The Effect of A Good Ethics Framework On The Corruption Level In An Organisation

1.1  Introduction

Corruption has become a global problem, whether in the political arena, corporate world, or when receiving government services. This is evidenced by the formation of international bodies and initiatives such as Transparency International (TI) and Partnering Against Corruption Initiative (PACI), aimed at eradicating it, and by international conventions and individual company efforts to reduce or completely stop corruption. Lately, more corporates are realising the importance of having proper corporate governance structures in place. They are investing in getting such in place and in getting their employees to understand as well. They believe that these proper structures will help create policies and establish standards which will strengthen the ethics and culture in the organisation. (Sullivan J D, 2009).

Bodies such as the World Economic Forum, whose purpose is to improve the state of the world, have taken notice of the negative impact that corruption has on the economy. Fleming S (2019) states that, at the Forum’s 50^th Annual meeting held in Davos, they adopted a new economic model called “Stakeholder capitalism”. One of the main initiatives in this new model is the call to fight corruption.  This is an initiative they will run through PACI, which they established in 2004 because they realised the serious and damaging effect that corruption has on the economy.

The question is, will this investment yield the desired result; less corruption? This is the question that this research paper aims to answer. The Standard Lesotho Bank (SLB), the biggest bank in Lesotho, has been flooded with fraud cases in which employees are defrauding the Bank and its customers. One of the measures they have taken to minimise this corruption is to invest in getting the employees to understand the ethics of the bank and to encourage all to have good ethical standards when approaching their work. The SLB is therefore going to be used to try and answer this question through a survey that will be distributed to the employees.

1.2 Problem Statement

Ortiz-Ospina, E and Roser, M (2016) define corruption as an important problem imposing political, economic, and environmental costs on societies around the world. It is one of the leading causes why developing countries are not progressing in terms of their economy when compared with first-world countries. Corruption costs developing countries $1.26 trillion every year, this is enough money to lift the 1.4 billion people who get by on less than $1.25 a day above the poverty threshold and keep them there for at least six years. (Fleming S, 2019). This shows what a serious impact corruption has on society. It is costing some people their livelihood, especially the poorest and most vulnerable people. Corporates or organisations are not immune to this negative impact, they can also find themselves forced to close-down due to corruption, either through hefty fines imposed on them because of their employees’ corrupt acts, or by the corruption directly costing the business too much money for it to survive.

“Unethical practices in business organizations cause enormous harm to stakeholders of business organizations. The best example is the sub-prime loans given to borrowers in the US in 2008 which brought down the economy of the US and badly affected the economy of the whole world. The economy of the whole world suffered from serious economic slowdown, thousands of employees became unemployed, and investors lost billions of dollars and so on” (Jalil et al, 2010). This shows that these unethical behaviours have the potential to bankrupt an organisation, or worst-case scenario, negatively affect a whole country’s economy. Hence the reason for this study and investigation of whether an ethical framework can indeed reduce unethical acts or corruption so that more companies invest in them and keep from going bankrupt and causing innocent people to suffer the consequences.

The following are shocking statistics from (Transparency International UK, 2020) with regards to corruption:

1. Nearly half of workers across Europe, the Middle East, Africa and India think bribery and corruption are acceptable ways to survive an economic downturn
2. More than 40 percent of employees at board and senior manager levelsaid that sales or cost numbers had been manipulated by their company. This included reporting revenue early to meet short-term financial targets, under-reporting costs to meet budget targets, and requiring customers to buy unnecessary stock to meet sales targets.
3. Fewer than half of respondents knew that their company’s policy contains guidance on gifts or hospitality, and less than a quarter knew of policies on political contributions. More than half of respondents do not know whether their company has specific procedures to guide dealings with government officials.

The above statistics clearly show that the respondents are not ethically-inclined. They do not consider ethics to be as important as making profits or keeping the business going. The picture could be different if the respondents were more ethically-inclined, if they believed in doing the right thing. Therefore, more research is needed, which is what this paper aims to achieve, to investigate if having a good ethics framework will shift the dial and make people more aware of the negative impact corruption has, as well as make corruption a taboo, instead of the business-as-usual practise that it currently is.

