'Clean' companies in a corrupt system
Posted on July 25, 2013
It is always a puzzle to me as to how 'clean' companies work in a corrupt system. There are many of these companies. Some are multinationals whose internal code of ethics do not allow them to bribe a public official anywhere in the world. Some are Indian companies which do follow some code of ethics internally, and some which speak about ethics and maybe do take some effort to follow up on their thoughts.
Majority of the Indian companies are comfortable in bribing government officials and getting their way through. It is very clear. But the question is how are the clean companies getting along and how are they fighting the competition.
A recent survey titled - Bribery and corruption: Ground reality in India ; A survey by Fraud Investigation & Dispute services' conducted by Ernst & Young and Federation of Indian Chambers of Commerce and Industry (FICCI) throws some light on the issue.
The report mentions how companies circumvent the 'bribe question' and find innovative ways to pay a bribe and still keep their account books clean. One way is to pay high salaries to selected employees with an undertaking that the excess amount would be used to make improper payments.
Second and the most common way is routing bribes through facilitators, who are mostly vendors or material suppliers to pass on the cash, keeping the company officially out of the loop.
Third would be to pay vendors a 'performance bonus' to procure a licence or to get work done at the government level.
The most common appears to be hiring a government official after retirement and paying him a regular 'performance' bonus for getting things done from the government. Mind you, these are for companies which feel that they have some ethical policy, and which feel a need to be less brazen about it.
But the question is how do they hide it in their accounts? The report recounts quite a few simple tricks. One, is to record bribes paid as money paid for repairs and maintanence or as annual performance bonus payments for dealers and distributors. Amounts spent on gifts is normally recorded under reimbursement for meals, refreshments or travel.