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Corporate Corruption, Fraud: Low Risk, High Profit Business 

By Kennedy Abang — In Cameroon, corruption had become a low risk, high profit business. Corruption is rampant and pervasive and has permeated all spheres of national life. In government, civil society formations, academic institutions, religious organisations, industry, trade and commerce, corrupt practices are deeply ingrained in the Cameroonian psyche and have even attained the status of a sub-culture.

According to Transparency International (TI) Cameroon is number 134 out of 186 countries on the corruption perception index of 2011. In reality, the true extent of corruption cannot be calibrated against any scale.

There is no longer any shame in being corrupt. It is the person who tries to be honest who has to justify his honesty. Among the factors determining corruption levels are the individual’s sense of values and social norms inculcated at an early age. Hence, there are corrupt people even amongst the highest paid and the rich and there are honest people who are poor and do not get tempted into dishonesty, lack of transparency, bureaucracy and red tape.

Greed is another major driver of corruption. There is need to remedy this ‘cancerous disease’, as it is destroying the very fabric of corporations and society. Corporations are an extraction from the societies in which they operate. They are creatures of law that enjoy separate legal and juristic personality and exist because societies recognise that incorporation is an efficient form of organisation that benefits society as well as firms.

They are expected to be good corporate citizens. Corporations are legal construct – a relationship of forces with neither a physical existence nor conscience. They exercise their decision making powers exclusively through the intermediary of directors. Thus, corporate conduct and values is a reflection of human and societal values. The central purpose of incorporation is value creation for shareholders and other stakeholders on a sustainable basis. It is no longer about profit maximisation.

In the process of creating wealth, corporations provide products and services, employment and tax revenue. They act as the engine for economic development, thereby improving living standards. The corporate sector is the engine for growth of national economies. It underpins the foundation for sustained performance of countries and corporations.

However, despite the good they could do, corporations could also harm individuals, communities and the environment by pursuing their own interests at the expense of the societies in which they operate. Corporate scandals and failures have inflicted tremendous harm on societies, as evidenced by the recent global financial meltdown. Corporate malfeasance has become the bane of some captains of industry.

Corrupt Human resource practices, tax evasion and regulatory non-compliance have colluded to maintain a stranglehold over the jugular of state finances and have greatly undermined economic growth. This is where corporate governance comes in. Corporate governance is a system by which corporations are directed, controlled and held to account. According to corporate governance guru, Sir Adrian Cadbury, the aim of corporate governance is to align as nearly as possible the interests of individuals, corporations and society.

It is a tool to fight poverty and corruption by shareholders, boards, management and staff. It is founded on the four pillars of accountability, transparency, fairness and responsibility. Boards are responsible for effective corporate leadership as stewards on behalf of shareholders. They need to protect stakeholder rights and interests, manage risk and create business value.

A new way of looking at corporate governance emerging, is where a set of core values, encompassing human rights, environmental protection and anti-corruption measures, guide the board’s oversight, relationship with management and accountability to shareowners. The benefits flowing from good corporate governance are significant for the company and society. The long-term costs of corruption are high for both.

If corporations are to fulfill their major objectives, they need to behave ethically, which means acting in a manner that is morally right, as opposed to commercially or financially right. In today’s globalised and increasingly interconnected world, investors and all other stakeholders have come to recognise that environmental, social and governance responsibilities of a company are integral to its performance and long-term sustainability.

Over and above basic principles such as justice, mutual respect, stewardship and honesty, there is need for commonsense and moral reasoning, corporate codes of conduct and comprehensive personnel polices, including holistic management development.

Zero Tolerance For Corruption

In order to promote good governance and ethical behavior, let us re-inculcate moral values and apply external pressure by refining the legal framework and structures to make corruption a dangerous business. The system needs to encourage honest people while simultaneously punishing dishonest ones.

There should be mechanisms to confiscate ill-gotten property. In short, we must have zero tolerance for corruption. Good corporate governance and good business ethical conduct make good business sense. It is essential, for any society’s economic prosperity and social progress and has been shown to help fight poverty.

Lack of business ethics and good corporate governance give rise to corruption, corporate scandals and poverty. It affects the efficiency of the economy’s productivity by misallocating scarce and limited capital resources for sub-optimal outcomes. In such cases no one benefits.

Corruption is, basically, an aberration. It is dishonesty and it harms the interests of shareholders, stakeholders and society in general. Ethics go beyond the law, which generally only lays down minimum acceptable standards of behavior. The difference between an ordinary decision and an ethical one lies at the point where the accepted rules no longer serve and the decision maker is faced with the responsibility of weighing values and reaching a judgment in a different situation.

Examples of unethical conducts include the giving of gifts or gratuities to influence decisions, rewarding for reasons other than work-related performance, being dishonest with customers, falsifying (doctoring) accounting reports or records, over claiming expenses, insider trading and poor HR practices (nepotism, tribalism).

Regulators, industry mother bodies and the State should refocus their energies in the fight against corporate corruption, fraud and other forms of business malpractices and to encourage the adoption and enforcement of corporate governance code.

Such a code will greatly enhance good business and ethical conduct. And ultimately reduce the cost of friction with the social environment, motivate employees and make competitive sense. It reassures investors, suppliers and customers. It also enhances share price.

First published in The Post print edition no. 01353

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