Corporate bribery—that is, the practice of companies paying government officials for preferential treatment—is not only illegal in dozens of countries. Studies show that it’s also counterproductive resulting in lower profit margins, return on equity, and employee morale; costly delays as players haggle over the size of the kickback; and poverty and poor governance in the markets where they’re paid. Yet, according to the World Bank, roughly one-third of firms around the world use kickbacks, paying an estimated total of $400 billion a year. Since 2006, hundreds of companies — including global brands like Novartis, Hewlett-Packard, and Rolls Royce — have reached settlements with U.S. authorities on charges of overseas bribery.
How Managers Should Respond When Bribes Are Business as Usual
Four strategies for navigating markets where bribery is rife.
November 16, 2018
Summary.
Commercial bribery is illegal and counterproductive. Yet officials in many parts of the world still demand them, and executives remain tempted to pay up. How can organizations kick the kickback habit? By preparing their people with a resistance plan, building the cost of avoiding bribery into their estimates, walking away from markets where bribery is too rife to do business with out it, and shifting performance incentives to acknowledge high-risk regions.
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Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Global Collaboration. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
Learn how to overcome barriers when working globally.