Say No to Corruption and Make It Your Market Advantage

Frequently when I meet with a business person contemplating export entry or the development of operations in a new foreign market they eventually get around to asking about corruption.   They ask how bad it is, usually in a voice that is suddenly more nervous.  My sense is they're nervous in part because it's a subject they haven't had to confront so directly in their domestic business dealings.  But I also sense a bit of nervousness due to what seems to be a percolating realization that if push comes to shove they might feel compelled to go down that road, or at least look the other way while one of their foreign agents does the dirty work for them.  "What else can we do?" they wonder.

The simple answer is to just say "No!"  There are plenty of good reasons for this.  One of course is legal.   Under the U.S. Foreign Corrupt Practices Act, it is a criminal act for an American company to obtain business through bribery.  Do you really want to go from being an American business person to an American criminal to make a few more bucks?  Hopefully that's reason enough, but there is more.

A second reason is that you can become a hostage to your foreign partners / customers / suppliers / competitors.  Most foreign counties also have laws against corruption, and while enforcement may be lax, they are far more apt to be enforced against an alien corporation in response to a complaint by one of their citizens.   I don't know how many times I've heard stories of companies that were led down the primrose path by their local agent only to be turned into the local authorities when the relationship starts to go south.   Needless to say, this is not a good position to get yourself into.

But if the legal constraints are not enough to dissuade you and the threat of being held up just fills you with contempt, let me give you a positive business reason that may be the best of all -- taking a hard stand against corruption in a generally corrupt market can be a winning strategy to differentiate your company to the customers with whom you most want to do business.  Asia Inspection gets it.  In a recent post on their Chief Asia Inspector blog they explained the importance in their business of taking a hard stand for the integrity of the process.  It's another good reason why I think they're on to something as I indicated in an earlier post about their remote quality control services.

Even in corrupt markets, not all business people are corrupt, and even fewer like it that way.  It's incredible how many business people are looking for a way out of the muck -- and that translates into an emotional need that the local competitors aren't meeting.  In my experience, if you take a hard and clear stand against playing the corruption game, while you may lose some short term opportunities as you use them to demonstrate the steadfastness of your commitment, in the long run you will begin to attract the cream of the crop of customers and business partners.   The people who have been aching for someone to give them an opportunity to elevate their business game where it's what they do and not who they pay off that matters. 

Of course there will always be others who sneer and wonder where you get off being Mr. Clean, but they are probably the same people that you went into the market wondering how to avoid getting ensnared with in the first place.   A simple strategy calculated to sort out the good customers from the bad customers through a process of self selection-- and you probably thought that might be difficult in a new foreign market.

Comments

[China Law Blog]

I completely agree. Paying bribes is simply bad business. What amazes me is how some people brag about doing it as though it is some sort of mark of their sophistication or worldliness. It is not.

I have seen many companies go from being "friends" with the governor or some other politico to being kicked out of a country after the governor's term ends (either prematurely or otherwise). I have also been made aware (many times actually) of incidents where companies have paid bribes to get something "done smoothly" and the time it takes is not one minute faster than it takes for those who do not make the payment.

The other thing about companies that pay bribes is that they get hooked in with people who are more concerned about partaking in corruption than in getting things done and it becomes nearly impossible to break free.

Great post!

[Craig Maginness]

Dan:

Thanks for the comments and the link in your related post. Corruption is such a pervasive issue, but it's just bad business.

Craig