 1.3 Research question

The research question for this study is “Will a good ethics framework reduce or eliminate the level of corruption in an organisation?”

 1.4 Research objectives

The research objectives of this study, or reasons that I am undergoing this research were sparked by the number of corruption cases that were reported at my workplace, Standard Lesotho Bank (SLB). I then started asking myself measures that could be taken to resolve this issue as it was costing the Bank its reputation, which led to less customers and then less bonuses at the end of the year. There was also a corruption case which led to financial loss to the Bank as the insurance did not cover it, and it also affected the profits negatively in a time where there was a headcount freeze due to the company not reaching intended budget goals or underperforming financially. This put not only bonuses on the line, but even people’s jobs. So, the objectives of this research are as follows:

1. To investigate if a goof code of ethics framework can reduce the level of corruption.
2. To determine if the SLB code of Ethics are well-understood across the organisation.

  1.5 Abbreviated literature review

Before going into this research, I checked to see what other scholars were saying on this topic and to read their views on the topic. Another aim of going through the literature was to establish if there was more research that needed to be done or if there was enough research that had been done and no further studying was needed. Having gone through some of the literature, there are some concepts that came to light regarding the topic at hand. These concepts are as follows:

1.5.1 Concept 1 : Proper corporate governance structures and a good code of ethics are vital in fighting the corruption in an organisation

(References:

1. The Moral Compass of Companies: Business Ethics and Corporate Governance as Anti-Corruption Tools – Sullivan J.D. (2009)
2. Transparency to reduce corruption? – Halter M. V. et al (2009) )

(Sullivan J D, 2009) aims to find the relationship between corporate governance, business ethics, and the level of corruption in companies. These have become important aspects in an organisation and have moved from being considered as not important as they are non-financial to being considered as the core issues necessary for a business to be sustainable. For this reason, more organisations are finding it vital to have proper corporate governance structures in place, which in turn will be expected to create policies and establish standards which will strengthen the ethics and culture in the organisation.

(Halter M V et al, 2009) discuss the corruption in Brazil, the focus on one organisation which decided to beef-up their ethics framework and corporate governance with the most concentration being on becoming more transparent within the organisation. The analysis of this company was undertaken to gauge the effect of transparency on corruption. The company created a clear code of conduct and promoted professionalism as the only way to do business. The results showed that, though the country is generally corrupt, establishing ethical standards within the company itself and using transparency as a tool to achieve this reduced the level of corruption in this company. Therefore, proving that transparency can indeed be used as a tool to reduce corruption and that adopting best ethical practices within a company is an effective way of reducing corruption within that company regardless of the environment or ethical climate that the company is operating in.

1.5.2 Concept 2: Education on ethics can reduce corruption by making people aware that corrupt acts are not the normal way of doing things.

(References:

Corruption as a challenge to global ethics: The role of Transparency International – Kimeu S. (2014)

Public Sector and Corruption in Nigeria: An Ethical and Institutional Framework of Analysis – Casimir A. K. C. et al (2004))

(Kimeu S., 2014) states that “Transparency International (TI) defines corruption as the abuse of entrusted power for private gain” TI is a global movement that is consists of a coalition of individuals whose common goal is to eradicate corruption. This article mainly focuses on TI Kenya, where it is estimated that 30% of the funds allocated towards the development fund were lost due to corruption. The movement initially focused on changing laws in member countries, making corruption consequences to be hard, but they later realised that they were treating the symptom and not the cause. They then shifted their focus on empowering and educating the nations in which they are present to be able to identify corrupt behaviour and to know the correct actions to take when identifying corruption. TI has some success stories and they continue to influence nations to be more aware of corrupt behaviour and thus encouraging people in power to act with integrity as people’s knowledge and awareness of corruption means, when electing people into power at any level, whether national or just a student body at a university, their level of corruption is now taken into consideration, and used as one of the deciding factors on whether to vote the person into power or not.

