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What Is Corruption? It's Not So Simple

John Hooker, 01.04.10, 04:45 PM EST

For one thing, it depends on where in the world you are.

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There was an awkward silence when Terry Rhodes introduced himself to a group of government officials in a West African capital recently. He had called the meeting to discuss the license his company, Celtel International, needed to set up mobile phone service there. Rhodes and his partner, Mo Ibrahim, had founded Celtel in 1998 determined to do business in sub-Saharan Africa by playing it clean. Thanks to persistence and an understanding of local politics, they had already set up phone service in a few neighboring countries without paying a single bribe. Rhodes hoped this meeting would clear the way to securing a license for which they had already paid the statutory fee of $750,000.

Instead, the government officials said almost nothing. Only later did Rhodes learn why. One of them had sent a fax that morning to Celtel's Amsterdam headquarters listing the government representatives who would attend the meeting with monetary amounts next to them totaling about $50,000. These were payments just for attendance at the meeting. Further bribes would be needed to close the deal. Because of poor telephone service, Rhodes hadn't learned about the fax when he met the officials. They looked like they were expecting something, but with nothing forthcoming the meeting reached a deadlock.

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The corruption in that situation is obvious enough. Yet when you look at how business is practiced around the world, it's often not so clear what is corrupt and what is not. We typically identify corruption with side payments, cronyism and nepotism, but all those activities can be entirely legitimate when practiced responsibly in the right cultural context. Corruption is activity that corrupts. It undermines the system in which it occurs. Because business systems can work very differently, different kinds of activity corrupt them.

Lee Kam Sheung started the Chinese food products firm Lee Kum Kee as a small oyster sauce business in 1888. By 2005 the family-owned company employed 3,900 workers and was selling its products in 80 countries. Lee's grandson Man Tat was group chairman and had appointed his four sons to serve as chairmen and/or chief executives of various divisions.

Man Tat was aware of the importance of bringing managerial expertise into his growing company. He addressed that need partly by sending his sons to business schools in the U.S. before persuading them to join the company. He also set out to recruit non-family professionals as board members and high-level managers. He sought persons who, in his words, were "culturally attuned to the firm, and to family as CEOs of its divisions." That is, he wanted professional managers who were comfortable with nepotism.

Westerners tend to associate nepotism with lazy and incompetent relatives of bosses. Yet it can have definite advantages in a Confucian culture, where loyalty to the family is paramount. Where a Western grandfather may go easy on his grandson, a Chinese grandfather has authority. He may be able to extract more work from family members than from anyone else. They may not be the most talented possible candidates for a job, but the grandfather knows their strengths and weaknesses intimately and can assign them duties that take advantage of their particular skills.

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