840723125002001 VOO SIEW FUN OUMM 3203

FACULTY OF EDUCATION AND LANGUAGES

2013 MAY SEMESTER

OUMM 3203 PROFESSIONAL ETHICS

MATRICS NUMBER ID NUMBER TELEPHONE NUMBER E-MAIL ADDRESS

: 840723125002001 : 840723125002 : 0168217033 : fenvs@hotmail.com

LEARNING CENTRE

: SABAH LEARNING CENTRE

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Table of Content Content 1.0 Introduction 1.1 Definition of Bribery 1.2 History of Bribery 2.0 Content 2.1 Economic Analysis 2.2 Legal Analysis 2.3 Ethical Theories 3.0 Conclusion 4.0 References

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1.0 Introduction 1.1 Definition of Bribery According to Oxford Concise Dictionary, bribe is defined as -dishonestly persuade (someone) to act in ones favour by a payment or other inducement. Hence, bribery will be the action of dishonestly persuading someone to act in ones favour by a payment or other inducement which could include money, asset, safety, entertainment, etc. According to www.thefreedictionary.com , bribery is defined as the process of giving or taking bribe. Bribery itself had been an action which had human had partook in since decade or even centuries ago. This by itself is proven when tons of words of metaphor now exist just to describe bribery. Among them include the famous phrase blood money which is used to describe the money paid as a reward for incriminating evidence or betrayal, especially such as will result in anothers death. The extend of the action of bribery within our current society warrant a thorough research on the background of the word bribery. Referring to Michael Quinnion (n.d) the word bribe originated from medieval French. At that time, bribe simply means a piece of bread. By a linguistic game of consequences, this word then changes to mean a piece of bread given to a beggar which will then be generally known as alms. With the continuing changing trend and passing time, bribery now means the action of giving or taking bribe. 1.2 History of Bribery The action of bribery had left its scar among mankind history and it had played a significant role in shaping the world as it is today. One of the most famous corruption scandals include the case of U.S. V. Stanley, 08-cr-00597 (Micheal N.Mllby, Clark, 2008) where Albert J. Stanley was sentenced to 2 and a half year in prison for bribing Nigerian officials to win 6 billion in natural gas contracts for the company and its partner. On September 2008, Stanley pleaded guilty in violation of the U.S anti-bribery law, the Foreign Corrupt Practices Act, and agreed to make restitution of 10.8 million and faces as long as seven year in prison under the terms of his own cooperation agreement (Laurel Brubaker Calkins, 2012) Lets not forget, in the year 2006, according to the Department of Justice of United States (2010) Alcatel- Lucent S.A and three of its subsidiaries have come to an agreement to pay a combined
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92 million of penalty to resolve a Foreign Corrupt Practice Act investigation into the worldwide sales practice of Alcatel S.A prior to its 2006 merging with Lucent Technologies Inc. These are mainly a few well known cases of bribery which had shook the world to how dirty and corrupted big corporate can be and how deep bribery had stained our world. What even more shocking is the fact that even the world leading figure are not out of the so call game of bribery. This is proven when the vice president of United State, Spiro Agnew was acquitted of bribery and was forced to resign (Charles J. Holden & Zach Messitte, 2006). Even before his rise to the seat of vice president, Spiro Agnew was a Governor of Maryland from 1967-1969 where it is known that he had taken inducement and was even responsible for giving them. His action doesnt stop even when he took the seat of vice president of Richard Nixons vice president from 1969-1973. Such act was deemed to be unethical and unfit not just by professional standard, but by human moral standard.

