Maintaining high status can spur bribery

September 26, 2017 by Greta Guest, University of Michigan
Credit: University of Michigan

Understanding what causes and predicates the bribery of government officials by high-level corporate executives has always been tricky. Self-reporting, even on anonymous surveys, is unreliable and data hard to come by.

Jordan Siegel, associate professor of corporate strategy at the University of Michigan's Ross School of Business, and Yujin Jeong of American University examined a trove of information released in South Korea that sheds light on when companies are likely to engage in bribery.

Siegel and Jeong used court verdicts from two high-profile bribery trials, publicly available financial information, and a social network of the country's leading business families to find patterns of behavior that can help predict when a company may resort to bribery.

"Once we put it together, there were some obvious patterns that were staring straight at us," Siegel said. "It wasn't the same companies paying the most in bribes every year. It varied. And we found that it wasn't the firms that were most secure in status or had low status, but ones that had high status and were encountering economic difficulties."

The government of South Korea released extensive documents after the trials of former presidents Chun Doo Hwan and Roh Tae Woo. Both received bribes from business groups during their terms in office from the 1980s and early 1990s, and the documents provided detailed information on who paid what to whom and when.

Chun and Roh were tried for corruption and ordered to pay back millions, and a significant number of business group leaders were found guilty of corruption charges.

Siegel and Jeong then looked at social network relationships involving the country's leading families.

"Marriage is a way in which powerful families have come together to form long-lasting ties," Siegel said. "Business in many cultures is based on trust, particularly in emerging economies. So we built a relational database based on the marriage ties between the families that controlled businesses."

They found that when a company with high status—with many connections in the relational database—lagged behind its industry peers financially, that was more likely to choose large-scale bribery as a nonmarket strategy.

"When you're in a high-status position you want to stay there," Siegel said. "There were a number of benefits to high status in terms of government support and you want to continue to have your children be part of the elite. There's really a high return to keeping your and a big downside—professionally and personally—to losing it."

The study is one of the first to use empirical data to show how social dynamics can contribute to illegal corporate activity. It also can serve as a guide to government and media watchdogs—especially in emerging economies—and give them an idea of which companies to more closely monitor.

"There are fewer monitors and watchdogs in many places that need them, so knowing what kinds of specific conditions create ripe conditions for can be a big help in simply knowing where to start looking," Siegel said.

Explore further: Tool created to help multinational companies assess risk of bribery when doing business in foreign countries

More information: Threat Of Falling Hight Status And Corporate Bribery: Evidence from the Revealed Accounting Records of Two South Korean Presidents: drive.google.com/file/d/0B16dM … SWt5ZzM3UWlfVk0/view

Related Stories

BBC reports BAT tobacco giant paid bribes in east Africa

November 30, 2015

British American Tobacco paid bribes to officials in east Africa, including two members of a convention created under the World Health Organization (WHO) to combat smoking, according to a BBC investigation airing on Monday.

Prospects of ending corporate corruption 'bleak'

October 15, 2014

Legislation designed to help law enforcement agencies respond to economic crimes such as corporate corruption and bribery is facing significant obstacles to enforcement – and the situation is unlikely to improve in the ...

South Korean court sentences Samsung heir to 5 years prison

August 25, 2017

A South Korean court sentenced the billionaire chief of Samsung to five years in prison for crimes that helped topple the country's president, a stunning downfall that could freeze up decision making at a global electronics ...

France's Sanofi opens research hub in China

September 25, 2014

French pharmaceutical giant Sanofi opened a research hub in Shanghai Thursday, the company said, as foreign drug firms face government scrutiny after drugmaker GlaxoSmithKline (GSK) was found guilty of bribery last week.

Recommended for you

Scientists solve mystery shrouding oldest animal fossils

March 25, 2019

Scientists from The Australian National University (ANU) have discovered that 558 million-year-old Dickinsonia fossils do not reveal all of the features of the earliest known animals, which potentially had mouths and guts.

Earth's deep mantle flows dynamically

March 25, 2019

As ancient ocean floors plunge over 1,000 km into the Earth's deep interior, they cause hot rock in the lower mantle to flow much more dynamically than previously thought, finds a new UCL-led study.

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.