Corruption affects societies
Abstract: How and why corruption and ethics are linked, how one helps to counterbalance the other and finally how ethics can become better for business and society through its developmental effects.
Introduction
"Perception is reality." [1]
In Mexico, 71% of the people believe that dishonest practices have increased in the country. 93% perceive it as a serious problem and 91% think that political parties are the most corrupt known structures[2]. Corruption always involves at least 2 participants: The one who corrupts (corruptor) and the one who is corrupted. Within this, it is possible that one is from the citizen sector, and the other from the public, or both from the public and finally both from the citizen sector. Corruption is on both sides, it is not exclusive to the public sector, however, the administration of public resources is substantial and the effects that are expected from an efficient administration vanish in the loss of effectiveness that corruption exerts, as it usually incites to break the rules or laws, with economic stimulation, diverting money that would have ended up in a program, support, investment, subsidy or any other form of exercise of public resources, within the purse of a group of people.
Development
Why corruption negatively affects societies, it generates diverse perceptions in our way of understanding the environments, from, that the rules can be disobeyed, affecting then the feelings of "duty", affect the conviction of "Integrity" and its convenience and also the "ethics" of the members of the community, questioning then these 3 values, the rules of "even floor" to develop, to move socially, to keep daily a conviction of "overcoming" are slowly lost, within the culture and mentality of the citizens.
I would like to make a series of analogies about markets, starting with a sports game. You choose the one you like best.
Markets are made up of various companies that provide services and offer products and consumers, based on the basic premise that "the rules of the market are implacable". That is, depending on the attributes of the offer, will be the possibility of business success. When the rules are clear, when everyone plays the same game, when business is "legal", one might think that the best players will win. But, economy and business are not a single championship, moreover, in this game both players on the supply side and on the consumer side have to win. In other words, there is not just one prize, but such a large field that there are prizes for almost all players. All those who have something to offer and those who need something to satisfy a need can enter the market, and they know the rules of the game.
As in any game, if the playing field is level, that is, if there are equal conditions to be the winner among suppliers and consumers, there is enthusiasm, encouragement and development is stimulated so that there are better and better proposals of goods and services, as well as better buyers. Without this premise of justice and equity, there would not be the desire and hope that business is possible, desirable and can be successful.
In summary, the lack of clear and equitable rules affects free competition and discourages investors by increasing the risk of business failure. This is when investors, in order to protect themselves, ask for higher investment returns, higher in proportion to their risks, both for the business itself and for the risk of exiting the business due to lack of clarity in the rules.
Living in a market, whether local or global, where corruption is notable to such a degree that the convenience of competing in it is questioned, definitely affects all its participants and society in general, producing shortages or inflated prices, either for the protection of the investor, as well as for the effect of corruption itself. Corruption always directly affects the consumer's pocket. A peso used to corrupt is a peso paid by consumers that could have been saved. On the other hand, markets known for their level of corruption, unleash a series of processes that lead bidders and consumers to commit crimes, increasing dishonest offers, contaminating legal businesses, causing those who do not want to participate in illegal activities to become discouraged, withdraw, exclude themselves and leave the field open only for those who are willing to participate in the dirty game.
An important part of the fight against corruption is the formation of values of integrity and honesty within companies, in which business ethics are founded, the harmful effects of corruption are clearly stated, and tools are implemented to offer transparency and "fair play".
While it is true that the basis for the education of values in individuals is given at home, with the example of parents, with the traditions of families, and that these should be reinforced in schools, we cannot fail to insist that companies are also an enabling environment that demands the culture of "should be" and "ethics". The rules of companies, which form the development policies of individuals and the verification of actions within the legal frameworks and internal rules, allow us to affirm that companies also have a great capacity to influence the values and behavior of individuals.
Companies that reject corruption reduce their expenses, because by not incurring in immoral offers of contributions to improper persons or institutions, they save and improve their cash flows, with which they can do better business, by allocating the resource to developments and institutional strengthening. Normally, the expense of corruption requires establishing costly and complex (illegal) structures, in which outsiders participate, with dubious reputation as well (otherwise they would not consider them in the matter), exposing the company to future extortions (potential costs not measured), expenses that will not be verified (effect of unmeasured fiscal costs), and losses that cannot be claimed (they can be exposed and prefer to assume the cost of the losses), not to mention the risks of committing crimes that I will mention later on.
They are also capable of attracting investments from third parties, who, upon learning about and verifying the company's honest and demanding practices, trust and are encouraged to participate in joint ventures or capital injections, also enabling the growth of the ethical company, putting it in a better position to compete within a regulated and legal framework.
Companies with a code of ethics build trust and develop the spirit of collaboration of their employees and suppliers. Both are able to enter into negotiations that would not take place without a basis of trust, and that in no way would take place between parties that are not widely known for their integrity and business ethics. This can take your business to states that even credit and capital cannot buy.
A company that rejects illegal practices also gains a resource that is difficult to fully value economically. Exposure to lawsuits. Regardless of the risk of incurring defense and warranty costs, there is the hidden cost of the time and resources devoted to the strategies of committing the illegal practice, and subsequently, the same time and resources devoted to the defense strategy when the commission of a crime is discovered and prosecuted. Indeed, estimating this element economically seems difficult, but it is always a huge cost.
Customers also benefit and recognize the values of companies. They will always prefer to buy from those who honestly offer their services and goods, those who fulfill the promised offers, those who are consistent between what they say and what they deliver. The return on investment is enormous, and it shows, every time there is a repurchase. This latter recognition is also known as "brand loyalty".
Ethical companies, since they do not engage in illegal, dishonest or immoral acts, are less monitored by various authorities than corrupt ones. In other words, tax authorities do not receive indicators that make them presume acts that should be monitored, nor do labor authorities, the Public Prosecutor's Office or others. This also entails the possibility that entrepreneurs, directors, managers and other management personnel can dedicate themselves with greater focus to the development and strategy activities of their company, replacing the time spent with the authorities with productive time. What value does this have on their payrolls, and what is more, what value can this have in developing new businesses or dedicating themselves to making their company grow, instead of attending to the authorities? You answer.
Conclusion
A company that adheres to its code of ethics improves its reputation with its investors, employees, suppliers, customers and authorities. We believe that the adoption of ethical criteria is not only a moral alternative, but part of a strategy that will positively influence business environments and markets that are becoming increasingly larger and broader, in which it is a requirement to participate in them, being aligned to these criteria will also become a way to develop and grow business.
If you would like further information, please do not hesitate to contact the Kreston CSM office nearest you.
[1] Al Ries and Jack Trout, "The 22 Immutable Laws of Marketing", Mc Graw Hill Interamericana, 1993.
[2] CESYOP of the Chamber of Deputies, Report: Transparency and Fight against Corruption, February 2015.