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2.0 Content 2.1 Economic Analysis Analysis of the act of bribery had taken place in a few different grounds, and among them are the economy analysis of bribery and extortion. According to Susan Rose- Ackerman (2010), economy analysis can help one understand the incentive of bribery and extortion and the deterrent effect of the law. This analysis falls into two broad categories, where economics can help to isolate the underlying factors which produce corrupt incentive, independent of strength of bribery laws and where economic principles can help one assess the laws of policies against bribery to see whether they deter payoffs effectively (Susan Rose- Ackerman, 2010). In short, economy analysis can help guide the proposing of workable law enforcement strategies for control of bribery and extortion. A cross country empirical investigation proven that corruption is associated with lower levels of investment, productivity, and growth and that corruption reduces both capital inflow and foreign direct investment (Mauro 1995, Wei 2000, Graf Lambsdorff 2007). Highly corrupted countries tend to spend less on education, to over invest in public infrastructure, and to have lower levels of environmental quality (Mauro,1998 Etsy & Porter 2002, Tanzi & Davoodi 2002). Hence it could be said that with corruption, the growth of a country is retarded. In the ground of economy analysis, inspired mainly be the CPI- index of transparency International studies, several theories had been raise to further study the cause and effect of corruption, and among them include the micro-economic bureaucracy-models (Jens Chr. Andvig & Odd-Helge Fjeldstad, 2000). In this theory, it is understood that in any public or private organization, there is a flow of hierarchy and the key relationship in this hierarchy is the one between a subordinate employee and his or her superior. Hence the bureaucracy-models focus in the understanding of this relationship and it is discussed under the heading of principle-agent theory as this relationship is also one of the few core of explanation for many other microeconomic theories of corruption. In the principle-agent theory, (Robert Klitgaard, 1988) many corrupt transactions may be fruitfully analyzed as the outcome of interaction between three actor, principal (P) who is assume to be honest, agent (A) an inferior in the hierarchy, is bribe by a nonmember, a client (C). With this theoretical frame work, we could assume that the agent and the
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client are motivated by self-interest and hence their decision to behave honestly are based on potential gain or loses that they might suffer resulting from their own behavior. In most cases of corruption, it revolve around the relationship between A and C, be it bribery or extortion and the direct abuse of As relationship to P. Hence, it is understood that the core of this theory are the differences in objective and the differences in the level of information they have access to, therefore, the principal could have no knowledge of the agent activities, either production or corruption as agent has the incentives to mislead the principal into thinking that he is working on productive activities and never on the corrupt ones. In general, the bureaucracies are not subjected to competition and are free to set its own ground and objective which may or may not have anything to do with the principles objective. In these cases, the market forces will dwindle, as the principle, who might be an honest business person goes broke due to the corruption of the agent. This situation is studied on two planes, where when the principle might suffer loss, the client acquires gain and when the principle and client suffer loss, the agent acquires gain. An agents decision whether to behave honestly or corruptly depend on the anticipated cost of the decision. In this decision making, a few factor are taken into account, first, the probability of being detected, second, the size of the penalty. Consequently, the decision of the agent will not be influence by the high probability of being detected if the penalty is insignificant and also if the probability of detection is minimal even with high penalty. Hence to counter act against this, control and monitoring had been proposed. The main objective of monitoring is to identify the corruption taking place within the hierarchy, but his however did not solve any problem as according to Moorkherjee and Png (1995), there might be low effort of the one doing the monitoring or on revealing the corruption, the monitor fail to report and partook in to act of bribery himself. In this cases, an incentive theory was proposed, where the principal design an incentive scheme that stimulate effort and a bonus system linked the fulfillment of goals where the principle provide the appropriate incentive incases a fraud is detected and reported. But, in cases where bribes are large, this may result in a very expensive monitoring system. Hence the cost benefit ratios of such theory are not very lucrative for any organization to consider.

