Corruption and bribery are considered detrimental to the economy. According to the World Bank, 0.5 per cent of Gross Domestic Product disappears because of corruption on annual basis. Engaging in corruption also creates an unfavorable business climate inspiring unjust competition strategies, eventually bringing down the reputation of a corrupt firm. Corruption is a major problem to a country’s economic advance: it undermines trust in public institutions, weakens the rule of law, and defies the principles of democracy.
When working in another country, you should remain true to your own business or country’s ethical code, even if giving “favors” is considered to be a sign of respect to the citizens and culture of the country. Being fair and loyal would allow firms to gain reputation, respect, and success in the long run. British Petroleum Company offers an illustrative example of that. Several oil product transactions in Vietnam involved questionable donations to local managers in exchange for cooperation with BP. The malpractice was uncovered in 2002; as a result, BP suffered a potential profit loss of $300,000. Moreover, two sales managers involved with the issue tended their resignation. All the same, BP managed to recover by the end of the year and exceeded its sales targets after returning to traditional selling approach.
According to Charles W.L. Hill, it is called a straw men statement. Cultural relativism implies that if the country’s culture or government endorses slavery, it is excusable to exploit slave laborers in that country. From the example of BP, it becomes clear that companies ought to avoid using cultural relativism in trying to justify morally objectionable business practices, even though such practices may be considered a norm in the country of destination.
The Naive Immoralist argues that if a company representative notices that companies from other countries do not respect the principles of ethics in a target country, then they also should not. First, it is not sufficient to just say that the action is excusable just because everybody does that. If the company in a certain country employs 13-year old children and makes them work overtime, does it mean everyone should follow the suit? Of course not, and the choice for the company is free and clear in this case. It may simply decide not to invest in a country notorious for such practices in the first place. Second, the powerful foreign company should realize that it could have a say in changing the status quo in the target country. For example, it could direct its influence to positive ends by emphasizing ethical practices. In this vein, BP introduced a zero-tolerance policy to bribes and unofficial donations. BP is of the opinion that such donations are of suspicious ethical nature, and it is down to BP’s managers to positively influence the prevailing situation in the Indian market. Some may object by saying that pushing their own cultural agenda can make foreign companies appear insensitive towards the target country’s way of doing things. However, if such cultural agenda is compatible with the ethical principles of the rest of the world in general, such moral imperialism could be excused.
Social responsibility implies the philosophy that business people are obligated to keep in mind the social ramifications of their decisions, not only those related to their bottom line. Therefore, good business decisions are those that count in both social and economic aspects.
First, bribery tends to ignore the hidden costs that will accumulate over time, which will lower firm’s revenue, instigate shortages of capital, and bring on smaller profit margins. An example of small or medium size businesses that means that a firm cannot always afford to refuse to pay bribes or other unofficial payments. It could put a firm out of business. After surveying SMEs in Mexico, researchers found that over 50% of the respondents reported negative impacts of corruption on their businesses (83% referred to lost contracts, 81% to rising operational costs, and 79% to restricted access to public services).
There are concerns that lobbying may easily turn into corruption. The Global Corruption Report 2009: Corruption and the Private Sector argues that powerful businesses with good resources and connections can gain an unfair advantage over everyday citizens in their access to policy making processes. If the country is lacking a viable system of checks and balances controlling the lobbyists, it can result in undesirable and unjust impacts on that country’s political life.