When people hear about instances of corruption, they often assume that business is at fault. It is not uncommon to hear that companies use bribes to get ahead, to gain access to resources, or to sway regulations one way or another.
Yet, there is another side of the coin. Companies are often victims of corruption, as bribes are extorted from the private sector, as well as from ordinary citizens, by government officials wielding enormous power. In many cases, the bribes are demanded in exchange for services public official are supposed to provide in the first place.
You may want to get your goods through the customs in due time. You can be trying to receive a proper license to enter a market. You might expect to have a contract with a local supplier properly enforced.
If you are operating in a developed country, chances are you will have access to resources and institutions that will help to address your company’s needs. You can predict how long it will take to get your goods through customs and what documentation you need to provide. You know the steps involved in getting a license and the costs of doing so. And you will have access to a legal system that can provide you with effective and consistent contract enforcement mechanisms.
However, in emerging markets, the success of your business may depend on a single individual or a small group of government officials, who can use their discretionary powers to arbitrarily decide what you can and cannot do. Their decisions may not always coincide with what the law says, but such is the nature of the environments with weak rule of law.
For no given reason, you may find that your goods will be held for a ‘random’ inspection for an undetermined period of time at the border or that your paperwork was simply lost. You may discover that a public official does not have a time limit within which a decision on a license has to be carried out. Or you may find out that your local supplier is in cahoots with a judge and you can’t enforce your contract through the country’s judicial system.
At the same time, you are approached by the person orchestrating these difficulties, who hints that all issues can be easily resolved for a ‘small fee.’ You can get your good through the border, but you have to pay a little extra. You can get your license or enforce your contract, but it will also cost a little extra.
Sometimes you can say “No.” But you may also find yourself in situations where standing up to those corrupt officials is more difficult than it sounds.
What can companies do when they try to play by the rules, yet face extortion and threats for refusing to pay a bribe?
There are many efforts that seek to limit the ability of government officials to extort bribes. Many of them involve improving the transparency of government processes, preventing regulatory opportunities for corruption, reducing the discretionary power of government officials, and instituting accountability measures.
A new initiative by Transparent Agents and Contracting Entities (TRACE) also seeks to minimize instances of extortion by exposing the worst offenders.
This summer, the TRACE Institute will launch BRIBEline – a web-based tool that will allow companies and individuals to report instances of extortion.
No names will be requested in the process, as reports made to BRIBEline will not be used for investigations or prosecutions. Instead, the information will be made public in 13 languages, identifying the countries in which corruption is rampant and the sectors most susceptible to demand-side bribery.
Exposing extortion is one way of fighting it, as corruption thrives in the dark. For many companies, this tool may become an effective way of identifying corruption-prone areas and reducing the potential that they will become victims of extortion.