In the opinion of Pickett and Pickett (2012), corruption may be described as the misuse of power for individual gain. Sometimes, corruption is interchangeably used with bribery. In the opinion of Santoro and Strauss (2013), bribery is the act of offering, seeking or receiving any valuable item to sway the actions of people with power in discharge of public duty. Forms of corruption involve fraud, embezzlement, favoritism, collusion, and extortion. Evidence shows that corruption and bribery have been practiced for many years; although up to date, they have attracted increasing attention. It is unclear whether the attention of corruption and bribery reflect a growing awareness or a growing scope of the vice. Nonetheless, according to Cheng and Ma (2009) corruption and bribery has increased within the recent decades.
The factors or causes, which encourage corruption, are those, which influence the demand for corrupt acts, as well as those, which influence the supply of acts or deeds of corruption. Factors influencing the demand include authorizations and regulations, some spending decisions, as well as provision of services and goods at prices that are below-market. Factors influencing the supply of deeds or acts of corruption include bureaucratic tradition, penalty systems, institutional controls, level or degree of public sector incomes, transparency of laws, processes, and rules, and examples of the leadership (Bowen, Edwards & Cattell 2012).
The Causes of Bribery and Corruption
One of the sources always mentioned particularly for corruption and bribery is the inadequate remuneration of state employees. One can argue against a view that within states or societies where corruption and bribery are unchecked, unemployment rate is always high and government officials are advantaged in that they have secured a job as well as remuneration. Nonetheless, according to perverse way of thinking, this view, more often than not, is made that compensation or remuneration of the government employees or officials can be kept low as civil servants have the privilege or chance to supplement with bribes (Nestor 2009). Moreover, salaries are normally not paid or processed regularly, and it is usual for government employees to go with no salary. Even in situations when salaries are paid or processed, unwritten rules can compel civil servants to assist their extended family members with favors and cash.
The instability or insecurity of the political structures of many nations or societies is a major source of corruption. Politicians purchase votes to secure electoral positions, and once in, indulge into corruption to secure financial independence because they do not expect pension once out of office. Within many nations, the common argument is cynically conveyed that individuals who never exploit such opportunity are stupid and naive rather than honest (Masciandaro 2010).
Peer pressure can too lead to public officials involving into corruption and bribery since the latter or corruption is quasi institutionalized within branches of civil service or system of government. It is challenging for newcomers to question a system in which boss is part.
The Means and Ways of Corruption
Corruption is executed in many shapes and forms and the thoughts of the corrupt appears to have no boundary as to the paths and methods pursued to attain their goal. No matter the cause of bribery and corruption, it often includes the misuse of discretionary power and/or of total control over a service or a resource as a lever. With this respect, every requirement for a formal authorization, every point of control as well as every regulation is possible toll stations. Therefore, it is not surprising that societies or nations where corruption and bribery are rampant show an especially dense regulatory environment (Ragatz & Duska 2010).
Threats or risks of an unfavorable or poor decision: it is regrettably a frequent event within some societies or nations for the police officers to stop drivers then accuse them of an alleged or real violation of traffic with certain hint that it may be settled or cleared via direct payment. Immigration or customs officers can accept payment via cash to clear individuals or goods via immigration even if certain documents are defective or missing. More often than not, the public takes the initiative to provide immediate settlement if they have the impression that the civil servant is open to such transaction (CISEC 2010). Tax audits too are a favored area or department for soliciting or providing a bribe since the evaluation of the outcomes of an audit relies on the auditor’s discretion (Gill 2009).
Kickbacks on state contracts: in many states, industries tendering are faced with the solicitation or bribery of a portion of the contract value to be rewarded to one or many public servants who have contributed towards the contract award (FCEN 2012). Requests are normally made prior to the process of tendering or when the contract is awarded with some threat of revoking the award and/or of interrupting the completion of the contract. A number of firms cannot wait execution of such request instead will attempt to be competitive by providing a kickback. Whether such kickback is offered or solicited, payments are made via an agent to a letterbox firm within an offshore centre (McCosh 2009).
Participation of politicians or public officials within firms involved within government contracts: for long-term projects, foreign investors are always invited to form a mutual venture with a home partner in which politicians or public officials are participating or taking part at preferential terms. The preferential conditions are, nonetheless, bribe destined to protect or secure the award as well as the smooth execution of the project (Weismann & American Bar Association 2012).
Trading in influence involves granting or accepting an unjustified advantage so that an individual may exercise his/her influence in favoring the preferences of another individual with the public or administration authorities, regardless the success of such an influence. Nonetheless, not all exercise of influence can be viewed or taken as unlawful trading in influence (Osborne 2009).
The Consequences of Bribery and corruption
Corruption and bribery implies a distortion of the resources allocation. The forces of market, which are expected to ensure an optimal labour and capital allocation, are non-operational. The awarding of contracts, more often than not, goes to those paying the highest bribe instead of the lowest bidder, which in turn, is an additional cost and, per se, increases the price (Ethics 2012).