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2.2 Legal Analysis In order to curb bribery, the government itself had taken step of prevention and some of this includes the enactment of the UK bribery ACT was published in draft on 2009 and was passes on April 8, 2010 (Frederick T. Stocker, 2011). The purpose of the Act is to reform the law regarding corruption and provide a new scheme of bribery offense covering both in the country and abroad. After that, the UK Bribery Act was once again reform once again in 2013 to form the UK Bribery Act 2013 which was enforces on 1st of July 2013 affect both UK and overseas (Ashurst, 2013) Before the recent enforcement of UK Bribery Act 2013, under this law, in section 1, a person who promises, offers, or gives a financial advantage to another person either directly or indirectly to induce someone to perform improperly a relevant activity is stated as being involve in an act of bribery ( Frederick T. Stocker, 2011). Section 2 of the act stated that a person is guilty of the offence of bribery when either they request, agree to receive, or accept a financial or other advantage directly or indirectly and in this cases, it doesnt matter if the person involve knows or believe his action in proper or improper. Penalties of such act are up to 10 years of imprisonment for individual and unlimited monetary fines. Under this act, for a corporate to be convicted of corruption, one will need to prove that a senior person within the organization, for example the director, committed the offense and his or her activities are directly or indirectly linked to the organization. This by itself is a hard task to achieve, hence under the new reformation of the act, when a person associated with the organization bribe another person and the bribe was made with the intention of obtaining or retaining business or advantage in the conduct of business for the organization, the organization is then said to be involve in an act of bribery. However, the organization will not be liable for the prosecution of corruption when it could prove that adequate procedures design to prevent bribery was in place. The law which regulate the do and donts of a corporate are so vaguely drawn as it had been recognize that bona fide hospitability or promotional or other legitimate business expenditure is an important part of doing business. Hence quoting Kenneth Clarke, no one wants to stop firms getting to know their clients by taking them to events like Wimbledon or the Gran Prix. The regulations of such laws are entirely up to the authorities of each country, as each country has their own department which is responsible for such regulation, but even with that, there are also

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the existence of the Global Infrastructure Anti-Corruption Center which is an international organization which provides anti-corruption resources and service. 2.3 Ethical Theories Even with all the legal regulation, yet what had kept the act of corruption to minimal in certain country are the sense of professionalism and ethical conduct. According to Ferrel, Fraedrich and Ferell (2002), people made their decision based on two main teleological principle, utilitarianism or egoism. Both of this theory are based on the fact that any decision made is justified by it consequences. Utilitarianism is based on the concept of utility maximization where when a person are face with a decision, he or she will have to act on the decision which provided the maximum yield with the least harm( Adams and Maine, 1998). So it is said that, in utilitarianism, the moral or right and wrong is not in priority but the yield and outcome (least harm) is in priority therefore, for an utilitarian an act of corruption is morally correct as long as it provided the best interest with the least harm. Egoism on the other hand originated from Freud (18561939) and it state that human being are naturally aggressive and selfish (Geetanee Napal, 2006). An egoist will choose what is best for himself as he or she had his make decision base on which will maximize their own self-interest. Generally, it is known that an egoist is intrinsically unethical as they focus on short term goals as long as they derive benefit from it and it is to popular believe that they as long as they are able to achieve gain, unethical act such as corruption is acceptable as long as it the ratio or harm and benefit are in favor for them. In 2002, Ferrell et al. presented another theory of ethical conduct. The concept revolves around an egoist, but in this case the egoist in question allows for the wellbeing or others and adopts a long term perspective, but even will all this, the egoist still prioritize its own self-interest. He name this theory enlightened egoist. The theory of egoism states that people should behave as egoist rather than people they do behave as egoist. In this sense, an act is considered ethical as long as it promotes the individuals long-term interests (Reidenbach, et al.,1991). However, when a business made a particular donation, in the intent to receive something in return, such act involves an element of corrupt behavior. Hence, what is considered ethical for an egoist might not be ethical in accordance to the law.

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According to Seth Oppong (2007), the act of bribery sprung for the social-cognitive theory of psychology. Based on this theory, there is a reciprocal interaction between behavior, person and the environment. This is translated as a persons behavior is the function of himself and his environment and at the same time the behavior that emerges affects both the person and the environment. For instance, when a person live in an environment where bribery are actively taking places without any reciprocation, he or she is made to believe that such an act is okay. In this theory, it is understood that behavior follow by preferable consequences are likely to be repeated while behavior with unpreferable consequences are unlikely to re-occur. Taken for instance, if a person were to accept a bribe of RM200 per day, that will amount to around 6 thousand ringgit per month which is higher than any average income family in Malaysia. Even when that person are caught on the act and ending up in jail for 5 years without having to refund the money, the ratio of benefit weigh with the time spend in jail, it is still a lucrative activity. Hence, according to this theory, a person justified his action be it bribery based on his environment and the outcome of his action.

