March 2018
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How Do You Avoid Corruption in Endemically Corrupt Places?

Balancing the cost of walking away against the price for paying up.

IKEA just fired two senior managers in St. Petersburg, Russia for paying bribes. The firm has a very public position on refusing to pay for corruption. Their store in Samara stands empty a year after it was finished, reportedly because the firm refuses to pay off local officials. Their St. Petersburg store ran on generators for several years, because management apparently refused to pay bribes to get connected to the local electricity net.

Now the firm has a scandal to manage because their managers seem to have paid bribes after all. Some argue that the firm would have been better off paying from the start to avoid “administrative difficulties”. Even experts argue that it is impossible to avoid corruption in Russia.

Meanwhile, BAE, the British defense firm, is finding that paying up has risks as well. The firm just agreed to pay a 400 million dollar fine in the United States, to settle a case involving the bribery of officials in Eastern Europe, Saudi Arabia, and Africa.

BAE found no protection the fact that the alleged crimes did not take place in the United States. US legislation covers any firm doing business in the United States and presents a dilemma. Can you afford to accept bribery as the price of doing business in endemically corrupt places and risk becoming a target of the United States Department of Justice?

Now that accepting corruption no longer seems to be the easier option, how do you convince the official with hungry pockets that you simply can’t pay up?

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