Cash incentives and criminal punishment will not root out corrupt business practices. A government culture of honesty, integrity and strong leadership could help to cure corruption, say University of Birmingham researchers. They found that corporate governance choices made by business leaders are directly related to government integrity. Dishonest practices are more likely in states where the government operates in a way that is dishonest or unethical.
Professors Amon Chizema and Ganna Pogrebna, from Birmingham Business School, examined think-tank World Economic Forum (WEF) data from 2011 to 2018 on small, medium and large companies in agriculture, manufacturing and non-manufacturing industries – such as mining and quarrying, utilities and construction – as well as services with headquarters in 93 countries.
The researchers published their findings in The Leadership Quarterly, also demonstrating experimentally that leaders were more likely to make honest decisions and abstain from bribery and tax evasion when asked what a good leader would do in a particular business situation. They suggest that Chief Executive Officers (CEO) are more likely to cheat in a corrupt environment than in a transparent one.
Comment
Prof Pogrebna said: “This simple solution of asking ‘what would a good leader do’ had a much higher positive effect on leadership integrity than changing financial incentives or increasing the propensity of being caught and punished by the law.
“The world craves credible and sincere leadership. Our policies need to shift from financial and legal solutions of the corruption problem to influencing leadership values and culture at all levels of the society.”
And Prof Chizema said: “Governments need to get it right first before expecting corporate citizenry to do the right thing. Norms often precede legislation but are supported, maintained and extended by laws. If those with power to change societal norms do not have the interest or motive to do so, corporate leaders may continue to make bad corporate governance choices and decisions.”
The research paper can be downloaded at https://www.sciencedirect.com/science/article/pii/S104898431830078X.
