Problem

Unethical commercial practices


Experimental visualization of narrower problems
Other Names:
Commercial malpractice
Illegal trade
Commercial bribery
Commercial crime
Corruption by large companies
Illegal businesses
Misconduct in business
Nature:

Corrupt practices in business include diversion of company funds, tax evasion, and the use of bribery, intimidation and fraud. High company officials involved in corruption or seeking to extend the power of the company may offer bribes to public officials in return for favours. Commercial pressures on companies to improve performance increase susceptibility to unethical behaviour. Establishing criminal liability in such cases is a matter of law and evidence, generally with the requirement that the manager should know of the wrongdoing or be willfully blind to actions by a subordinate.

Corporate crime differs from white collar crime in that the latter is solely for the benefit of the individual, whereas corporate crime serves the corporate entity, even though in some cases the interests of the company and an individual may be connected. Embezzlement of funds from your employer is white collar crime. Deliberate inflated invoicing, which siphons funds from your clients' into your company's accounts, could be either corporate crime or white collar crime or both, depending on whether the perpetrator is able to take personal gain from the action.

A distinction can be also be made between unethical corporate activity undertaken at the discretion of a company employee and that undertaken with the tacit encouragement of, or by instruction of, superiors. Examples include cases where pollutants are dumped illegally to save disposal costs. It is considered impractical for top executives to know all the decisions taken by subordinates. In some cases such executives make it clear that they do not care how a job is done, provided it gets done. In other cases they deliberately turn a blind eye, or implicitly agree to it. And without in any way condoning unethical activity, executives may reward those subordinates who do get a job done under difficult circumstances. In all such cases the executives remain shielded from the blame by plausible deniability, although several countries have introduced new legislation to ensure that directors of companies are held liable for the criminal activities of the company and its employees.

Incidence:

The International Chamber of Commerce has had rules against bribery, but most countries continue to ignore them. European companies are free to indulge in such practices. Many of their governments actually encourage bribery by allowing exporters a tax write-off on foreign bribes (described as consultants fees) as a legitimate cost of doing business. Corporations seeking to trade internationally can rarely afford to be too sensitive to the standards of human rights in countries promising lucrative business.

Counter Claim:

Despite the fact that businessmen regard unethical practices as very widespread, pressures to conform are very strong. These pressures can be communicated directly from top management, with an immediate effect on lower-level managers. Three quarters of a surveyed group agreed that young executives automatically go along with superiors to show loyalty. Very often, however, there is no such communication from top management; the pressures are conveyed indirectly. If the incentives for achieving next to impossible goals – retaining one's job, promotions, bonuses, or salary increases – are too compelling, the temptation to lie and to cheat can grow intolerable.

 

Reduces:
Disloyalty
Problem Type:
C: Cross-sectoral problems
Date of last update
16.06.2018 – 22:04 CEST