The ABC’s of Corruption – A Guide for Employers

In this post-Zondo Commission era, South African organisations are more aware than ever of the catastrophic reputation consequences that follow revelations of unethical business activity. Are you confident that no corruption is taking place within your organisation? Or between it and your suppliers, customers and other third parties?

Whether you answered YES, NO, or UNSURE to our question, your strength of confidence should be based on an unambiguous understanding of what corruption is and how it impacts your workplace or organisation.

With headlines focused on ‘grand corruption’ and eye-watering financial losses, it’s understandable that many executives feel comparatively confident that they occupy a moral high ground based on the way their business dealings are conducted.

It is in this comparative confidence that a great deal of risk lies. For corruption is corruption, with all its legal, financial, reputational and social implications, regardless of whether its occurrence is:

• Sporadic in frequency within a generally non-corrupt system, or part of a systemic condition in which all players accept and follow the improper rules of the game.
• Sanctioned by the organisation’s decision-makers, or the doing of so-called rogue
• Small and seemingly insignificant in value, or so big as to impact on the future viability of the business.

Corruption in the workplace can occur at every level

You will often hear corruption described as ‘the abuse of entrusted power for personal gain’. It’s the use of the term ‘power’ in this definition that misleads many into believing that corruption is only perpetrated by people in senior positions who can exercise authority over others, and who can set or vary rules to suit themselves.

The truth is that anyone whose position affords them access to or control of resources and systems can cause a deviation in the way things are supposed to be done. It is this access, together with the skills they deploy, that gives them the power to cause corruption regardless of their level of seniority in an organisation.

Consider the entry-level data capture clerk, who receives a bribe from a syndicate to alter input or provide confidential company information that is pivotal to the success of a corruption scheme. Chances are that this employee does not define themself as having power in the hierarchy, but they can certainly have a powerfully damaging effect on their employer.

In this example, mention was made of bribery. Together with abuse of position, blackmail, extortion and fraud, bribery is to corruption what a screwdriver is to carpentry – a staple of the toolbox that is not required for every project. Simply put, the absence of bribery in a business does not mean that its processes are not being corrupted using other methods.

Understanding the tools of corruption

Let’s take a closer look at the contents of the corruption toolbox.

As each method is brought to life in practical examples, you will see that one or more tools can be used – simultaneously or concurrently. An alphabetic listing coincidentally sees us start with the one that is most widely experienced within organisations.

• Abuse of position: The use of a role to achieve or undertake a deviation from a correct action for illegitimate gain. It may be that someone uses their authority to achieve a deviation by influencing the actions of someone else who has less authority, or it may be that someone’s position provides them with the opportunity of undertaking the deviation themselves. Either way it is abuse of position.

Mary, a recruitment officer, must only consider applications received via the company’s official application management system. This makes it possible to check that all candidates and the recruiters considering them have followed a fair process. A member of the board walks into the recruitment office and drops a CV on the desk. ‘Do me a favour and get this candidate on the short-list, I won’t forget it’.

The words ‘I won’t forget it’ echo ominously in Mary’s mind. Working in HR, she knows that the board will shortly be considering proposals to downsize the support services and other jobs are hard to come by. ‘Perhaps there is no harm’, Mary rationalises, ‘after all it’s only the short list and she is not the final selector… In fact, if a board member believes it’s ok to bypass the system and there’s a chance that I am going to lose my job anyway, I might as well slip my cousin’s CV into the short-list as well – no-one will suspect we are related’, Mary resolves.

• Blackmail: The use of information as a threat to compel another to do something they should not do, or to refrain from doing something they should.

The director is tasked with chairing the appeal of disciplinary hearing. The employee facing dismissal hands the director a private note, saying that if the dismissal is upheld, evidence of his ‘cosy’ relationship with a supplier will be exposed.

• Bribery and kickbacks: A bribe or kickback can be anything of value that is offered, promised, accepted, asked for or given in exchange for improperly deviating from the way something is correctly done, or in exchange for doing something that should be done regardless. Kick-back is the label given to a type of bribe where payment follows rather than precedes delivery.

A sales representative for a manufacturer of commercial paper shredders has an ear to the ground and hears that Reginald, a buyer working for a potential customer, has a love of fast cars. He arranges through a mutual friend to meet Reg at a social event. He offers him the use of a high-spec BMW to take his family on a road-trip holiday, in return for putting his company on the list of three suppliers to which requests for quotations are sent. Reg happily agrees, especially given the second part of the deal which will score him a ‘commission’ on any actual and future sales.      

