Ethical crossroads - dealing with dishonesty18 March 2004
The higher you go up the business ladder, the more likely you are to encounter corporate dishonesty. The murky waters can soon engulf the unwary, says Martin Cunningham
IT'S AN everyday dilemma that all honest business people hope will never happen to them. Someone with a position of power in an organisation that your company does business with takes you for a quiet drink and asks for a 'backhander'. Perhaps the request comes from someone who exercises control over a big contract. The future jobs of half your workforce could rest on the successful outcome. It becomes clear that the customer is not playing games. He wants money and suggests when, where and how he'd like to be paid. What do you do?
The answer, in black and white terms, is that you must stick to ethical principles. Obtaining money through deception is a crime, and facilitating it makes you an accessory to crime.
The problem is that in some sectors and overseas territories these values simply don't apply. What is considered normal in UK business as a whole and many developed western countries, may be exceptional elsewhere. Let's face it, in some parts of industry and many parts of the globe, illicit 'commission' and elaborate 'gifts', or bribes, are an intrinsic part of the business and political scene.
Cases have been known where expensive cars, watches, houses, boats and even funds to cover the cost of a divorce have been quoted as the price of getting a smooth ride to contractual completion.
When this happens, it's honest people with no experience of these matters who find it difficult to deal with the situation they find themselves in. They know that if they get it wrong, the contract, their own career or even their business is probably on the line. If they succumb, they're acting illegally and risk having to face the consequences.
Trying to share the problem with trusted associates or colleagues is fraught with risks, too. Trust can soon evaporate into a cloud of suspicion that is difficult, or impossible, to disperse. Superiors have been known to advise middle managers: 'don't bring me problems, bring me solutions' rather than risk being implicated in the mess or damage to the business.
One answer is to seek help from someone within your company with a known talent for fixing such problems, someone with a suitably phlegmatic and worldly approach. Perhaps they can talk face-to-face with someone at the highest level in the opposing camp and blow the whistle on the fraudster?
Unfortunately, there is no certainty that this will either salvage the contract or cause the offending head to roll. Business life is not always that simple. The personal shortcomings of financially productive people are sometimes conveniently overlooked, especially in countries where able managers are hard and expensive to find. There may be bigger fish to fry, or a different agenda.
Bribery is a very complex problem with significant legal, ethical and social implications, not to mention the probability of awkward taxation or money laundering questions being raised.
Perks of the job
To make matters worse, in some parts of the world senior managers receive relatively poor pay on the explicit understanding that they will normally receive 'consultancy fees' from suppliers, usually paid into an offshore trust or untraceable offshore bank account.
The entire history of trade and commerce is littered with mechanisms to 'express gratitude' to those who have advanced the interests of a supplier. At a legitimate level, there are of course agency fees and sales commissions, percentages and bonuses (not to mention gifts, entertainment and less tangible forms of corporate largesse) but when the recipient is clearly in the customer's employ, 'gratitude' reads 'bribe' to most western eyes.
In conventional business terms, corruption undermines the cornerstones of prosperity.
When the purchaser happens to be an officer of a government or state institution, deriving an illicit pecuniary advantage from the awarding of contracts strikes a blow at the very foundations of democracy, fairness and social responsibility.
But then, finding a continuous stream of orders to optimise assets and occupy a large, expensively trained workforce and satisfy shareholders in a competitive world involves heavy responsibilities too.
The bigger the sums involved, the more complex the issues become. Even the most honourable, hardworking and principled business people may have second thoughts when the contract in question has a string of noughts on the bottom line. An additional margin may have been built into the original price structure to cover 'unforeseen contingencies' and protect profitability, so no real damage would result from the additional 'expenditure'.
In the home market, it's not unknown for influential buyers to have businesses, usually run by their spouses or relations, which exist solely to receive virtually untraceable favours, in the form of seemingly legitimate sales transactions. The difficulty is always that such 'fronts' never compete fairly. They exist to provide over-priced supplies that mask what are, in fact, corrupt transactions.
There are scores of such dodges and wheezes, ranging from free holidays at the boss's luxurious Marbella retreat to bars of gold bullion mysteriously finding their way into Swiss banks.
Which way now?
People who find themselves at the ethical crossroads can be divided into two camps. The majority are well intentioned, ambitious but slightly naive owner-managers or executives who are driven by the wish to see their business or career flourish, but who lack the moral rectitude to resist the rewards of a seemingly victimless white-collar crime. They are the ones most likely to stumble and get caught.
Then there are the 'doers' whose ambition and greed has defined their ethical stance from the outset. For them, corruption is just one of the ways things gets done in a tough world. They've learnt how to be suspicious and cunning, and to cover their tracks.
Everyone who wants to climb the ladder of business success will almost certainly reach an ethical crossroads at some point in his or her career, so it's a good idea to decide your philosophical position well in advance and prepare your response.
In the murky world of givers and takers, he who hesitates is presumed to be a soft touch. The wheels of corruption begin to turn almost before the unwary realise they've been entrapped. Once this cycle has begun, it's doubly difficult to reverse it. If you reject unethical approaches, you run the risk of the disappointed cheat accusing you of wrongdoing anyway, even though your hands are clean.
In either case, with careers, livelihoods, the completion of a contract or even the survival of a business in the balance, the most vigorous legal defence is appropriate. In Britain, at least, you're innocent of bribery and corruption until you've been found guilty in a court of law.Martin Cunningham is a criminal defence lawyer who specialises in corporate fraud.For further information, contact Martin Cunningham Solicitors on +44 (0) 161 456 5857
In Britain, at least, you're innocent of bribery and corruption until you've been found guilty in a court of law.