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3.0 Conclusion To culminate, in generally the act of bribery had it mark on different level of society, and this by itself had its own impact on the growth of the country. The act of bribery by itself is wrong and we could not and should never have redefine duty on the basis of benefits that it brings to the wrongdoer. Yet in this current world, bribery continues to dominate depending on the cultural acceptability of the action pertaining to bribery. In the present society, the existence of hierarchy is inevitable and had become a norm yet it is due this this difference of level in hierarchy that corruptions take place yet it is due to this hierarchy that governance of countries, organization , corporate and many other were able to function effectively. A world without corruption is just an ideology as according to Argandona (2003), Colombatto (2003,) Crawford, G. (2000), Damania et al.(2004), corruption is a feature of business worldwide. Yet to strive for this ideology, multiple actions had been taken and some include the enactment of law which regulate and judge the action the corrupt. For some, the law regulating the action of the corrupt are still vague or in certain sense, and for some, the ratio of punishment and gain is still far more favourable that they choose to be involve in bribery. Therefore, for the enforcement of law to be efficient, the punishment and benefit ratio will had to be taken into consideration which this had been done with the reform of the recent UK Bribery Act 2013. Studies had shown that, it is within our own subconscious to choose what is beneficial for us, and it had been argued that corruption by itself where self-interest is prioritize is considered ethical. Ethics by itself differ from an individual to another, as what might be ethical for one might not be ethical for another. Therefore, to just rely on human ethical sense, it is not possible for corruption to cease to exist. Bribery stated that an inducement is provided for personal gain, an incase where business contact is made will the simple gesture of buying a meal, if the definition were to be taken seriously this by itself is an act of corruption. Yet according to current social norm, a simple gesture of extending relationship is acceptable. Therefore, in the end, whether an action taken is considered ethical or corrupted, it is based on personal moral basis.

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4.0 References Reference Adam, D. M. and Maine, E. W., (1998). Business Ethics for the 21st Century, California,Mayfield Publishing Company

Andvig, & Jens, (1993). Economic analysis of corruption pp.228-253 in Arve Ofstad Arne Wiig, Developmental Theory: Recent trends. Proceedings of the NFU annual Conference 1992.

Argandano, A. (2002). Political Party Funding and Business Corruption Research Paper no.458, University of Navarra . [Online]. Available: http://www/iese.edu/research/pdfs/DI-o458-E.pdf . [2013, July 3].

Ashurst, (2013). Quickguides, Bribery and Corruption . [Online]. Available: www.ashurst.com/doc.aspx?id_Resouce=4649. [2013, July 3].

Calkins, L. B., (2012). Ex- KBR CEO Stanley Gets two and a half Years in Prison for Foreign Bribes . [Online]. Available: www.bloomberg.com/news/2012-02-23/ex-kbr-ceo-albertstanley-gets-30-month-prison-term-in-nigeria-bribe-case.html . [2013, July 3].

Colombatto, E, (2003). Why is Corruption Tolerated? The review of Austrian Economics . [Online]. Available: www.gmu.edu/rae/archives/VOL16_4_2003/5_colombatto.pdf . [2013, July 3].

Concise Oxford English Dictionary 11(e.d.). (2004). Oxford University Press.

Crawford, G., (2000). Promoting Democratic Governance in the South, The European Journal of Developmental Research. . [Online]. Available: http://www.tandfonline.com/doi/abs/10/1080/09578810008526751 . [2013, July 3].

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Department of Justice, Office of Public Affairs, (2010) . [Online]. Available: www.justice.gov/opa/pr/2010/December/10-crm-1481.html . [2013, July 3].

