Sunday, December 23, 2007

Conventional wisdom probably wrong

Dear Colleagues

It has been commonplace to associate corruption with doing business in "Third World" or "Developing" countries. But this is probably not entirely fair. Maybe corruption is more associated with "business" than it is with "third world" or "developing" countries.

Unless I am totally misinformed about the driving force of business ... corporate behavior is almost entirely driven by the potential for profit and the related risks.

If this is true, then the corporate world would not be involved in any bribery and corruption unless there was a profit value in getting involved ... and clearly there is. In fact, it must be argued that for every $1 invested in bribery and corruption there is an expectation that many times more profit benefit will accrue to the corporate organization.

In fact ... given the dominant role of profit in determining the value of the corporate for the stockholders, the corporate management would be derelict in their duties if they did not make use of all opportunities to improve profit performance, including being involved with (overseas) bribery and corruption.

The fact that there is in the USA a "Foreign Corrupt Practices Act" suggests that there is a potential public relations (PR) issue involved with overseas bribery and corruption ... but the act is sufficiently loosely worded so that the benefit of bribery can be achieved without actually bumping into the provisions of the law, such as by using a lawyer or a subsidiary company as an intermediary!

So while the elite leadership of "Third World" or "Developing" countries benefits from bribery and corruption, the international corporate world benefits even more.

The loser in all of this is the local community ... the local society that gets rather little from its government, and rather little from the international corporate community. The value of the natural resources in communities in "Third World" or "Developing" countries is huge ... the amount of this value that is ever used for the benefit of these host societies is puny. From the corporate perspective, this probably does not matter. These people ... these societies ... are not important in national decision making and they have no voice that can ever reach the international media so there is no potential for negative PR.

But maybe ... just maybe ... that is about to change. When there are performance metrics at the community level, and the reasons for results are on the record ... then the wrecking of local economies by international corporations might possibly start to get into the media ... and possibly, just possibly, this might encourage the international corporations to pay a little bit more attention to their global corporate behavior.

Maybe ... I am an optimist.


Peter Burgess
The Tr-Ac-Net Organization

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