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Enhancing Life Through Nation-Building: A Q&A with Dr. Stephen Lakkis

Corruption and the Panama Papers

June 23, 2016 • By Stephen Lakkis Corruption and the Panama Papers

At a recent international conference on business ethics and public policy, a German scholar casually wondered aloud why poorer countries couldn’t get their act together and stamp out corruption. After all, many western nations, like Germany, have admirable anti-corruption laws and practices. Why can’t others do the same? Some South Africans gruffly responded that if German companies would only stop coming and corrupting their government and industries, then their country might just have a chance! 

Over the last few months, explosive revelations from the Unaoil scandal and the Panama Papers leak show the extent to which corruption is rife around the world – especially behind the concerned ethical facade presented by major western nations and their corporations. 

It’s not surprising, then, that in interviews, Taiwanese business leaders see little difference between East and West—say between China and the US—when it comes to corruption and business culture. Leaders stress that the only difference is that Western companies have “different names” for illicit payments. While corruption is big news today, the levying and concealment of “commission fees”, “administrative overheads”, “operative costs”, “managerial surcharges”, “introduction expenses”, and “miscellaneous outgoings” have been standard for decades.

The cynical response would be to dismiss corruption as just a normal and universal part of business life around the world. Corruption is a “hidden cost” that simply needs to be factored into the balance sheet.

But if we aren’t willing to just accept corruption, and if we want to find ways to rein it in, then we need a deeper understanding of how systems of corruption develop and function. When we look closer, we find that corruption exists in vastly different forms, from influence peddling and political manipulation to the “old-boy network.” This makes corruption itself challenging to define. When we add cultural and religious factors, the task becomes even more difficult. 

The Panama Papers themselves suggest that there are also substantial differences across cultures and societies in the incidence of corruption. For example, the Australian Tax Office has identified approximately 800 individuals and more than 1,000 Australian-linked companiesin the leaked data. In Taiwan, a country roughly equal to Australia in population size, the names of more than 16,000 individuals have been exposed—a 20-fold difference. While these raw numbers don’t tell us much, when combined with the constant flow of corruption stories out of Asia (of prime ministerial corruption scandals, of presidential imprisonments and suicides), there’s good cause to search for deeper reasons for the amount of corruption as well as the types of corruption in Taiwan/Asia.

Transparency International, a global anti-corruption organization, suggests defining corruption as “the abuse of entrusted power for private gain.” But that doesn’t bring us very far. What are our criteria for distinguishing use and abuse? And is it even possible to disconnect work and human “sociableness” from the ingrained motivation for private gain? Don’t social, business, and political relationships grow from reciprocity and feelings of mutual gain?

Religious culture muddies the waters even further in Taiwan. Taoism, Buddhism, and Confucianism—which unite to create Taiwan’s local religious culture—all place substantial weight on loyalty, honesty, and mutual trust in human relationships. For local Taoists, it’s only through openness, honesty, and the proper way of the Tao that harmony or “synchronization” in a relationship can be achieved.

But Taoist interviewees note the growing modern temptation to bypass the Tao by placing trust and loyalty in something other than human relationships. For example, people depend on money and power, using those to manipulate relationships or to artificially solve problems instead of following the correct way of the Tao. Why seek balanced, harmonious relationships when we can just bulldoze over problems with money and power? But particularly damaging in the view of Taoist interviewees is the increasing trend to shift trust away from the human relationship and place it instead in the legal system and the business contract.

Here we see a striking difference between Euro-American and East Asian approaches. Taiwanese interviewees stress the absolute importance of the relationship (guānxì, 關係): it is expected that business partners and employees alike will place their trust in the human relationship rather than the law. Laws and contracts are seen as means for bypassing true friendship and true loyalty as the foundation for human relationships. This is increasingly opposed to a western approach where we see the shifting of trust and loyalty to the law as a positive move – since we know how deeply undependable human relationships can be, especially those relationships between people who are only connected through business. But in Taiwan we encounter a religious and cultural expectation that guānxì (relationships) will still transcend the importance of law, which could point to why “corruption” may seem more prevalent here.

This intense focus on loyalty and relationships of harmony can be immensely positive in business culture. But the downside is the ease with which “loyal and harmonious relationships of mutual interest” can tip over into systems of corruption. While none of this should be taken as a justification of corruption, it highlights the religious and cultural challenges we face when even attempting to define corruption, not to mention finding culturally appropriate methods to combat it.

Read a Q&A with Stephen Lakkies about his research here.

Photo courtesy of Hans Splinter via Flickr.