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Tuesday, April 11, 2017

Strategic CSR - Bribery

The article in the url below about the effects of bribery on firm performance reminded me of other research I have seen before. The research summarized here states that, while bribery helps drive revenue, it does not help drive profits:
"[The research] by two Harvard Business School professors analysed anti-corruption data from 480 multi-national firms based on sales growth, the strength of companies' anti-corruption programs and the type of market the businesses were operating in. When companies with lower end anti-corruption programs entered high bribery markets they achieved 14.1% growth over three years, compared with 2.6 % growth for top compliance companies. But the fast growth was typically offset by other costs, the study found."
In other words, while bribery appears on the surface to pay dividends, it in fact stimulates other costs that end up offsetting any gains. So, while bribery drives revenue growth, it does not increase a firm's profits. The article in the second url below, however, shows that (like much academic research), this empirical reality does not necessarily change behavior:
"Bribery is a way of life for British companies working in emerging markets, with 85pc of managers forced to resort to it to do business, according to a new report. … [The research] claims the vast majority of UK managers operating in these markets resort to the dishonest practice on a monthly basis – often with the tacit permission of their chief executives."
Rather than a choice, however, the article suggests bribery is a way of conducting business in some emerging countries that cannot be avoided. As the researcher notes:
"'It is the managing directors and general managers in country… who are being forced to give bribes to win business. These are good people being forced to do bad things. Boards are doing worse than paying lip service to anti-corruption laws because they are using them to protect themselves while they know bribery is going on.'"
Take care
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Study Finds Bribery Increases Sales Not Profits
By Stephen Dockery
March 1, 2016
The Wall Street Journal
Bribery a way of life for companies operating in emerging markets 
By Alan Tovey
October 26, 2016
The Daily Telegraph