How can corruption influence the work practice?

Corruption is a constant in society and occurs in all civilizations; however, it has only been in the
past 20 years that this phenomenon has begun being seriously explored. It has many different
shapes as well as many various effects, both on the economy and the society at large. Among
the most common causes of corruption are the political and economic environment, professional
ethics and morality and, of course, habits, customs, tradition and demography. Its effects on the
economy (and also on the wider society) are well researched, yet still not completely.

Corruption in the workplace has become a hindrance to the quality and efficiency of service
delivery by organisations. In short, corruption has a negative impact on the performance of
employees and eventually the profit of the organisation. Corruption at senior levels of
management of an organisation has a direct impact on the progress of the organisation and
results in huge losses.

Forgery of signatures and stamps at this level becomes very easy because of the authority and
responsibility that rests with people at these levels.

The impact of corruption on a business is largely depend on the size of the company. Large
companies are better protected in an environment that is prone to corruption, they avoid taxes
more easily and their size protects them from petty corruption, while they are often also
politically protected, which is why the survival of small (especially start-up companies) and
middle-sized companies, regardless of their importance for the growth of the economy and the
development, is much more difficult than the survival of large companies.

For businesses that are guilty of corruption, fines and regulatory actions seem to be the only
major consequences. However, research published by Harvard Business School revealed that
corruption has a negative effect on employee morale as well.

When employees know that they are working for an organization where the management has
not only tolerated but also practiced bribery, they are less likely to put their best into their work.

The sales teams of businesses where products value less than the payoff will not spend their
time developing strategies that differentiate their product from the rest in the market, or even on
strategizing for effective product promotion.

In this unethical chaos, the efforts made by sincere employees are often marginalized by the act
of corruption.In the end, they only feel like quitting the company and also do so, when things go
beyond tolerance.

Another thing to consider is what happens when corruption in a business becomes public. The
customers in that business will lose their faith in the business. The management would then be
forced to require that valuable resources be deviated from where they had been productive to
the efforts to monitor how many clients the company is losing.

A significant effect that corruption has on a business is economic. When a corrupt professional
within a company has stolen a considerable amount of money and wants to cover up his sins,
the business may swell up its employee ranks so that the business can achieve that goal. Of
course, this will cost the business for it to increase its employee ranks in this fashion. Moreover,
it will also cost the business to deal with embezzlement. All of these costs will be passed on to
the consumer, which will cause prices to become inflated. Such prices can be also be inflated
when corruption takes place externally to the business, such as when bribing of corrupt
government officers takes place.

Another impact of corruption on a company is on the existing shareholders. When corruption is

reported in a business, the existing investors and shareholders will lose the confidence and trust
that they had put in the business. When fraud is perpetrated within an organization, then the risk
of accruing losses by entrepreneurs is increased. The sales will reduce with reduced public
confidence in the firm and resources will be made scarce through the fraud and embezzlement.

Whether the corruption is internal or external, it will discourage both those investors and
shareholders who are within the firm and those who are without, considering the prospects of
joining the firm.

When a firm is exposed to corruption, then it is also exposed to massive damage to its name.
As the general public, including the company’s loyal customers, get a negative perspective on
the business, they may never trust the company again and, by extension, they may never trust
its products and services again. They will feel betrayed and will want to take their business
elsewhere. Consequently, the business will lose important business partners and clients.

The phenomenon of corruption cuts across all cultures and continents. Corruption in business
conduct is a subset of a wider phenomenon of corruption prevalent in all parts of the world.

Business managers seek dispensation of favours (both legitimate and illegitimate) and public
officials command the discretion to dispense those favours. Some examples of legitimate
(within law) favours sought by business could be grant of trading rights, licenses, permits,
allotment of industrial land, tax breaks, award of contracts, tenders and amendment of laws to
suit business interest. Illegitimate favours could range from tax avoidance; inaction in case of
environmental damage; suppression of wrongdoing including illegal acts to almost anything that
may be ultra vires the law, but suits business interests.

