Are you faced with an ethical dilemma? Are you witnessing corruption but don’t know what to do about it? Ask the team of Corruption Watch experts what to do by writing to: email@example.com and mark your letter ‘Dear Corruption Watch’.
Dear Corruption Watch,
We are an entrepreneurial construction firm looking forward to benefiting from government infrastructure spending. We are fully BEE compliant and are proud of our status and proud of what we have achieved. However, it has been intimated that we may have to grant shareholding to provincial politicians, or companies fronting for them to stand a better chance of winning tenders.
Our long-term objective is an AIM listing to raise capital. How can we reject aiding this clear conflict of interest when even President Zuma says in Parliament he sees no reason why politicians cannot and should not benefit from government infrastructure spending as business people?
We need to distinguish between two scenarios. The first is, presumably, what President Zuma was talking about. A politician wishes to invest money in shares. She chooses to invest in a construction firm that does some work for government. Our imaginary politician discloses her interest to her government employers, and is not part of the department that gives work to the company. She in no way attempts to influence the government tenders for which the company applies, but is happy to benefit if they win those tenders on the merits of their proposals.
That is not automatically illegal. Politicians are allowed to own shares in companies that do business with government. But there are safeguards. They must disclose those interests and cannot be employed by the department that gives the company work. More importantly, they may not use their position to influence government’s decisions. If they do so, they are guilty of corruption: a crime with a penalty of up to 25 years imprisonment.
That leads us to the second scenario – the one your company is in. A politician tells a construction company that wants to do business with government that if it does not offer him and his cronies some financial incentive – shares, cash, a car, whatever – the company will not get any business from government. That “offer” is corruption, pure and simple. It is a crime for which the politicians involved should be prosecuted and sent to jail.
The question you have is how you should react to that offer. You have three options: accept the offer; reject the offer but take no further action; or report the offer to the appropriate authorities.
Accepting the offer would make you guilty of corruption. That may still seem like a good solution, if you think it’s unlikely you will get caught. But remember, if you are caught, you go to jail. While it may help in the short-term, complying with the offer is not a great long-term strategy. You will be locked into a relationship with people who violate the law for their own financial advantage. They may make less attractive “offers” in the future. In addition, if you list on AIM, you will be covered by the UK Bribery Act, which makes it an offence to bribe foreign officials or to fail to take steps to prevent bribery. An on-going corrupt relationship may prevent your listing, or bring it to a rather embarrassing end.
The real question is whether, after you refuse the offer, you should report it. Reporting it is not only the ethically right thing to do, it makes good business sense. Once you turn down their offer, the politicians will probably block you from future contracts. It will be difficult for them to do that if they are in a jail cell. The next lot of politicians might think twice before trying to solicit a bribe from you.
Take a stand and report an incident of corruption. This article originally appeared in the Sunday Times Business Times on 2 September 2012.