Monday, December 18, 2006


Corporate Corruption Starts At Home

Corporate corruption is spreading across the globe. 60 percent of the half million bribery and corruption cases brought to Chinese courts in the last ten years involved international trade and foreign businessmen, but China lacks the legal apparatus to punish multinational corporations involved in such cases. Consequently, most go unpunished and their frequency is on the rise. Ironically, many in China had always assumed that foreign firms were more ethical than domestic firms, but that is clearly no longer true. Even Germany, a nation once admired for its extreme correctness in business matters, has been rocked by scandal. Six top executives at Siemens have been arrested for setting up a 200 million euro slush fund to bribe international customers. Additional scandals have recently smeared the reputations of Daimler-Chrysler, BMW and Volkswagen. Yet Germany is still considered one of the least corrupt of nations, ranking as the 16th best nation by the World Corruption Index - coming in ahead of the United States and Japan. What is happening to the corporations of the world, and of the Western world in particular?

Part of the blame lies with business schools, which emphasize finance and marketing at the expense of business ethics. According to London Business School professor Sumantra Ghoshal, the "worst excesses of recent management practices have their roots in a set of ideas that have emerged from business-school academics over the last 30 years." Based partly on the homo economicus theories of Milton Friedman and others, these ideas promote amoral self-interest as the legitimate driver of all corporate action, thereby relieving business school students of the need to develop "any sense of moral responsibility."

Measurements of business success that look solely at the bottom line tend to reward any increase in profits, regardless of how destructive they may be to the long-term health of a company - much less to its role in the society at large. They excuse downsizing, the acquisition of other companies simply to destroy them and sell off their parts, even the nonsensical practice of giving bloated salaries to "cost-cutting" CEOs, thereby rewarding decreased costs with increased costs and cutting profit virtually in half. It doesn't matter what CEOs do to increase profit, how well they do it, or even for how long. So long as the desired end is accomplished in the short term, the shareholders and the public at large are expected to be impressed. And, unfortunately, they sometimes are. The exercise of corporate ethics is restricted to self-aggrandizing gestures of "giving back" through philanthropy, and is entirely absent from the day-to-day operation of the company and its treatment of its customers and employees. In essence, many corporations rob from the poor to give to the poor when they lay off their lowest paid workers to bankroll their philanthropic pretensions.

Even if ethics courses were more widely taught at business schools, they would make their point too late. The ethical sense of most students is deficient before they even enter business school. 56 percent of American business students admit to cheating on exams. Hear that? The majority not only do it, but "admit" it - as if they believe there was no shame in what they did and feel no need to conceal their actions. Already they believe that the end justifies the means. Only by focusing on ethics as early as grade school, the author asserts, can we teach our young that winning at any cost is not necessarily winning at all. Good luck to that, I say. Good luck!

"Corporate corruption - stopping the rot" from mercatornet

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