MGT 540 International Business
International Business and Corruption
Dr. Patricia Humphrey
November 28, 2005
International Business and Corruption
Globalization of markets and the falling trade barriers have opened the floodgates for foreign direct investment and multinational investments. But just as the number of multinational corporations soared in the midst of this socio-economical development and entrepreneurial growth, so has corruption. In today’s developing nations, corruption has become an overwhelming predicament. There is no country that has not been hit in some form or fashion, in spite of its political system, development, or its social and economic culture. Enron is proof of this. Lately, more attention has been focused on world-wide corruption due to the immense increase in scandals. The United States and Europe share the spotlight as well as Africa, South America and China. But what really defines corruption? It has been defined in Webster’s New World, 2003 as “those actions for which there is social consensus that they are a bad thing”, “impairment of integrity, virtue or moral principle” (Merriam-Webster Online Dictionary, 2005) and “dishonestly using your position or power to your own advantage, especially for money” (Cambridge Dictionary Online, 2005). Corruption comes in various forms and reaches as high as it does low. Minor types of corruption encompass trivial incidences which entail public service personnel who use their jobs to cut through some of the red tape it takes to issue licenses and forms among other minor duties. Even though this is considered an “impairment of integrity” these minor acts of corruption hardly cause any grave economical injuries. But corruption and bribery go hand in hand. What is bribery? Bribery is defined as the “offering of money or other incentives to persuade somebody to do something, especially something dishonest or illegal (Encarta Dictionary Online, 2005).” Bribery and corruption in international business has quickly become a key issue in public policy around the globe. Developing nation’s government officials have been bribed by multinational businesses in order to win contracts that aide in their market entry. These bribes may range from small inconsequential amounts to billions of dollars. In other words, bribery may be deemed petty or grand based on the dollar amount. Petty bribery appears to be the result of extortion driven by economic factors. The small passages of money are usually seen as nothing more than a little “tip” or “thank you” for helping to get things going. Most often the bribes consist of pushing through some of the red tape that businesses go through in order to obtain a permit or a license. But the big guns come out when funds are rerouted from the government and end up lining the pockets of private individuals. This type of corruption can be detrimental to national economies, hurt international trade, and cause serious harm to the economy of developing nations. It is called grand bribery and consists of payments made by high-level officials with no other motive than pure greed. Top public officials have been known to embezzle monies from their governments through multinational assistance. The dollar amounts of these “actions” have climbed well over a billion dollars. Nigeria is a country that sits smack dab atop approximately 25 billion barrels of high-quality crude oil. Obtaining that oil from its governmental swamps is a muddled job. During an agreement with the Nigerian National Oil Corporation, Addax Petroleum Company was accused of attempting to steal over a billion dollars from the Nigerian government (Nwabuzar, 2005). An alleged attempt of six Nigerian businessmen from the private sector to scam a Brazilian national, Nelson Sakaguchi gives an example of the continuing level of crime in developing nations. The Brazilian was promised a contract to lift Nigerian crude oil in exchange for $242 million. Mr....
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