Corruption and bribery distorts resources allocation and inflates projects’ costs: where the paid bribe is expressed like a proportion of the project’s total cost, as is normally the case, individuals who manage or control project’s specifications have an enticement to over-engineer a project to maximize their commission. Within some extreme situations, projects have been finished without justifications, for example, bridges constructed without a road; the intention of such projects are to disguise and support bribery and corruption (Gottschalk 2010). In these situations, resources, which could rather be usefully committed to improving the well-being of the society, are wholly or partly invested with no rightful purpose, a part from maximizing an unlawful gain for a few individuals (US 2010).
The misallocation of the resources due to corruption and bribery does not just imply higher costs although also affects or influences the quality or value of the involved services and goods. Any bidder certain of getting contract award due to paid bribe or corrupt acts has low motivation to ensure quality standards. In contrast, the bidder will at all times attempt to recover bribery cost by lowering the quality standards (Banuazizi 2010).
Generally, the multiplication and the slowing down of the administrative processes, which accompany corruption and bribery, discourage business and investment (Prasad 2012). Working slow permits in order to obtain bribe for faster working and every additional process is another toll in the road to developing or creating a business (Simonet 2011).
In summary, the paper explains the incidence and damages that bribery and corruption brings to democracies and economies. When corruption and bribery is widespread and, particularly when it interferes with the process of policy making and award of contracts within market-oriented economies, then it becomes challenging to have developments. Corruption and bribery is linked with the manner governments manage their affairs within the modern societies. As a result, the growth of corruption and bribery is likely linked with the development of certain activities of the government within the economy.
List of References
Banuazizi, A 2010, “ Faltering legitimacy: The ruling clerics and civil society in contemporary Iran.” International Journal of Politics, Culture and Society, vol. 6, no. 1, pp. 6-7.
Bowen, P. A., Edwards, P. J & Cattell, K 2012, “ Corruption in the South African construction industry: a thematic analysis of verbatim comments from survey participants.” Construction Management and Economics, vol. 1, no. 2, pp. 10-12.
Cambridge International Symposium on Economic Crime 2010, Journal of financial crime, Henry Stewart Pub, London.
Cheng, H & Ma, L 2009, “ White collar crime and the criminal justice system : Government response to bank fraud and corruption in China.” Journal of Financial Crime, vol. 4, no. 2, pp. 5-7.
Ethics: A handbook for financial services professionals, 2012, Silver Lake Pub, Los Angeles, CA.
Financial Crimes Enforcement Network (U. S.) 2012, The role of domestic shell companies in financial crime and money laundering: Limited liability companies, Financial Crimes Enforcement Network, Washington, D. C.
Gill, M 2009, Accountants’ truth: Knowledge and ethics in the financial world, Oxford University Press, New York, Oxford.
Gottschalk, P 2010, Investigation and prevention of financial crime: Knowledge management, intelligence strategy and executive leadership, Gower Pub, Farnham Surrey, England.
Masciandaro, D 2010, Global financial crime: Terrorism, money laundering, and offshore centres, Ashgate , Aldershot, Hants.
McCosh, A 2009, Financial ethics, Kluwer Academic, Boston.
Mills, A 2009, “ Ethical decision making and policing – the challenge for police leadership.” Journal of Financial Crime, vol. 1, no. 7, pp. 21-22.
Nestor, S 2009, “ The impact of changing corporate governance norms on economic crime.” Journal of Financial Crime, vol. 3, no. 2, pp. 8-10.
Osborne, D 2009, “ Transparency and accountability reconsidered.” Journal of Financial Crime, vol. 1, no. 4, pp. 9-10.
Pickett, K & Pickett, J 2012, Financial crime investigation and control, J. Wiley, New York.
Prasad, N 2012, “ Privatisation Results: Private Sector Participation in Water Services After 15 Years.” Development Policy Review, vol. 3, no. 4, pp. 7-9.
Ragatz, J & Duska, R 2010, Ethics for the financial services professional, American College Press, Bryn Mawr, PA.
Santoro, M & Strauss, R 2013, Wall Street values: Business ethics and the global financial crisis, Cambridge University Press, Cambridge.
Simonet, D 2011, “ The New Public Management Theory and the Reform of European Health Care Systems: An International Comparative Perspective.” International Journal of Public Administration, vol. 2, no. 3, pp. 21-25.
United States 2010, The Cash connection: Organized crime, financial institutions, and money laundering, President’s Commission on Organized Crime, Washington, D. C.
Weismann, M & American Bar Association 2012, Corporate crime & financial fraud: Legal and financial implications of corporate misconduct, American Bar Association, Criminal Justice Section, Chicago, Ill.