Corruption on Capitalism and Foreign

¶ … Corruption on Capitalism and Foreign Investment

Over the last several years, the issue of corruption has been increasingly brought to the forefront. This is because there has been an emphasis on the international level to establish standards that will prohibit these kinds of practices in the future. As a result, non-governmental organizations (NGOs) have enacted various provisions that require all of their members to have anti-corruption laws in place. However, despite this kind of positive first step forward, there have been major challenges in dealing with the overall scope of corruption around the world. (Heineman, 2006, pp. 75 -- 86)

For most businesses, this can be challenging as they must engage in these kinds of practices to receive support and services in particular areas. To fully understand how this is impacting firms requires: examining the various types of corruption, its effects on multinational corporation (MNCs) and how they can deal with these problems. Together, these different elements will highlight how large corporations can effectively address these issues. (Heineman, 2006, pp. 75 -- 86)

What are the types of corruption?

Corruption takes place in various shapes and sizes. This is because it will depend upon the customs, traditions and economic realities inside various regions of the world. As a result, there are numerous forms to include: petty, administrative, corporate and political corruption. Petty corruption is when a government official will require some kind of bribe or kickback in exchange for favoritism with a particular activity. Administrative corruption occurs during the process of providing various awards and contracts for government projects. In order to receive some kind of benefit, government officials will want a host of special favors in exchange for making this kind of award. Corporate corruption is when business executives will engage in actions to benefit themselves over that of various stakeholders. Political corruption takes place in the arena of politics. In these kinds of situations, someone will support a particular individual for public office based upon the kind of benefits they can provide to them down the road (such as: more lax regulations or less red tape on specific projects). These elements are illustrating how corruption will occur inside many different levels of government and within the private sector. (Bhargava, 2006, pp. 341 -- 362)

What are effects of corruption on MNCs?

The effects of corruption are that it creates vast disparities in society. This will occur with those individuals who are in positions of power that will use this as a way to build their personal net worth. While the rest of society will receive limited amounts of the essential services they require. Over the course of time, this will have an adverse impact on economic growth by making it harder for the region to experience any kind of sustained expansion. When this happens, the standard of living and income levels will remain stagnant. (Bhargava, 2006, pp. 341 -- 362) (Cazurra, 2008, pp. 12 -- 27)

Moreover, corruption will increase the costs of doing business inside a particular area. This is troubling, as it will lead to less employers relocating to the region. Instead, they will seek out locations where there are lower amounts of corruption. This is a part of an effort to keep their costs as low as possible so that they can increase their overall returns and remain competitive in the global marketplace. For the region, this will result in less high paying jobs (which helps contribute to an increase in the unemployment rate). (Bhargava, 2006, pp. 341 -- 362) (Cazurra, 2008, pp. 12 -- 27) (Heineman, 2006, pp. 75 -- 86)

How can MNCs deal effectively with these problems?

The ways that MNCs are able to deal with these challenges include: effectively lobbying and making larger commitments to governments that have strong anti-corruption practices. Lobbying is an important tool, in helping these firms to let officials know: who they are and what they stand for. This builds a relationship between the firm and the local government that is based upon mutual trust. At the heart of this trust, is letting the other parties know that various acts of corruption will not be tolerated.