Bribery, Extortion, Grease Payments and Gifts

Probably the single most important issue faced by professionals in the local and international
world is the bribery and related phenomena. Many cases commonly described as illustrating
bribery turn out to be better understood as examples of extortion. There are also grease
payments, which are payments to hasten or facilitate the performance of certain functions such
as the passage of goods through customs, the installation of a telephone, or the processing of a
legal document. Many cultures encourage the giving and receiving of gifts as the proper way to
cement a friendship. In many cultures it is also believed that friendship should be the basis of
business relationships. Let us consider each of these practices.

Bribery:

Bribery is made to a government or nongovernment official in exchange for violating some

official duty or responsibility. The payment might result, for example, in an official’s not making
a decision to buy a product on the merits of the product.

Bribery is a payment of money (for something of value) to another person in exchange for his
giving one special consideration that is incompatible with the duties of his office, position, or
role.

An executive of a Company A hopes to sell twenty-five airplanes to the national airline of

Country X. The deal requires the approval of the head of the Ministry of Transportation in
Country X. The executive knows that the official, who has a reputation of honesty, makes a
better deal elsewhere, but he also is experiencing personal financial difficulties. So the
executive offers the official $300,000 to authorize purchase of the planes from Company A. The
official accepts the bribe and orders the planes to be purchased.

It is important to keep in mind that bribes presuppose an agreement that the bribe must be in
exchange for a certain type of conduct. If this agreement is not present, it is hard to distinguish
bribes from gifts or rewards.

Giving and receiving bribes are forbidden by professionals. There is good reason for this:

1. If a professional takes a bribe, she is creating a situation that will most likely corrupt her
professional judgment and tarnish the reputation of the profession.
2. If she offers bribe, she engages in activity that will also tarnish the reputation f her
profession, if it is discovered, and probably violate her obligation to promote the well-
being of the public.
3. Bribery induces the person taking the bribe to act immorally by violating the obligation
to act on behalf of the interest of the client or employer. For example, it can induce a
government official to break the obligation to act on behalf of the best interests of the
citizenry.
4. Bribery can also undermine the efficiency of the market by inducing one to buy products
that are not the best for the price.
5. Bribery can give one an unfair advantage over one’s competitors, thus violating the
standards of justice and fair play.

Extortion:
Many cases that look like bribery are actually cases of extortion. Suppose the same
executive knows that he is offering the best deal on airplanes to the official in Country X,
who has the authority to authorize purchases for his national airlines. The executive
knows, however, that the official will not deal with him unless he offers the official a
large cash payment. The executive offers the payment to the official, and the official
authorizes the purchase of the airplanes. This is extortion rather than bribery.
It is more difficult to offer a definition of extortion; for example, here is proposed
definition which is inadequate:
Extortion is the act of threatening someone with harm (that the extorter is not entitled
to inflict) to obtain benefits to which the extorter has no prior right.
This definition is inadequate because some actions not covered by the definition are still
extortion. For example, my threatening to expose the official misconduct of a
government official unless he pays me a large sum of money would be extortion, even
though exposing the official would be both morally and legally permissible. We find it
impossible, however, to give a completely adequate definition of extortion. All we can
say is that this definition gives a sufficient (though not a necessary) condition of
extortion.
Sometimes it is difficult to know whether one is paying bribery or extortion. An
inspector who demands a payoff to authorize a shipment of a product may claim that
the product does not meet the standards. It may be difficult to know whether he is lying
and too expensive to find out. In this case, a company may decide to pay off without
knowing whether it is paying a bribe or extortion. Of course it may be irresponsible not
to find out.
The moral status of paying extortion is different from the moral status of paying and
accepting bribes:
1. Paying extortion will not usually corrupt professional judgment.
2. Although paying extortion can tarnish one’s professional reputation, it will probably
not do so as much as paying a bribe.
3. Paying extortion will not cause one to act contrary to the best interest of one’s
employer or client by, for example, selecting an inferior product, but it does involve
the use of a client’s or employer’s money.
4. Paying extortion does not undermine the efficiency of the market by promoting the
selection of inferior or more expensive products, but it does divert funds from the
most efficient use.
5. Finally, paying extortion does not give one an unfair advantage over others, except
insofar as others do not or cannot pay the extortion. The main problem with paying
extortion is that is perpetuates a practice that is a type of theft.

Grease Payments:
These are offered to facilitate routine bureaucratic decisions, such as hastening the
passage of goods through customs. They do not give one an unfair advantage over
others, assuming that others make the payments too, and they are often tacitly
condoned by governments. Unlike bribes, grease payments aren’t made to get
someone to violate their duties. They are a form of petty extortion, or even perhaps
fees for services to be rendered. For example, in many countries, customs official may
not be paid an adequate salary, and the government may assume that officials will
receive grease payments to supplement their salary, just as employers assume waiters
will receive tips. Still, grease payments will be better eliminated and replaced with
higher fees, which would then be passed on to officials in the form of higher salaries. In
this way, the payments would not have to be kept secret.
There is a slippery slope, furthermore, leading from grease payments intended to gain
special consideration over others. As was earlier noted, sometimes the grease payment
may allow the passage of inferior goods through customs, thus giving one an advantage
over others who do not make the payment. A fee to get telephone service in three
weeks rather than six months or to get a permit expedited through a government
bureaucracy, by putting a person at the front of the cue, clearly gives him an advantage
over others.

Gifts:
In some culture an exchange of gifts is a way to cement personal relationships. Business
relationships, in turn, are built on personal relationships. Further, in some cultures, one
is expected to show favoritism toward “friends,” even when one acts in an official
capacity. Many societies find the impersonal nature of Western business transactions,
separated as they are from personal relationships and family ties, to be unnatural and
even offensive. Sometimes, these payments may be illegal in the country, even though
the laws may not be enforced. Geoffrey Fadiman suggests that one answer to the
dilemma is to give gifts to the community rather than to the individuals.

A commercial bribe is consideration given or offered to an employee by a person

outside the firm with the understanding that, when the employee transacts business for
the firm, the employee will deal favorably with that person or that person’s firm. A
purchasing agent, for example, is accepting bribe when accepting money from a supplier
who gives it to the agent to receive favored treatment in the agent’s purchasing
decisions.

In contrast, an employee is engaged in commercial extortion if the employee demands a

consideration from persons outside the firms as a condition for dealing favorably with
those persons when the employee transacts business for the firm. For example,
purchasing agents who will buy only from those salespeople who give them certain
goods or services are involved in extortion.

Gift: Vincent Barry suggests that the following factors should be considered when
evaluating the morality of accepting a gift:
1. What is the value of the gift? That is, is it substantial enough to influence
one’s decisions?
2. What is the purpose of the gift? That is, is the gift intended or accepted as a
bribe?
3. What are the circumstances under which the gift was given? That is, was the
gift given openly? Was it given to celebrate a special event?
4. What is the position of the recipient of the gift? That is, is the recipient in a
position to influence his own firm’s dealings with the giver of the gift?
5. What is the accepted business practice in the area? That is, is the gift part of
an open and well-known industry practice?
6. What is the company’s policy? That is, does the company forbid acceptance
of such gifts?
7. What is the law? That is, is the gift forbidden by a law, such as a law
prohibiting gifts in sports recruiting?