Thursday, August 6, 2009

Bribery.........and Extortion

Bribery is a red rag to any BE practitioner. But I would like to throw a big red flag at the BE community by adding a new word to the Ethics dictionary - Extortion. I met a businessman a few days back who runs a medium sized firm and asked him if his firm paid bribes. He said "I have a policy of not paying bribes, but I do get extorted from time to time. I have been trying to resist being extorted without success". Now, there is a subtle difference between bribery and extortion. One normally pays a bribe to give legitimacy to an unlawful act, like a pollution clearance for untreated effluents. But extortion is where you are forced to pay a fee for getting permission to carry out a legal business activity. A property developer in Delhi has to pay a "fee" to get legitimate building plans approved, an activist in Manila has to pay a "fee" to get a non-profit registered and I learnt that even in some US cities there is a "fee" for getting licences to start a petrol pump or a restaurant. Large business houses and MNCs have the ability to avoid being extorted or to manage this by engaging lawyers or agents or franchisees to do the not so clean work, but most small businesses have no easy escape routes. Extortion raises a number of interesting questions for the BE community. Firstly, it does not qualify as a payment for routine governmental action, so what would be the status of extortion vis-a-vis FCPA? A small business that resists extortion may soon be out of business, so would we label a small firm as 'unethical' for allowing itslef to be extorted? Can organisations equip themselves not to be extorted, or atleast to reduce the frequency of the experience? I met a German who lives in Hyderabad in India and runs a bio-tech exporting company there. He told me how he has put in place an elaborate mechanism in his company to avoid being coerced. What he told me was fascinating, but that would be another blog. I would'nt like to extort too much of your time at one go!

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