This report discusses the United Nations Global Compact and corruption, both positive and negative impacts it has on a firm and how to fight or reduce corruption practices in all its forms in the future. Corruption is the 10th Principle of the UN Global Compact; Anti-Corruption, which means that businesses should work against corruption in all its forms, including extortion and bribery.
THE UNITED NATIONS GLOBAL COMPACT
The United Nations Global Compact was formed in 2000 to hold the UN’s status and induce companies to embrace the 10 principles incorporating values of environmental sustainability, protection of human rights, fair treatment of workers, and elimination of bribery and corruption. (Sethi ; Shepers, 2013). As a leadership initiative approved by chief executives, its intention is to align business operations and strategies everywhere with the universal 10 Principles in areas of human rights, labour, environment and anti-corruption.
Sethi ; Shepers 2013 states that objective goals such as building markets, reduce corruption, taking care of the environment and ensuring social inclusion, have resulted in unprecedented partnerships and openness between businesses, governments, civil society, labour and the United Nations. Howeve Parez ; Leonard, 2017 explain that The Global Compact has been criticized by some perceiver who consider that the UN loses some of its independence through connections with corporate entities.
According to Transparency International 2013, corruption can be defined the misuse of endowed power for private gain. It can be put as grand, petty, and political depending on the cash lost and sector where its spent.
In most recent years many studies about the effects of corruption and how to combat its disruption have been carried out by different institutions, organisations and professionals from all over the world. The problem is known very well to law makers all over the world, but people usually still tend to address the whole issue to developing countries. Clearly, corruption is constantly linked to shortcoming of govern and the authorization of lawful rights particularly concerning contracts and property (Sundaram 2009) hence usually developing countries are concerned by the negative outcomes that accompany corruption. At first sight, one may conclude that corruption essentially is an issue that just happens in situations of weak governance yet this isn’t the case.
Siemens AG, a company in Greece had to deal with extensive damage because of corruption bringing the struggling nation to the centre of attention in the present Euro crises. Despite the fact that there have been a lot government failures, Transparency international has stated that business organisations are one of the weakest pillars in regard with their resistance to corruption (Transparency international-Greece 2012)
Corruption exists all through world, in both developed and developing countries. As of late, there have been high increments in the attention paid to corruption because of (1) increased corrupt cases in industrialised countries (2) increased knowledge of the costs of corruption all over and (3) due to the political and monetary changes which numerous countries are experiencing. (G Lawal 2007).
The effect of corruption on business activity is observed through bribing and extortion. In the first case the entrepreneurs prefer to rather bribe public officials due to a complexity in business legislation as following all the rules may end up in bankruptcy. As a consequence, bribing in a long run leads to extortion from the officials and applies to even those entrepreneurs who do not want to violate any law. Moreover, corrupt practices in the form of patronage or nepotism offers a number of benefits for definite entrepreneurs forcing others out of competition. In addition, corrupt actions are considered to be also those that take place inside a company without any involvement of public officials. (Schelker, 2015)
Botswana is seen to be one of the least corrupt nations in Africa as indicated by Transparency International’s Corruption Index (CPI). In 2013, Botswana scored 64,which places it 30th of 175 nations. (Transparency International 2013). As indicated by the Global Competitive Report 2011-2012,corruption is the seventh most uncertain factor when operationg in botswana. (World Economic Forum 2012), after unsatisfactory wprk attitudes, access to funds, insufficiently instructed work force, inadequate government administration and restrictive labour regulations. (Jones 2014)
While Botswana scores well regionally and globally, it still faces corruption challenges. Performance slides in the Worldwide Governance Indicators show that effectiveness of corruption management may have decreased as of late.
HOW CORRUPTION AFFECTS BUSINESS ORGANISATIONS
CHALLENGES FACED BY BUSINESS
Once corruption becomes established, its negative effects multiply. It brings on about sarcasm because people start to regard it as a norm. It hinders social values because people find it easier and more gainful to engage in corruption than to seek legitimate employment. Corruption destroys governmental authenticity because it hampers the effective delivery of public good and services. It limits economic growth because it reduces the amount of public resources, prevents private investment and saving and hinders the efficient use of government revenue and development assistance funds. (Lawal 2007)
A number of country level findings show that firstly, corruption is destructive to economic development and growth. (Tella et al., 2006) secondly, countries with high levels of corruption have relatively lower levels of firm performance. (Faruq ; Webb, 2013).
