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Corporate corruption: how is it defined and what are the common forms of corruption

Updated: Jan 7

To say that corporate corruption is a real scourge is not rhetoric, but it is the numbers that confirm this costly reality: it is estimated that around 2.6 trillion dollars are lost worldwide due to corruption, practically 5% of the global GDP.


According to a study by DNV Assurance, over half of companies have implemented an anti-corruption policy, but only 3% are familiar with the international anti-corruption standard ISO 37001 or similar anti-corruption standards. This means that efforts to combat corruption within companies are still inadequate to contain the phenomenon.


Companies, in fact, seem focused on regulatory compliance without implementing concrete measures such as the adoption of tools for reporting corporate misconduct (whistleblowing). However, it is precisely by underestimating these aspects that the corruptive phenomenon continues to perpetrate, damaging the company itself primarily.


To prevent episodes of extortion, clientelism, favoritism, or other forms of corruption, it is essential to accurately define the phenomenon and understand common forms of corporate corruption.


Article contents:


Corruzione aziendale: come si definisce e quali sono le forme di corruzione comuni

How to define corporate corruption


The correct definition of corruption refers to the practice of a subject (the corruptor) inducing a person (the corrupted) to act inappropriately towards their organization in exchange for benefits.


Inappropriate conduct occurs within work activities, whether public or private, where the subject is encouraged to take actions contrary to their duties or obligations towards the company.


The benefits offered in the context of corrupt practices can be of an economic nature (money) or otherwise. Both those offering the advantage and inducing the act of corruption and those accepting the proposed advantage are involved in corruption. The reverse process, i.e., the act of requesting an advantage in exchange for an illicit attitude in the workplace, also falls within the definition of corporate corruption.


So, what is corporate corruption?

It is an attitude that disregards the interests of the company, undermining its integrity to the detriment of the common good and workplace well-being.


Corruption is often confused with a conflict of interest. However, the latter, despite being an ambiguous situation, does not necessarily lead to the commission of a crime.


Corruzione aziendale: come si definisce e quali sono le forme di corruzione comuni

Different forms of corruption in the company


The difficulty of recognizing and containing corruption in organizations is strongly linked to the various and multiple forms of corruption that can be implemented:


  • clientelism

  • familism or nepotism

  • favoritism

  • patronage

  • embezzlement or embezzlement

  • state capture

  • tangent

Let's delve deeper into them.


Clientelism

One of the oldest forms of corruption, clientelism is based on an exchange of benefits between two parties. Generally, one or more influential individuals grant favors to those who would not be entitled to them.


The relationship is based on mutual benefit, where the person granting the benefit (allocation of resources, privileged positions, jobs, etc.) still has their own gain (e.g., votes during elections).


familism or nepotism

As the terms suggest, nepotism or familism occurs when family members and friends of those in leadership positions are hired within the company.


Promotion or hiring occurs regardless of the person's qualifications, sometimes to the detriment of those with greater competence within the organization. This is clearly detrimental to the company because it disregards the actual qualities of the person, also fueling discontent among employees.


Favoritism

Very similar to nepotism, favoritism involves favoring one person over others. This happens regardless of professional capabilities because preferential treatment is based on feelings such as sympathy or attraction.


Although not officially illegal, it can lead to discrimination based on race, gender, sexual orientation, health status, family obligations, or towards pregnant women.


Patronage

Patronage takes the form of remuneration that those in power grant in exchange for votes or other advantages.


Embezzlement or Misappropriation

The Penal Code defines embezzlement as a form of corruption in which "anyone, to procure an unjust profit for oneself or others, appropriates another person's money or movable property." Typically, those committing the crime of embezzlement within the company hold a position of trust.


State capture

State capture involves bypassing normal procedures to promote private interests. It is an extremely serious form of corporate corruption carried out against the state or public officials.


Bribery

Corruption related to bribes is considered a crime involving both the corrupted and the corruptor. In practice, the corruption offense occurs both when receiving or requesting a bribe and when offering one. A bribe refers to a benefit, in the form of money or other value, in exchange for the improper exercise of one's role within the organization in favor of the corruptor.


Corruzione aziendale: come si definisce e quali sono le forme di corruzione comuni


How to fight corruption?

Gifts, job promotions, gift stays, contract awards, money in exchange for favors are all examples of corporate corruption. But there are many situations, even at the everyday level, that can hide illicit behaviors and corruption.


For example, a sales director offering personal advantages to the purchasing office director of a company to which they intend to propose a supply. Or the president or director of a company offering a bribe to a political figure or official to secure a contract.


Implementing anti-corruption measures within the company is essential to prevent illicit behaviors and address any cases of corruption. The crime of corruption not only entails significant social costs but also compromises corporate well-being, exposes the organization to heavy sanctions, and can have serious consequences for the entire business.


Therefore, it is advisable to have a genuine anti-corruption strategy that includes measures at the organizational, control, and personnel management levels.


To comply with whistleblowing regulations and implement your anti-corruption strategy, an important step is to equip yourself with a tool for reporting corporate misconduct, which clearly includes corruption. Qomprendo is a platform designed to detect issues within the company and understand the dynamics at play. It is an indispensable tool to align the organization with regulations but, above all, to preserve the integrity of employees and the well-being of the company.


Request your demo now and promote social responsibility in your organization!


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