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Corruption

Corruption as defined by Webster’s Collegiate Dictionary (11th edition) is an “inducement to wrong by improper or unlawful means (as bribery).” Political corruption, that is, corruption of a political system or institution where public officials seek illegitimate personal gain through actions such as bribery, is the kind of corruption that directly affects the financial side of business.

The level of corruption that is present in a system will affect how business is conducted between companies as well as the interaction or payment required by government or other officials. Being aware of the potential situation and the possible added costs to business are important for an international manager to prepare for. One tool that can be used is the Corruption Perceptions Index, which measures "the degree to which corruption is perceived to exist among public officials and politicians."

Blue colors indicate little corruption; red colors indicate much corruption. Data source: Corruption Perceptions Index 2006 by Transparency International

The greatest challenges occur when business is conducted between companies located in a country that is blue and one that is red. Understanding that the individuals in the red country may not consider bribery illegal or immoral but simply the way business is done can be a significant challenge for “blue country” companies.

Questions that international managers may have to consider include the following:
1. How much do we budget for “grease payments”?
2. Can such payments be legally made?
3. How are such payments accounted for on the financial records?
4. Will the delay in such payments result in a slowdown of business or payment?
5. Will a larger payment from a competitive company limit our ability to conduct business?

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