According to Myrdal (2015), corrupt civil servants cause delays that would not occur simply in order to provide themselves with the opportunity to receive a corrupt payment to speed up the process. Corruption is not seen to hinder efficiency. A similar negative image exists at the firm level, which are enterprises that engage in corruption have lower levels of organisational performance. (Athanasoul et al., 2012). However the information for this has been narrowed to a small number of findings of single countries or regions. According to Teal ; McArthur (2002), it is found that organisations in Africa engaging in payments to corrupt public officials have about 20% lower output per worker.
In a study focused on more than 200 Ugandan firms, proof is presented that high rates of bribery negatively affect the organization’s development rates in the short run. (Fisman & Sevensson, 2007).
BENEFITS OF CORRUPTION IN A BUSINESS ORGANIZATION
Alternatively, corruption has been positioned at the country level to boost economic development (Jian & Nie, 2014). It is believed to reduce heavy bureaucratic burden and end continued delays in areas with formal institutional imperfections. Such dirty money thus circumvents in a second best world the distortions caused by an inefficient bureaucracy (Wei, 2011) and helps overcome liabilities of `newness` or `smallness` (Stinchcombe, 2007) by enabling entrepreneurs to develop favourable relationships with public/government officials which increases their legitimacy and decreases the risk of failure. From this perspective, therefore, corruption positively contributes to firm performance because it compensates for a defective institutional framework, such as an inefficient administration or the weak rule of law. In this case, Ayaydin & Hayaloglu (2014) analyse the relationship between firm growth and corruption in 41 manufacturing firms in Turkey, and find that making corrupt payments to public officials has a positive effect on firm growth, mainly because such “speed money” enables enterprises to circumvent bureaucratic delays. Using panel data of Indonesian manufacturing firms, Vial & Hanoteau (2010) also find a positive relation between corruption and firm output and labour productivity.
Even the weakest forms of corruption may have strong and positive impact for a certain company. Paying off/bribing agents appear to be the easiest way to be given, without unnecessarily delay, a permit or licence, and it is an activity that will ensure the delivery of the service, or enhance its quality, speed, etc. therefore assuring that the organisation gets what it is qualified for.(Argandon 2005). With everything taken into account, the decrease of transaction costs is the core goal of corrupt companies; however the typical conduct aims are not restricted to this. Many cross country findings have shown that particularly in highly regulative countries, bribing can be beneficial for the organisation involved. (Schulte 2013.)
The recommendations below suggest ways to combat corruption in future:
Businesses are at the front lines in the battle against corruption, since the first step towards unethical behaviour almost always derives from corporate representatives. A well conducted framework and a well-organized anti-corruption apartment are essential. Literature also suggests that regular publications on key figures concerning the successful fight against corruption might be useful and increase transparency (Gordon & Wynhoven, 2003). Research has shown not only a significant lack of anti-corruption programs in certain business areas, but also the necessity to strengthen existing ones. A recent analysis of PwC pointed out, that 80% of the analysed companies do have corruption detection apartments and still only 22% of those are convinced that these work well enough to identify and to alleviate the effects (PwC, 2008)
Faruq & Webb,2013, discuss strategies to reduce corruption have to be realistic and achievable and made according to the needs of particular countries. In other words, policies that mean to address corruption have to be constantly implemented over the long run. Corruption is essentially a government issue. Increased governmental accountability and transparency, increased public participation in decision making , extended public sector and civil society institutions and higher constancy to the rule of law will not only improve governance but will also help to tackle corruption. Free and open competition is ultimately the greatest weapon against corrupt practices-whether political, economic or bureaucratic.
Specialised agencies and anticorruption bodies can be highly effective as to help limit corruption globally, but only provided that they have sufficient independence authority and resources to function more efficiently. Both the government and the public is needed to help combat corruption public opinion has to be supportive to anti-corruption activities and public opinion is the main influence in creating an environment in which corruption is not accepted or tolerated. Public education as to the negative effects of corruption crucial in creating public awareness and active public response to support endorsement of anti-corruption measures for this free professional press and media and available channels of information are important.