Corruption in the private sector is equally wrong


  • Corporate News
  • Saturday, 08 Feb 2020

Golf course

IF anybody thought that the level of corruption in the public sector is bad – they are wrong. It’s worse in the private sector.

Offering bribes in exchange for contracts especially to executive in large companies with big budgets to spend is rampant. It is generally an accepted practice that businesses grease the hands of decision makers – whether they are in the private or public sectors – in exchange for favours such as a new contract.

It is often viewed as an acceptable method of growing businesses until somebody gets caught and the incident is exposed.

The bribes come in many forms and many places. For instance in Malaysia, one of the most common places where corruption takes place is at golf courses. The givers of bribes purposely lose their games in favour of the takers. The winners then collect cash from the losers.

Corruption and abuses goes beyond golf courses.

For instance the owner of a plantation company used to have a phalanx of bodyguards supplied by and paid for by the firm that was given the contract to maintain security in his plantations.

It would not have mattered if the plantation company was a private entity and owned by a single person. In this case, the plantation company was listed and had more than 1,000 shareholders. The owner gained at the expense of shareholders.

The owner of an education group had guards in and outside his house. The benefit came from the security form that was awarded the contract to handle the security system at the private colleges.

In one instance, the professional manager of a large listed company even had the guards of the company to handle his dogs.

Even journalists are guilty of corruption.

Sometime in late 2000, Siemens sponsored a junket trip for journalists to the US. Some journalists were simply “too demanding”, which prompted the Siemens executive to give them a lecture on the code of conduct that the company had adopted.

The journalists were told that the company would not pay for anything that it cannot account for or seen as offering a bribe. Siemens was then recovering from an explosive corruption scandal where it was charged with bribing government officials to win contracts.

The list of how corruption takes place can just go on and on. Companies, especially privately-owned entities do not bat an eye when securing contracts.

However such practices become a problem when it is listed and with a business that has a global reach. Siemens of Germany, Alstom of France, BNP Paribas and Goldman Sachs have all had to pay fines to authorities in the US and Europe.

Not many would be surprised that Airbus is the latest to join the list. It paid €3.6bil to regulators in the US, France and the UK for giving bribes in exchange for contracts in several countries including Taiwan, Indonesia, Malaysia, Nepal, Russia, China, Sri Lanka and Colombia.

Airbus’s stacks of documents implicated many who have come out to defend the allegations as not true.

Denial and continuous denials are the first reaction from most people when they are hurled with allegations of having benefited from acts of corruption.

One need not go too far to see that.

In the trial of SRC International where former Prime Minister Datuk Seri Najib Razak is charged with having received money in return for approving government backed debt papers for SRC International Bhd, his biggest defence is a flat denial of knowing anything.

In the case of SRC International, it involves public funds and hence the gravity of the offence is viewed with much seriousness. Najib faces criminal charges and custodial sentence if found guilty.

However when it comes to corruption in listed companies, it is seen as less damaging because those who lose out are the shareholders. There are not many cases where corruption and bribery involving key executives of listed companies end up with a custodial sentence.

Generally, the view is that the executives who have been compromised did not make decisions that were probably best for shareholders. It did not result in the company losing money. Hence it is less harmful compared to mishandling of taxpayers money.

Nevertheless, no matter how one looks at it, giving or accepting bribes is wrong, even if it impacts only listed companies because there are thousands of shareholders.

Normally, when there is a big blow up, a committee with representatives within and outside the company is set up. An inquiry is conducted and most of the time nothing happens to anybody.

In cases where the company incurs huge loses, the new board takes up a civil suit. Sime Darby Bhd and FGV Holdings Bhd have taken civil suits for mismanagement. However most of the time it does not yield the desired results.

It’s because to prove that decisions were not made with the best interest of the company because of kickbacks is hard. What happens in most cases is that the executives relinquish their positions so that the company that they build or work for is not compromised.

Over time, the executives will always be remembered for what they did for the company instead of what they were not supposed to do.

The views expressed here are the writer’s own.

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