Most discussions of corruption tend to narrowly focus on the financial sleazes that take place in the public sector. Rarely do we consider that unethical economic behaviours occurring in the private sector also constitute corruption. Perhaps, exceptions may appear to include the financial crimes committed at the banks and to some lesser extent in some other financial services sub-sectors. The reason for this is understandable. Since publicly owned resources belong to everybody, most people feel that they have a duty to show interest in its management. Unfortunately, the degree of confidentiality that covers the operations of private sector organizations makes this particularly tricky and challenging. Some efforts also go into better understanding and reining on the financial services industry because of its unique responsibility in keeping and managing people’s assets and resources. Even though the black box element in the activities of the banks remain high, there are evident justifications for this interest dating back to the history of bank failures in Nigeria. Aside from the financial services sector, even the economic value destructions that occur in some reasonably large and sometimes publicly quoted companies do not seem to attract such widespread interest. Notwithstanding these challenges, it is still strategically important to sustain non-interfering interest in the activities and ethical compliance of privately organized enterprises. One such reason is that private sector corruption affects the capacities of more players to contribute to speeding up our macroeconomic growth engines.
The investment activities occurring in the private sector generates employment, output, and income. It is a life-giver to the economy. Corruption, on the other hand, is the force of value destruction. As a canker warm, corruption in the private sector eats up the pillars of entrepreneurial acumen supporting it and the economy. Its effect on the private sector is much more devastating than in the public sector due to the employment and income reducing effects. Unfortunately, while it is reasonably more comfortable with gauging the level of corruption in the public sector, there are a few reliable published indicators on the nature and magnitude of unethical practices in the private sector. The scarcity of these indicators has given room to loads of guesstimates. For instance, there are schools of thought that believe that the level of corruption in the private sector by far supersedes what obtains in the government sector. Some proponents of the school believe that the private sector gives strength to a substantial part of the incentives for corruption in the public sector. They hold that much of public sector corruption is visible in the procurement process, which is rarely possible without the involvement of the private sector. And therefore, the private sector perhaps might be the corrupter of the public sector.
Practical evaluation of private sector corruption should ideally take into consideration the nature of interactions between the public and private sectors on the one hand and competing firms within the private sector. In all these levels of interactions, observable infractions usually include kickbacks, money-laundering, product faking, conflicts of interests, bribery, fraud, and so on. Although some of these unethical corporate behaviours have resulted in massive economic successes in several organizations practising it, it has also substantially redefined the rules of competition in many of the industries where they are pervasive. For instance, it is very much likely that many of the erstwhile averagely performing banks that dramatically joined the tier-1 category achieved the feats by redefining the competitive landscape through unethical practices. Some of the deployed corrupt tactics included the hefty kickbacks to permanent secretaries of federal and state ministries for deposits as well as the manipulation of the capital market that gave them unmerited competitive advantages over others. The extent of consideration of some of these activities as unethical may also depend on the specific context. Lobbying in many respects a perceived as a form of bribe-giving, yet it is an accepted tool in engaging with public sector decision-makers. Similarly, gift-giving is a popular marketing tool deployed in winning new transactions, yet it serves as an oversized cloak hiding bribery.
One primary reason for combating corruption in the private sector is because of its distortion of the market and the consequent creation of unfair competition. Bribe taking, for instance, indirectly undermines the procurement process and somehow compels the process managers to exclude other competitors or at worst to minimize the transaction opportunities that other competitors should legitimately access. That jeopardizes the natural order of rivalry that characterizes entrepreneurial competition and smothers more innovation, better quality goods at lower prices. The same argument extends to the use of this bribe and lobby mechanisms to fraudulently influence regulatory decision-making to favour the corporate givers of such. That is why many people question the propriety of appointing managing directors of commercial banks to lead the central bank of Nigeria. It may not be wrong also to argue that the machinery of lobby and bribing would have been the key reason why the scion of an organization within a fiercely competing industry should be the ombudsman of the same industry. It would be difficult to convince anybody that these appointees will not tamper with the rules of competition in favour of the companies that produced them.
