Unethical commercial practices

Visualization of narrower problems
Commercial malpractice
Illegal trade
Commercial bribery
Commercial crime
Corruption by large companies
Illegal businesses
Misconduct in business
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.

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.

[Italy] Throughout the period 1992 through 1994 numerous examples of bribery of officials, politicians and ministers by corporate executives were brought to light, often with the involvement of organized crime. In the 21 months up to the end of 1993, some 3,000 businessmen and politicians had been implicated in corruption scandals. Even the largest corporations failed to use their political weight to protest the pattern of corruption. In the case of one corporation its income from postal service contracts rose one hundred-fold from US$1.3 million in 1987 when bribes were first paid, to about US$130 million in 1988, reducing to around US$40 million after bribes ceased in 1992.

[Japan] The Recruit affair concern the purchase of influence by business, which emerged in 1988, brought down the government. In the period 1991 through 1994 corporate executives were frequently forced to acknowledge unethical practices in the dealings with government officials over public works contracts. In 1994 the links of business to organized crime were highlighted by the murder of a senior executive for refusal to pay extortion money.

[Russia] A very high percentage of business activity was considered by all observers in 1993 to be operating outside any rules and frequently with organized crime connections. In 1994 it was estimated that two thirds of all enterprises were deep in corruption.

[South Korea] In 1993 one of the most respected industrialists was convicted of embezzlement for misuse of £42 million of his corporate funds to finance a presidential campaign. By the end of the year two other prominent businessmen had been prosecuted for illegally diverting funds.

[UK] In 1991 almost 10% of business collapse involved some form of fraud, largely in an attempt to disguise failure for as long as possible. By 1993 it had become apparent that the business community considered it legitimate to engage in "dirty tricks" against one another in order to ensure a competitive advantage. This was signalled by a £3.5 million settlement by a major airline against complaints by a small competitor involving: press disinformation, switch selling practices (using privileged information to lure customers), use of private investigators to seek damaging information, hacking into the competitor's computer system, shredding of incriminating documents. In 1993 the director of one company was found guilty of diverting £150 million and engaging in a £56 million tax fraud.

[USA] In 1994, for example, USA corporations attempting to do business in China subjected the US Secretary of State to extensive criticism for endeavouring to restrict trade unless human rights standards were met in China.

1. 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.

2. Businesses is certain countries are subjected to pressure from political parties to pay extra-contractual commissions which amount to racketeering. This is a systematic, total and unavoidable bargaining process imposed by party representatives in relation to everything that they are able to control.

(C) Cross-sectoral problems