• Extortion: The threatened use of a position of authority or perpetration of physical harm as a means of achieving compliance with a deviation from the way something should correctly be done.

Your truck driver has been ignored for hours at the border post even though vehicles behind him have been processed. The refrigerated goods he is transporting could start to thaw. A border official who is part of a crime syndicate tells your driver that if he agrees to take on board a crate of unregistered medicines that a crime syndicate need transported across the border for sale on the black market, his transit wait will be over. Why would you trust me to deliver your valuable goods on the other side, your driver asks the border official. ‘Because I am always here, and your job requires you to pass between our countries. The next time you are parked off overnight, waiting for us to attend to your papers, I’ll sort you out the minute you fall asleep’.

• Fraud: The use of intentional deception or misrepresentation to achieve an illegitimate gain. This is the one method by which corrupt gains can be achieved by one person working in isolation within your business. Fraud can be perpetrated by outsiders or by insiders, and by outsiders and insiders working together.

Joe is out of town visiting clients, one of whom takes him to dinner and picks up the tab. As they leave, Joe sees that another group of diners have left their bill and receipt on their table. He picks it up and submits it as an expense reimbursement claim on his return to work. It’s so easy to deceive these systems that rely on trust, Joe thinks to himself.

Important points about the tools in practice

A simple description and single scenario of the commonly used tools of corruption cannot do full justice to their effectiveness in action. Given the prevalence of abuse of position and bribery in an organisational context, the following are additional important insights for employers.

Abuse of position

• When a position is abused in a corrupt act, it is not always for direct personal gain. Often the objective will be to achieve the preferential treatment or unfair favouritism of another individual or organisation. If the favouritism is showed to a family member, we call it nepotism, and if to a friend or business associate, we call it cronyism.  The person or organisation that is the subject of the preferential treatment can also be a benefactor of the person abusing their position, having some type of hold over them.
• There can be a fine line between abuse of position and extortion. From the position of Mary, the recruitment officer, the ‘request’ by the chairman left her feeling she had little choice. At the same time, there are no doubt instances in which the person in authority naively assumes that the less powerful person knows they are free to reject an improper request without fear of retaliation.
• Mary did a quick analysis of the risk of not complying with the chairman’s request, but a high percentage of people in an employment situation will unquestioningly comply with an irregular request from someone in a senior position. This likelihood has deep roots in the universal practice of teaching children to defer to authority, reinforced in the workplace by the fact that refusal to obey an instruction can be grounds for dismissal.

Bribery

• A bribery scheme can be extortive or transactional. Reg, the buyer, happily engaged in what is referred to as a collusive or transactional bribery scheme (which also involved the promise of a kickback). When you agree to pay cash on the spot to a traffic officer who threatens to otherwise put you in jail for the night (or to members of an armed militia who have set up a roadblock in a rural area), your bribe payment has been coerced or extorted from you.
• Both parties to a bribe, regardless of whether they have asked for or have paid the bribe are guilty of the offence of bribery.
• A so-called facilitation payment made to get an official to simply do what is expected of them in the course of normal duties rather than to pervert an established process, is defined as a bribery offence in anti-bribery legislation promulgated in countries that you may have direct or indirect associations with.

Finally, one of the things that these tools of corruption have in common is that they are always deployed in a surreptitious or secretive way. It is the intention of those who seek to corrupt, be this within your organisation or as an outsider in relation to your organisation, that you will not know about it.

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Let’s revisit the strength of your confidence that no corruption is taking place within your organisation or between it and your suppliers, customers and other third parties.

If your confidence remains high, it will be because you have in place the wide range of measures that are necessary to deter corruption in your workplace. These measures will be the subject of a further fact sheet in the ABC’s of Corruption series.

Text by Penny Milner-Smyth, anti-corruption trends monitor and author.

The ABC’s of Corruption series is commissioned by Whistle Blowers (Pty) Ltd for the private and public sector clients of its independent, multi-channel ethics hotline service, provided on six continents from a base in South Africa.

For sales enquiries about the Whistle Blowers Ethics Hotline please email Managing Director Dale Horne at dale@whistleblowing.co.za.

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