Bribery and Corruption: Definition and Process

The same justifications and excuses for bribery and corruption, like other white-collar crimes, are heard time and time again. “Everybody does it”, “it’s a cost of doing business”, “it doesn’t really matter”, “nobody gets hurt”. This article elaborates on ‘Bribery and Corruption: Definition and Process’.

Let us discuss corruption and bribery individually.

Corruption

Transparency International defines corruption as “the misuse of entrusted power for personal gain.” It can also be defined as any illegal or improper behavior aimed at gaining an unfair advantage through unethical means.

The corruption of public or private officials and decision makers, and the payment of bribes, raise serious moral and political concerns. These are not victimless crimes, and in fact exact a heavy economic, social cost, and in the case of poaching and illegal wildlife trade, environmental costs. Bribery and corruption create an unlevel playing field for honest businesses, and cut deep into the social fabric of developed and developing countries alike.

Corruption can take many forms, but all involve the abuse of public or private office for personal gain. A corrupt official may exercise his or her authority in a way they should not or fail to exercise authority in the way they should.

Other parties to corruption may act for a variety of personal or business reasons. Corrupt transactions can be extremely simple or incredibly complex, involving companies in many different countries. Corruption can take place at the highest levels of government and at the top of large multinational companies. It can also happen at a local level, wherever somebody has the power to influence decision-making.

Estimates from the World Economic Forum show that the cost of corruption equals more than 5% of global GDP, which is almost $3 trillion, with over $1 trillion paid in bribes each year, according to the World Bank. Corruption may also be linked with other criminal enterprises, such as tax evasion, money laundering and serious organized crime, including poaching and illegal wildlife trade.

Corruption has a significant negative impact on the economy and society overall. Many countries have deep-seated corruption, which curtails economic development, impairs democracy, and jeopardizes social justice and the law. Corruption varies from country to country in nature and degree. It affects good governance, competitive markets, and healthy public fiscal management. It weakens the confidence of people in democratic institutions and processes in extreme circumstances.

Public officials are not the only ones who are prone to corruption. Trusted corporate workers can also accept bribes to gain an unfair edge over a specific potential vendor or to steal company resources. However, if public officials participate, corruption may be extremely harmful.

Bribery And Corruption

Bribery

Bribery, on the other hand, can be simply defined as money or favor given or promised in order to influence the judgment or conduct of a person in a position of trust.

It is critical to understand that a bribe can be anything of worth and, hence, is not limited to money changing hands. For example, it could entail providing entertainment, presents, vacation, career opportunities, and benefits to family or friends.

Most bribery cases include kickbacks, bid-rigging schemes, or other forms of bribery and corruption. Let us quickly discuss these methods.

Kickback Schemes

A kickback is a form of negotiated bribery in which a commission is paid to the bribe-taker in exchange for services rendered. Generally speaking, the remuneration – such as money, goods, or services – is negotiated ahead of time. The kickback varies from other kinds of bribes in that there is implied collusion between agents of the two parties, rather than one party extorting the bribe from the other. The purpose of the kickback is usually to encourage the other party to cooperate in the scheme.

The most common form of kickback involves a vendor submitting a fraudulent or inflated invoice, with an employee of the victim company assisting in securing payment. For his or her assistance in securing payment, the individual receives some sort of payment or favor.

Kickbacks are also one of the most common forms of government corruption. In some cases, the kickback takes the form of a “cut of the action,” and can be so well known as to be common knowledge – and even become part of a nation’s culture.

For example, in Indonesia, President Suharto was publicly known as “Mr. Twenty-Five Percent” because he required that all major contracts throughout the nation provide him with 25 percent of the income before he would approve the contract. And, in Pakistan, President Asif Ali Zardari was publicly known as “Mr. Ten Percent” for the same reason, which later became hundred percent.

After coming into the government, he started taking 10% of all major contract investments before he would approve the contract. However, kickbacks differ from other forms of corruption, such as diversion of assets, as in embezzlement, because of the collusion between two parties.

Bid-Rigging

Bid rigging is a fraudulent scheme in procurement auctions resulting in non-competitive bids and can be performed by corrupt officials, by firms in an orchestrated act of collusion, or between officials and firms.

This form of collusion is illegal in most countries. It is a form of price fixing and market allocation, often practiced where contracts are determined by a call for bids, for example in the case of government construction contracts. The typical objective of bid rigging is to enable the “winning” party to obtain contracts at uncompetitive prices.

The other parties are compensated in various ways, for example, by cash payments, or by being designated to be the “winning” bidder on other contracts, or by an arrangement where some parts of the successful bidder’s contract will be subcontracted to them.

In this way, they “share the spoils” among themselves. Bid rigging almost always results in economic harm to the agency which is seeking the bids, and to the public, who ultimately bear the costs as taxpayers or consumers.

Other Exemplary Forms of Bribery and Corruption

Another form of corruption is when a corrupt official may perform his work in a way it should not be performed. An example could be when a manager grants a contract to a provider paying a bribe or when a substandard building is ignored by an inspector.

Comparably, when an official requests money in exchange for the use of its influence to gain an unreasonable edge for the payer, this is known as “influence peddling.” It is seen mostly in politics.

To encourage or assure that an official executes his or her usual tasks without any delay, facilitation payments might be given by a company to a government official. For example, when a company pays customs officials to avoid delays in shipment clearing. 

China, for example, has the busiest import and export ports in the world, leading to tough competition between importers and exporters of goods. Subsequently, a specific form of bribery and corruption has emerged. Bribing public officials and customs agents to avoid container certification, import regulations, legal customs, and other legal requirements is a typical bribery strategy used by organizations involved in the import-export industry.

Even though bribery and corruption do not always relate to illegal activities, they are ever-important facilitators for organized crime around the world.

Final Thoughts

This article explains how people or organizations use bribery and corruption for their personal gains. This article elaborates on ‘Bribery and Corruption: Definition and Process’. We can basically understand these two terms as an illegal or improper behavior aimed at gaining an unfair advantage through unethical means.

Leave a Reply

Your email address will not be published. Required fields are marked

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}