Corruption in the way deals are made, contracts are awarded, or economic operations are
carried out, leads to monopolies or oligopolies in the economy. Those business owners who can
use their connections or money to bribe government officials can manipulate policies and
market mechanisms to ensure they are the sole provider of goods or services in the market.
Monopolists, because they do not have to compete against alternative providers, tend to keep
their prices high and are not compelled to improve the quality of goods or services they provide
by market forces that would have been in operation if they had significant competition.

If, for example, a home construction company had to pay bribes to officials to be granted
licenses for operations, these costs incurred will, of course, be reflected in artificially high
housing prices.

In best practice, companies choose their suppliers via tender processes (requests for tender or
requests for proposal), which serve as mechanisms to enable the selection of suppliers offering
the best combination of price and quality. This ensures the efficient allocation of resources. In
corrupted economies, the companies that otherwise would not be qualified to win the tenders
are often awarded projects as a result of unfair or illegal tenders (e.g. tenders that involve
kickbacks).

This results in excessive expenditure in the execution of projects, and substandard or failed
projects, leading to overall inefficiency in the use of resources.

Corrupted economies are characterized by a disproportionately small middle class and

significant divergence between the living standards of the upper class and lower class. Because
most of the country's capital is aggregated in the hands of oligarchs or persons who back
corrupted public officials, most of the created wealth also flows to these individuals. Small
businesses are not widely spread and are usually discouraged because they face unfair
competition and illegal pressures by large companies who are connected with government
officials.

Because little confidence can be placed in the legal system of corrupted economies in which
legal judgments can be rigged, potential innovators cannot be certain their invention will be
protected by patents and not copied by those who know they can get away with it by bribing the
authorities. There is thus a disincentive for innovation, and as a result, emerging countries are
usually the importers of technology because such technology is not created within their own
societies.

Small businesses in corrupt countries tend to avoid having their businesses officially registered
with tax authorities to avoid taxation. As a result, the income generated by many businesses
exist outside the official economy, and thus are not subject to state taxation or included in the
calculation of the country's GDP.

Another negative of shadow businesses is that they usually pay their employees decreased
wages, lower than the minimum amount designated by the government. Also, they do not
provide acceptable working conditions, including appropriate health insurance benefits, for
employees.
Transparency

Transparency is about shedding light on rules, plans, processes and actions. It is knowing why,
how, what, and how much. Transparency ensures that public officials, civil servants, managers,
board members and business people act visibly and understandably, and report on their
activities. And it means that the general public can hold them to account. It is the surest way of
guarding against corruption, and helps increase trust in the people and institutions on which our
futures depend.

In the recent decade there has been a massive wave of research and debate about the causes
of corruption and driven partly by the growing awareness that corruption is not just a moral
problem but also a major impediment to development and growth in large parts of the world.

Lack of transparency creates opportunities for public officials to abuse their office for private
gain. This closely relates to accountability, and weak accountability mechanisms tend to
facilitate corruption. Where there is a lack of transparency and accountability corruption will
flourish. Once corrupt bureaucrats realize that they can take advantage of regulations, they will
produce more regulations and run the risk of becoming less transparent.

Transparency may indeed be an important remedy against corruption. Its main contribution,
however, is to show and explain why this link is not as straightforward as is usually assumed.

First, we distinguish between two types of transparency, the transparency which is controlled by
the agent itself (the institution/actor under supervision) and transparency which is not under the
agent’s immediate control. These two types of transparency, we argue, affect corruption for
different reasons and with different strengths.

Secondly, we show that the link between transparency and corruption is subject to two
important
and overlooked conditions: in order for transparency to alleviate corruption, the information
made available through transparency reforms must stand a reasonable chance of actually
reaching and being received by the public. We call this the publicity condition.

Furthermore, if the release of information to the public is to affect the behavior of potentially
corrupt government officials, the public must possess some sanctioning mechanism. This is the
accountability condition. Transparency on its own is simply making information available and will
do little to prevent corruption (and other forms of agency shirking).

Despite the popularity of the transparency concept, its role in reducing corruption and averting
the resource curse is poorly understood.Although, the main mechanisms through which
transparency can reduce corruption. It argues that transparency is insufficient in itself, and
needs to be complemented by other types of policies.