While big news of companies running afoul of general business ethics in emerging markets sprout up every year or so (see Alstom, Siemens, many others), experienced executives know that lurking dangers aren't exclusive to mega-contracts. Executives in emerging markets face pressures and decisions every day that can cross the line into unethical practices. What's harder, where that line exists is not always clear. Ernst & Young in its 10th global fraud survey found that 2/3 of respondents knew nothing about the Foreign Corrupt Practices Act--the emerging standard for ethical behavior globally.
One of our telecom industry members, considering entering an African nation, posed a question to our network around how others address variability in ethical practices across emerging markets. Strongest point coming out of responses from other experienced executives: Don't fall into the trap, even if it means reducing your competitiveness locally.
Some very useful tactical points also came through:
1. Clearly establish your own benchmarks: Members recommend developing detailed policy manuals for operating standards in international markets, including a section on dealing with bribes. This not only serves as an internal "check-point" for staff, but also as a leverage point in negotiating unethical terrain: "We've got clear policies here. See for yourself. Here are my limits."
2. Do it yourself: Third party relationships (brokers, distributors or agents, particularly when they're local) open you up to
some very bad potential situations. These partners often won't consider themselves bound to the same restrictions as you are, and won't always feel a need to tell you how they're getting things done. Although some might view this as a plus--"Wasn't me. I didn't tell them to do that"--if things go wrong, you'll be in as much deep water as those partners, if not more. As one of our members put it, "Direct employees or proven 3rd parties are your only
likely shot at conforming to business practices while maintaining ethical
approaches."
3. Tease within your boundaries, but never go all the way: A health care industry member shared successes with hinting in negotiations at great things to come to get a foot in the door. "'Don’t worry we
know how to look after our friends,' or 'we of course will show our deep
gratitude after we get the contract.'” Of course this is often code for a bribe, but it doesn't have to be. The trick then is that once a deal is closed, small gifts like a watch with your company logo or a fancy dinner are sufficient. When the expectation of a payoff is then brought up, as the member notes, "you can
say something like 'Oh, I would never insult a respectable person like yourself
by offering a bribe.'" Caveat here is that it will probably only work once with any local party, and only a couple of times within any country. But once you're viewed as a lucrative partner regardless of your standard ethics, interactions and expectations can often change.
[CEB members who would like to view detailed member responses to this question, email us.]
