Venckute, 2006).
Companies that bribe foreign officials should be put on trial according to international standards. This may account for positive variations at the national level also. Rules and standards against corruption vary from nation to nation. As this is the period of global investments and international business transactions these national wide differences in standards cannot control but in turn may help to spread corruption. So, there should be international standards and efforts to take legal action against the companies that bribe foreign officials (Venckute, 2006).
The social environment of a society is greatly influenced by the companies. So, to carry out the anti-corruption policies effectively the business sector and state institutions should act co-operatively. This is possible only when the brave interpret the cases of corruption. A very significant improvement regarding this is the OECD convection (Venckute, 2006).
There are different cultures and customs around the world and every culture has its own limitations. Some take the advantage of these limitations which may lead to corruption. Misusing the official power for achieving personal benefits and diverting the public or common resources to private accounts should be considered illegal and punish worthy irrespective of the cultures and customs of different societies (Venckute, 2006).
ADVANTAGES OF BRIBERY IN INTERNATIONAL MARKETING
First of all one should keep in mind that god is the whole and sole of the universe as Women (mother, wife) is the whole and sole of the family, as wealth or money is the Whole necessary of the life & society. In the same way Bribe become of the key concept in business, but it should be kept in the mind that Bribery is in always to be eliminated "Business should be, expected to honor their Obligations in a sprit of honesty and fairness". (Caux Round Table Secretariat 1994, Sec 2, Principal 1)
Even after all the hyper norms Bribery in certain situations is necessary and not prohibited. There are many advantages of Bribe ring. Deontological and consequentiality Approaches on the moral status of Bribery Defines or gives conditional status (reasons) when a bribery is unethical but on whole doesn't struck down completely bribery as unethical.
First of all direct and good consequences of bribery can be identified, more particularly by marketing decision maker's which will save job's enhancing share holder's wealth, ultimately creating an atmosphere of confidence in the market stake holder's and creditor's.
Thus will be able to pay to creditor's example: the Satyam computer's one of the famous Soft Ware company in India and also listed on U.S stock exchange utilized this option of bribery created accounts in support to their claim. It was listed on all major stock exchange in India and U.S.A the company had a loss to the tune of 30 cr INA Rs which has been covered by false drafted A/C started its boom and was giving job's to 50k to 60k employee's all over the world. Many social activities were initiated by the company. This was maintained for many year's and finally noticed by one and all now the company is taken over by Mahindra & Mahindra co. and re named as Mahindra Satyam. Bribery's saved the jobs directly of 60000 families (Dunfee, Smith and Ross, 1999)
The second major use of bribery would be that if the official is bribed, which in other word can be said is lubricated or greased will take decision soon or will act immediately. Even after office time, or in vacations he will see that all the hurdles in giving permission's are cleared as soon as possible if not he will take leisure time and create additional hurdles into the company's business (Dunfee, Smith and Ross, 1999).
The OPEC countries pressurize the major petroleum user countries higher officials and ministers with different modes of bribery and keep away the government from taking decision of implementing "mixture of alcohol" in petrol used for running automobile vehicles. In somecountries100% alcohol used vehicles are moving on the roads. India uses 5% alcohol mixed petrol where as India has capacity of large scale production of alcohol, many sugarcane farmers suicide, since their crop was not utilized by sugar manufacturing companies. The bribe by OPEC countries is giving oil producing countries large profits and is utilized for their country development (Dunfee, Smith and Ross, 1999).
Bribery in private sector: Bribery can also be given in private sector. The executives and other higher officials of Honda company were paid bribe by nearly 2 dozen Honda dealer's the main beneficiary's was the company's vice presidents regional managers, it was openly accepted practice in American Honda company. The salaries of employees were very much less to the prescribed industry norms or labor laws. The bribe was intended to allot extra pieces of popular Acura model vehicles. This Acura model was having high demand and was being paid more than what was prescribed by the company's price stickers (Jenkins 1996, miller 1994. Robinson 1997, Wall Street Journal, 1998)
There may be reasons which are to be considered amicably, justification has to be given to bribery to weigh morally. Though bribery is prima facie is wrong as said earlier.
The justifiable conditions or situations may be one may have duties to oneself or to ward's his family when put in panic situation of physical or economical dangers
The bribery might be for protection of jobs of employees of the company or for their welfare.
It might be saving a substantial investment by the company.
