Bribery Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Bribery is the practice of enticing people to do something they are otherwise reluctant, unwilling, or legally forbidden to do, with money or gifts. Though that description may sound straightforward, attitudes toward bribery vary widely around the world and across different contexts. A comparison might be to the varying attitudes toward other culture-specific practices, like tipping or haggling—either of which may be taken for granted in one culture while seen as bizarre and frustrating in another, or may be considered a social responsibility in one context (tipping a waiter) and unthinkable in another (tipping a doctor). The mechanism, severity of taboo or illegality, and sometimes language of bribery varies not just from country to country but industry to industry.

Legally speaking, the term bribery is applicable only when the transaction is forbidden by law—either explicitly or because it requires one party to break a law or neglect their duties—and typically involves officials and other authority figures. A driver may be pulled over and try to bribe a police officer in order to avoid a ticket, even offering more than the cost of the ticket in order to avoid points on his license. Lawyers may bribe workers in a courtroom for information pertinent to their case.

Gamblers, crime syndicates, or other interested parties may bribe the referees or players in a sports event, in order to influence the outcome so as to profit off of sports betting—this has been a perennial problem in organized sports, from the Black Sox scandal of the 1919 World Series to the charges against NBA referee Tim Donaghy in 2007, and affect even ostensibly “amateur” sports, as in the ice dancing scandal at the 2002 Winter Olympics. While a referee, judge, or other official is an obvious person to target for bribery, athletes can be enticed to throw the game, and coaches may be enticed to exert their influence.

Bribery And International Business

Bribery is an inescapable aspect of doing business internationally. In some countries, bribes are so accepted that they are tax-deductible. The U.S. Foreign Corrupt Practices Act even makes allowances for a limited degree of bribery, permitting “grease payments,” which are legally distinguished from the bribery of foreign officials, and which are usually made in order to speed up legal processes rather than to bypass local or international law. This makes it easier to do business, without violating American law, in countries where bribery is a way of life.

The Bribe Payers Index tabulates a rough estimate of how likely businesses from various countries are to pay bribes when doing business abroad. It is based on responses from over 10,000 executives, as part of the World Economic Forum. In 2006, the 30 leading export nations were ranked on a scale of 1 to 10, wit 10 being the most likely to pay bribes:

Switzerland 7.81
Sweden 7.81
Australia 7.59
Austria 7.50
Canada 7.46
United Kingdom 7.39
Germany 7.34
Netherlands 7.28
Belgium 7.22
United States 7.22
Japan 7.10
Singapore 6.78
Spain 6.63
United Arab Emirates 6.62
France 6.50
Portugal 6.47
Mexico 6.45
Hong Kong 6.01
Israel 6.01
Italy 5.94
South Korea 5.83
Saudi Arabia 5.75
Brazil 5.65
South Africa 5.61
Malaysia 5.59
Taiwan 5.41
Turkey 5.23
Russia 5.16
China 4.94
India 4.62

One of the interesting things about the list is the low placement of countries like Russia, where the common perception is that bribery is common within the country, which would intuitively lead to the assumption that its businesses would be as willing to pay bribes outside of the country.

Payola and Pay to Play

Pay to play is a phrase used in reference to an assortment of similar activities, some legal, many of them forms of bribery, all of them having in common the transaction of money for some form of access or attention. In its most literal rendering it refers to payola, the long-standing and often overlooked practice in the music industry of paying radio stations to play certain songs, without any overt announcement of sponsorship. Many of the most popular, successful, and talented artists in popular music history were given a boost by payola, if only because the practice creates a system into which everyone must buy in.

The institution of independent record promoters arose specifically to try to circumnavigate FCC regulations about payola, after both Alan Freed and Dick Clark—world-famous and influential DJs in the 1950s and 1960s—were subjects of payola scandals. In the independent promoter system, record companies pay independent promoters—separate companies or individuals—who then pay record stations or DJs to play the songs on the list the record company provides. Though blatantly the same essential act as paying the station directly, it was believed that this would honor the letter of the law and at least permit the practice until the law could be rewritten. Instead, the blatancy of the violation of the spirit of the law attracted the attention of state and federal prosecutors, resulting in a federal settlement in which four broadcasting companies— Clear Channel, CBS Radio, Entercomm, and Citadel— paid $12.5 million in fines but were not found guilty of specific charges, nor made to admit to wrongdoing. It was enough to send the message, and the practice has either died off or gone underground.

In politics, pay to play refers to the need to pay money—usually in the form of campaign contributions—in order to get special attention from a politician. That attention may be in the form of favorable legislation (which is the essential and legal goal of lobbying), government contracts, appointments to special posts, jobs, et cetera. The potential influence of a newly elected politician is broad, and a good many politicians—especially at the state and local level—elevated their campaign supporters to all the available posts in government, as a reward for their support. Though there are regulations governing campaign contributions from individuals, institutions, and corporations, and the disclosure thereof, pay to play payments are often made with so-called soft money, money that is donated to political organizations (called 527s for the section of tax code governing them) which do not fund advertising promoting the election or defeat of a specific candidate. The abuse and scrutiny of soft money contributions is one of the most prominent issues in campaign finance reform.

Rent Seeking

The reason bribery is so discouraged, beyond the consequences of its specific instances, is because it creates a “rent-seeking” culture, in which those who cannot afford to pay cannot afford to play. The rent of rent seeking is derived from Adam Smith’s tripartite division of income into wage, profit, and rent, and does not refer specifically to property leasing. A rent-seeking culture is one in which individuals and organizations in that culture seek to increase their incomes through the manipulation of conditions, rather than through production and trade. For instance, it may be cheaper for a manufacturer to preserve or change the regulations affecting its industry and its products than it is to alter those products or practices. If the cost of preserving beneficial regulations allowing for widget production to pollute the environment—whether through lobbying, campaign contributions, illegal bribes, or other illegal activity—is significantly lower than the cost of developing and producing a nonpolluting widget, then on paper it appears that it is in the business’s best interest to spend the money on those regulations. In fact, it is in a sense even in the interests of the widget consumer—until one factors in the environmental effects.

In late 2008, a global crackdown on companies using bribery to advance their business interests in foreign nations increased its momentum. In the United States, such investigations went from only three in 2002 to 84 in 2007. Also, in 2007, Baker Hughes, a Houston oil-field services firm, agreed to pay $44 million in fines and return profits associated with bribing Kazakhstan officials, as a penalty under the Foreign Corrupt Practices Act.

Bibliography:

Russell Gold and David Crawford, “U.S., Other Nations Step Up Bribery Battle Prosecutions Climb on Tougher Laws Aimed at Businesses,” Wall Street Journal (September 12, 2008);
Gordon Tullock, The Rent-Seeking Society (Liberty Fund, 2005);
Alexandra Addison Wrage, Bribery and Extortion: Undermining Business, Governments, and Security (Praeger Security International, 2007).

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