Esty, D., & Porte, M., (2002). National Environmental Performance Measurement and Determinants. In Environment Performance Measurement: The Global Report 2001-2002 (e.d.) D Esty, PK Cornelius, New York : Oxford University Press.

Ferrell, O.C., Fraedrich, J. and Ferrell, L., (2002). Business Ethics: Ethical Decision Making and Cases, United Kingdom, Boston,Houghton Mifflin Company.

Fjeldstad, Odd- Helge & Semboka, J., (2000). Dilemmas of fiscal decentralization: A study of local government taxation in Tanzania, Forum for Developmental Studies, vol. 27, no 1,pp. 7-41 . [Online]. Available: http://www.cmi.no/publications/file/966-dilemmas-of-fiscaldecentralisation.pdf. [2013, July 3].

Holden, C. J., & Messitte, Z., (2006). The Occasional Papers of The Center for the Study of Democracy, 2(1) . [Online]. Available: http://www.smcm.edu/democracy/assets/documents/agnewpaper.pdf . [2013, July 3].

Mauro, P., (1995). Corruption and Growth: Quaterly Journal of Ebconomics 110: 681-712 . [Online]. Available: http://homepage.ntu.edu.tw/~kslin/macro2009/Mauro%201995.pdf . [2013, July 3].

Michael, N., & Millby, C., (2008). United States Courts Southern District of Texas FILED, Case 4:08-cr-00597 . [Online]. Available: www.justice.gov/criminal/fraud/fcpa/cases/.../08-2908stanley-info.pdf . [2013, July 3].

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Moorkherjee, D. & I.P.L. Png, (1995). Corruptible supervisors and law enforcers: how should they be compensated?, Economic Journel, 105, pp. 145-159. . [Online]. Available: darp.lse.ac.uk/papersdb/mookherjee-Png_(EJ95).pdf . [2013, July 3].

Napal, G., (2006). An assessment of the Ethical Dimensions of Corruption, Electronic Journal of Business Ethics and organization Studies . [Online]. Available: ejbo.jyu.fi/pdf/ejbo_vol11_no1_pages_5-9.pdf. [2013, July 3].

Oppong, S., (2007). Understanding bribery and Corruption . [Online]. Available: www.ghanaweb.com/GhanaHomePage/features/artikel.php?ID=135189 . [2013, July 3].

Quinion, M., (n.d). World Wide Word, 1996-2013. [Online]. Available: www.worldwidewords.org/topicalwords/tw-bri1.htm . [2013, July 3].

Reidenbach, R. E., Robin, D. P. and Dawson, L. (1991). An Application and Extension of a Multidimensional Ethics Scale to Selected Marketing Practice and Marketing Group, Journal of the Academy Science . [Online]. Available: link.springer.com/article/10/1007%2FBF02726000 . [2013, July 3].

Robert, K., (1988). Controlling Corruption. Berkely: University of California Press.

Rose-Ackerman, S., (2010). The Law and Economics of bribery and Extortion, Forthcoming Annual Review of Law and Social Science . [Online]. Available: http://papers.ssrn.com/sol3/papers.cfm?abstractid=1646975 . [2013, July 3].

Thefreedictionary. [Online]. Available: www.thefreedictionary.com/bribery .[2013, July 3].

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V. Tanzi, & H. Davoodi, (2002). Corruption, Growth, and Public Finance. In Governance, Corruption and Ecinomics Performance (e.d.) . [Online]. Available: http://papers.ssrn.com/sol3/papers.cfm?abstractid=880260 . [2013, July 3].

Kenneth Clark, Lord Chancellor and Secretary of State, September 14, 2010 . [Online]. Available: www.duanemorris.com>News>NewsArticles . [2013, July 3].

Stocker, F. T., (2011). Legal Analysis and Regulations, U.K. Bribery Act Implementation Delayed : Respite or Reprieve? . [Online]. Available: www.mapi.net/system/files/LAR503_0.pdf . [2013, July 3].

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