It would be easy for the trader who in the business of perishable good allotted a wagon of railway or cargo and loaded as soon as possible
Many intermediates are living on these services of bribery and co-operating in getting work done by the officials
After focusing on the various advantages of bribery, it is seen that bribery if considered as a way to improve business process, in fair terms (such as gift giving although considered as unfair) can be followed in international marketing. As it is also seen that developing good relations in the market and making things done through exchange of gifts (could be of any way) is increasing the business profits, so here we can use bribery in terms of increasing business profits. Considering the Satyam case it is seen that it has saved jobs of thousands of employees and their families from being destructed. Next we have seen that OPEC officials have been bribed for the for stopping government officials from taking actions for mix of alcohol in petrol where in most produces of other products would have been effected due to this, but it is seen that this has increased the income of the petrol producing countries in increasing their economy and financial situation. In another instance if an employer is bribed to employ a new person, it is of no harm to either parties and upon which it leads to giving employment to a person, where in this individual is benefited in all means (either social, financial or personal). Therefore bribery up to a limit could be encouraged where in either parties (giver and receiver) are benefited mutually.
DISADVANTAGES OF BRIBERY IN INTERNATIONAL MARKETING
Bribery is always seen as guilty towards the social society. It has to be curbed to the max extent possible, so as to reduce its evil effect on the society. Corruption & bribery cannot be claimed as accepted phenomena in any culture. These acts are condemned by each of the major, moral and religious codes. They are criminalized by every country and they are universally despised, particularly by those who endure corrupt governments say (Nichols, 1997, p 324)
Bribery causes hurt to the competitive bidder or supplier's etc. if they too doesn't involve in corrupt practice of bribery it is seen in the following example's young & Rubicam (Lipman 1990: hall 1989). Honda (Jekings 1996, Miller 1994, Robinson 1997, Wall Street Journal 1998)
It will be difficult to account the bribery given to officials of the government and the result flow of the bribe money to its final destination.
The bribe money cannot be openly accounted as income of the employee. He will invest it in unofficial sources. Which will be, might be deled by anti social elements as in the cases of Honda. The bribe amount paid to the prime executive staff amounted to $15 millions Stanley Cardiges, the senior vice president, in charge of sales had received bribe amount of $5 millions within a period of 10 years, on the other hand he had legal salary only up to a tune of $125,000. This is one of the largest commercial bribery in the history of U.S.
It will be fit to note here that thought the company had fixed salary below the industry norms and saved the interest of shares holder's initially, encouraging bribery at the end Honda company ultimately settled the case sued by the 1800 effected dealers and paid $330 millions ultimate looser are the share holders
Disintegration of norms & moral values of the society: The principal framed for business transaction's had been developed and document by the Caux round table it clearly indicates " towards a global ethic" produced by the council for a parliament of the world's religions ,the norms set in these documents are to be noted here "You should not lie, speak and act truthfully" (parliament of the world's religion 1993 p.11)
Business (should be expected to) honor their obligations in a spirit of honesty and fairness (Caux round table secretariat 1994, section2, principle 1) Bribery conflicts these norms and moral values. Due to bribery the briber is enticed to do which is morally wrong (Carson 1985) It breaches the duty bond by the official position. It not only breaches binding obligations towards the principal but also violates the contract.
If the bribe is a government officer, he violates his oath of office and is answerable to public at large as in the case Young and Rubicam (hall 1989). In this case the Jamaican minister of tourism, Eric Abrahams had received bribe from Young and Rubicam company to give a favor of awarding contract
This contract of advertisement had got an award in campaign "make it Jamaica again", "come back to Jamaica".
The company was sued and found guilty of violating. Foreign Corrupt Practices Act (FCPA). The company was fines $ 500,000. In the above act the minister had breached obligation to public act large.
After focusing on the various disadvantages of bribery, it is seen that bribery as an unfair process leads to many problems and issues not only in organizations but also for individuals who are accused of bribing. From the above given examples it is clear that bribing leads suppliers, stake holders towards losses. In a open bidding process if the bidder is bribed, the suppliers and stake holders are put into problem as they loose the bid, this can cause a heavy loss to the supplier as well as the company. Company may loose an efficient supplier. Next we see that even though highly paid, some higher officials take bribe as they intend to put the bribed amount in another unfair business. This could lead to many issues and causes loss to the company and the individuals also. Bribery practicing against the cultures and values of the country (could be in any market place) and people will also lead to many cultural issues and people loose the spirit of honesty and fairness.
It is also seen that violating corruption practices has lead to huge fines foe companies and this could has led to many problems to public as well as the government officials. Therefore it is seen that bribery has led to many issues not only for organizations but also individuals in both domestic and international markets.