This paper examines the ethics and legality of bribery in international business, arguing that its detrimental economic and social effects make it unethical regardless of cultural norms. It surveys types of corruption, their opportunity costs, and strategies companies can adopt to win contracts without resorting to bribes. The paper then shifts to cross-cultural management, exploring how an understanding of local customs gives managers a competitive advantage, which organizational processes are most affected by cultural differences, and how cultural factors — including gender taboos and relationship-based business norms — drive up the cost of doing business internationally.
Bribery is unethical and illegal in some societies and a regular part of business in others. Whether or not an activity is unethical is largely dependent on the culture, customs, norms, values, and laws of the country where the activity takes place — it is a matter of perspective. When one considers that the act of bribery is intended to supplement the income of underpaid officials or increase the power of a nation's government, the outcome of the bribe is a negative one. Most economists and ethicists agree that bribery's effects are largely detrimental (Weber and Getz, 2004). If the effect of an act is detrimental, then it can be argued that it is unethical to engage in bribery even if it is framed merely as a cost of doing business.
There are different types of corruption: bureaucratic corruption, where officials take bribes; political corruption, where politicians exploit their positions of power for personal gain; and grand corruption, meaning the misuse of public power by heads of state, ministers, and top officials for private, pecuniary profit (Gerasimova, 2008). Bribery carries significant opportunity costs because money paid as bribes is not put to productive use and may lead officials to contract with inefficient firms for inappropriate goods or services (Weber and Getz, 2004). Bribery also creates disincentives to foreign investment by increasing risk and uncertainty for firms, thereby hindering economic development (Weber and Getz, 2004).
The negative consequences of bribery on the local population should be considered by every company that operates in that country. If the act of bribery causes the government to engage in unproductive projects that harm its citizens, then it is unethical for companies to participate in bribery.
Corruption is a symptom of deeper, underlying factors such as poorly designed economic policies, low levels of education, underdeveloped civil society, and the weak accountability of public institutions (Gerasimova, 2008). This makes it difficult for businesses to win contracts in countries where bribery is rampant. Depending on the level of corruption, it may not always be possible to win a contract without offering a bribe. It is difficult to compete against companies that are willing to pay bribes to secure contracts, despite the negative effects on the people of the country.
One approach businesses could take to win contracts is to offer to invest money in developing countries in order to stimulate economic development, build infrastructure, and create jobs. This can only work, however, if government officials in those countries are willing to forgo bribes for the good of their nation. Some countries have rampant bribery at all levels of government, while others have corruption concentrated among lower-level officials, leaving open a tier of government with which a company may be able to engage honestly.
Another method of winning contracts without bribes would be for competing companies to collectively agree not to offer them. This is a difficult proposition because not all companies share the same values, and the desire for profits may outweigh the desire to end corrupt practices. International organizations have suggested a two-sided approach to stopping bribery: changing attitudes toward multinational bribery in industrialized countries and increasing awareness in developing countries of the true costs of corruption (Gerasimova, 2008). Breaking the culture of bribery is the only real path to fair competition, because only then will all competing companies operate on a level playing field.
Many businesses have failed due to a lack of understanding of local culture, especially concerning taboos. In the Middle East, strict religious rules govern how men and women interact, and these must be taken into consideration when operating a business (Daniels, Radebaugh, and Sullivan, 2010). Managers who understand cultural differences will be more successful and less likely to make critical errors that drive customers away.
Understanding cultural differences can help businesses set appropriate operating days and hours, structure shopping areas appropriately for women and men in deference to religious or cultural beliefs, and offer products and advertising that will be most effective for the target market. Businesses will also be better positioned to identify the best local employees and manage their workforce more effectively when they are aware of cultural differences.
Managers who understand cultural differences have the advantage of knowing local tastes for different products. This knowledge can help businesses offer the right kinds of products for local markets without incurring the expense of extensive market research.
"How culture shapes management, communication, and strategy"
"Labor, time, and misunderstanding raise international costs"
"Cited academic and media sources"
Always verify citation format against your institution’s current style guide requirements.