The private sector is also notorious for exploiting tax laws to their advantage by abusing legal ambiguities within them. While it is incredibly discouraging to pay corporate taxes in Nigeria, it is nevertheless an obligation demanding compliance. Thankfully, some categories of entrepreneurs have recently received some relief. That notwithstanding, corporate tax evasion remains quite high and unofficially estimated at up to 55% loss to the government. Many analysts consider it the most common fraudulent act by Nigerian citizens and corporates. Of course, the implications are well-known. Governments lose the much-needed fiscal firepower to finance the socio-economic needs of the citizens.
What of the fraudulent conspiracy of many companies with the members of staff of several quality-control organizations that provide them with the cover to reduce production costs by reducing product quality? There the many unpleasant experiences of the purchasing public that are cheated by several companies selling substandard and low-quality goods at premium prices. From Indian firms to Chinese companies that seem to have practically bought over our regulatory bodies and are now free to produce or import any quality of products into the country without any disturbance, the story is the same. Consumers pay so much for what is practically worth nothing. The stories are endless.
The pressure to remain in business and equally succeed in it often provides justifications for corrupt activities that are rampant in the private sector. Reasons like this do not differ from what criminals adduce for their actions. It means, therefore, that they are not good explanations for the harm that they orchestrate on society. There is also this misleading cliché that “every company does it,” which culpable firms lean on to continue in their corporate sins. Just as everybody is not and cannot be a thief; likewise, all organizations cannot deliberately choose pathways that are reprehensible under the false belief that all other organizations are doing the same thing. We have worthy organizations that are committed to conducting their businesses on strong ethical principles. Those organizations are not interested in joining the complicit bandwagon. There is also the notion that the “end justifies the means”. That defective ideology also leads to a “dog-eat-dog” type of rivalry in pursuit of supernormal profits. No society folds its arms and watches the doctrine of the “end justifying its means” define the course of its socio-economic development. The “hows” of attaining goals are as important as the end. Otherwise, we would rather sit back in applause for successful armed robbers and kidnappers and other kinds of criminals.
In effect, therefore, there is a need to give more attention to private sector corruption as much as is given to public sector corruption. Because of the synergy between the two, it is evident that focusing solely or more narrowly on public sector misdemeanours, without also addressing one of its primary drivers, efforts put in it produce less than optimal results. The handprints of the private sector are always in several public sector corruption cases. The pursuit of public sector contracts leads so many of them to several unethical and unprofessional acts. And the annoying thing is that while the public sector counterparts who receives a bribe is labelled corrupt, the private sector inducer walks away as entrepreneurially smart. The private sector accomplice walks away free, untainted. That means that the private sector has a huge role to play in effectively combating corruption. By persuading and challenging organizations to appoint credible board members with impeccable characters, there will be much success in planting no-nonsense corporate governing bodies that would not tolerate corrupt practices. People reputed for high integrity often do not want to be associated with shady activities. Their well-cherished reputation will always win more businesses. Similarly, professional bodies and membership organizations have a significant role to play here. For instance, it may not be out of place for the Institute of directors to harp most stridently to its members about this and ensure that companies associated with its members are free of such ugly smears of corruption.
Unfortunately, very few private sector corruption cases make it the courts. One of the reasons for this is a deficient understanding by many that this acts a corrupt. Effectively managing this requires some additional efforts in orientating the masses. In doing this, the focus should be more on some activities hitherto taken for granted, which are ordinarily criminal if given more appropriate interpretation. The criminalization of private sector corruption will result in marked reductions in the levels of infringement. On the same note, membership organizations should as part of their self-regulating role, incorporate anticorruption networks within their system of operations. This network will have the responsibility of identifying, investigating and ostracising members who are irredeemably neck-deep into corrupt acts. By extension, this should also include the blacklisting of corrupt private sector organizations from participating in significant government contracts.
Frontpage February 5, 2020