Bribery has been the leading ethical issue in business activities. International bribery is more complicated and has greater repercussions than bribery within one country. Cross-border corruption has become a serious issue in international business especially in Asia's commercial activities. It is threatening the integrity of all cross-border business transactions. If not dealt with properly, it will undermine the effectiveness and efficiency of business in Asia and the world.
Prof. Lee Kam-hon, professor of marketing, began studying cross-border corruption in the US-Hong Kong-China mainland context with a grant of $161,000 from the Research Grants Council (RGC) in 1994.
Cross-border bribery is bribery aimed at manipulating business decisions made by a public official or a corporate employee across the national border in such a way that they are no longer motivated by the interest of the employer.
Since World War II, the US has been a major force in the world economy. The issue of cross-border bribery by American companies was first brought to public attention by the Foreign Corrupt Practices Act (FCPA) in 1977. It was recognized that many American companies were involved in questionable foreign payments in order to gain an edge over their competitors. It remains unclear, however, whether the Act has had any detrimental effect on the competitiveness of American companies in international business. In the context of US-China business, again little is known about the impact of the Act.
Cross-border corruption exists also in business activities between mainland China and Hong Kong. According to a press release issued by the Independent Commission Against Corruption (ICAC) in July 1993, in some 50 Hong Kong companies with a production base on the mainland, payments intended to bribe accounted for three to five per cent of their operating costs. While the Prevention of Bribery Ordinance in Hong Kong gave the ICAC the power to combat corruption in Hong Kong, there has been no legislation similar to the FCPA that deals with cross-border corruption.
Mainland Chinese authorities too show much concern about the issue. The Premier's Office has issued Corruption Prevention Directives to tackle the problem. In theory such directives should, together with the measures taken in the US and Hong Kong, be able to wipe out cross-border corruption among these three places. However this is far from the reality.
Transparency International, a non-government organization headquartered in Berlin, compiles regularly Corruption Perception Indices (CPI) for different economies in the world. Literally a poll of polls, the CPI combines the subjective evaluation of businessmen, political analysts, and ordinary citizens. With 10 being the highest score, and meaning the least corrupt, corruption in Hong Kong, China mainland, and the US has been on the rise over the last 15 years (see Table 1). It would be worthwhile to study the factors behind this phenomenon.
|
CPI score
|
|
1980-85
|
1988-92
|
1996
|
1997
|
|
| US |
8.41
|
7.76
|
7.66
|
7.61
|
| Hong Kong |
6.87
|
6.87
|
7.01
|
7.28
|
| China |
5.13
|
4.73
|
2.43
|
2.88
|
Table 1
The influence of ethical norms on cross-border business transactions can be examined from three different perspectives: cultural relativism, ethical imperialism (universalism), and the development of contextualized hypernorms.
Cultural relativism in this study means that business executives from different countries have different ethical convictions, while universalism refers to the tendency in executives to observe the same moral principles regardless of where their business operations take place. The development of contextualized hypernorms means that while business executives may consistently uphold the same moral principles, they will also take environmental factors into consideration when evaluating how to react to an ethical issue.
To investigate which perspective best describes business executives' attitude towards cross-border corruption, one must assess the impact of their cultural background, the nature of the bribe, the business environment, and the inter-relationships between these three variables.
If cultural background is found to have an obvious influence on cross-border corruption, cultural relativism prevails: business executives with different cultural backgrounds do go by different cultural norms. For example, corruption is frowned upon in Hong Kong and Singapore but in many southeast Asian countries, it is seen as a normal way of getting things done.
If business executives are found to behave very similarly under different business environments, universalism prevails. For example, employees of American companies may remain uncorrupt no matter whether they are operating in the US or in other business environments.
If the interactive relationship between the nature of the bribe and the business environment is found to have a significant impact on cross-border corruption, contextualized hypernorms prevail because the executives tend to react to each bribery proposal differently in the context of the specific business environments. For example, some transnational European companies train their employees to follow a strict code of behaviour regarding bribery when operating in developed countries, but to relax their adherence when operating in relatively less developed regions.
The subjects in Prof. Lee's study were three groups of 60 business executives each from mainland China, Hong Kong, and the US respectively. Prof. Lee designed an in-basket questionnaire with simulated business situations to solicit managerial decisions from the respondents. Would they resort to bribery to gain an edge or a favour under such and such circumstances?
The results of the survey clearly show that the respondents' cultural background, the nature of the bribe, and the interactive effect of the nature of the bribe and the business environment have a significant effect on the respondents' behaviour. Business environment alone, however, has negligible impact.
The results of the study support cultural relativism since cultural background is found to play a significant role; they also support universalism since the same ethical convictions were upheld in different business environments. Prof. Lee furthermore detected a strong interactive effect between the nature of the bribe and the operating business environment, with the respondents taking environmental factors into consideration when deciding how to respond to an ethical issue. This provides support for the perspective of contextualized hypernorms.
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| Prof. Lee Kam-hon obtained his B.Com. and his M.Com. from The Chinese University in 1967 and 1969 respectively, and his Ph.D. in marketing from Northwestern University in the US in 1975. He joined the University as assistant lecturer in business administration in 1969, becoming lecturer in marketing and international business in 1975, senior lecturer in 1981, and reader in 1987. He was appointed professor of marketing in 1992. His research interests include business negotiations, cross-cultural marketing, and marketing ethics. |
From such findings, it can be said that cultural relativism, universalism, and contextualized hypernorms are complementary rather than competing concepts in explaining the behaviour of the respondents.
The findings of the study have important implications for combatting cross-border corruption. For instance education can be used to shape people's attitudes towards corruption. This is a time-consuming process but its effects are long-lasting. An expedient alternative would be to pass legislation to deter business executives from giving or receiving bribes. It is widely believed that the FCPA has been useful in policing the behaviour of American businessmen abroad. And many in Hong Kong, including the ICAC, have considered using similar legal measures to combat cross-border corruption. Such legislation can also give ethical businessmen a legitimate excuse to decline a bribe.
However Prof. Lee's study also shows that American business executives as well as their counterparts from Hong Kong and mainland China behave much the same way in a foreign country as they do at home¢wexecutives who do not practise bribery at home do not do so abroad while those who do at home do so abroad. This indicates that such behaviour has little to do with the existence or absence of legal control. It would, therefore, be more effective to launch education programmes to cultivate an anti-corruption culture, and to explain how corruption is defined in different business environments. The ideal scenario, of course, is for us to exercise creativity in turning legally and ethically controversial proposals into acceptable business arrangments.