(Casimir A. K. C. et al, 2004) Corruption in Nigeria is high. It has reached such high proportions that some of the nationals have accepted it as a way of living, or a natural process. In order to get certain services from public offices, it is common knowledge that without paying bribes one will not get desired services, and it is almost natural to pay a bribe to get a service which is their right as citizens of the country. The authors of the article believe that as Africans, they have ethics embedded in their upbringing and should therefore form part of their DNA. It is for this reason that they urge Nigerians to individually go back to their roots and dig deep within themselves, so that ethical acts come as second nature to them, and they would therefore stop their corrupt or unethical actions. The main problem is that this corruption is not only found with high-ranking government officials, as in the norm in most countries, but it is embedded across all levels of society.

1.5.3 Concept 3 : Corruption is no longer a Public Sector problem, but it has moved

                                to the Private Sector.

          (Reference:

           Measuring Private Sector Corruption – Rose-Ackerman R. (2007))

In the past, corruption used to involve private sector officials bribing public officials for tenders or for business. The dial has shifted and lately, there are bribes which are paid by private sector officials to other private sector officials as the private sector has gained more power or responsibility in the economy. These acts of corruption in the private sector are on the rise and they need to be dealt with before they cripple the economy. Most of these acts are in multinational companies, and therefore it would be beneficial if donor companies were to take acts of corruption seriously and actively work towards anti-corruption campaigns.

  1.6 Research Methodology

A research methodology is a set of systematic techniques used in research. This simply means a guide to research and how it is conducted. It describes and analyses methods, throws more light on their limitations and resources, clarifying their pre- suppositions and consequences. (Igwenagu C, 2016). In this regard, it will be used to collect information to answer the research question of whether a good ethics framework can reduce the number of corruption cases in an organisation. Standard Lesotho Bank is the Bank that is going to be used to collect this information. For this research paper, I am going to use interviews and surveys as my research methods. Both are quantitative methods of gathering data. Surveys or questionnaires are referred to as research tools as they will be used to gather the data.

1.6.1   Quantitative/Qualitative Research Approach

There are generally three approaches that can be taken when conducting research. Quantitative, quantitative or a mix of the two approaches. Qualitative research is used to explore the meaning of the people’s experiences, their culture, and their views or opinions on certain issues or the issue being researched. Quantitative research is used to examine the relationship between variables, such as the dependent, independent variables, and extraneous variables (Elkatawneh H, 2016). Mixed research is where the two approaches are used for one research paper. For this research, a quantitative research approach will be adopted.

 1.6.2 Population And Sample Framework

The Standard Lesotho Bank has approximately 800 employees. For this research, 80 (approximately 10%) random employees of them are going to be used for the survey, while 2 employees from the Risk and Compliance, and 2 from the Human Capital departments are going to be targeted for the interviews. These are the two departments who are at the forefront of dealing with the corruption cases. Risk and compliance’s function is to detect on their own any irregularities that may lead to corruption or to investigate cases brought-forward by whistle-blowers. The Human Capital department is handed over cases which Risk and compliance believe are valid corruption cases and their role is to ensure that proper disciplinary action takes place by coordinating a disciplinary hearing with relevant stakeholders. The aim of the interviews will be to gather more information on the fraud cases that the SLB has had over the past three years.

I believe three years will give an indication of the trend since the ethics team has been more visible in the Standard Lesotho Bank as the framework was reintroduced and culture roadshows held in 2018. So, comparing 2017, 2018 and 2019 will provide an indication of the effect of the organisation investing in their employees being more aware of the Bank’s code of ethics and their values.

1.6.3   Data Collection Method

Syed K M (2016) describes data collection as the process of gathering and measuring information on variables of interest, in an established systematic fashion that enables one to answer stated research questions, test hypotheses, and evaluate outcomes. I will be using interviews and questionnaires as my methods of data collection. Because the research approach that is going to be used is quantitative, even the data collection methods are going to be quantitative. Quantitative data is usually numerical in nature, unlike the qualitative which is usually descriptive in nature (Syed K M, 2016).

The questionnaire will be closed questions only as the aim is to collect numerical data that can be easily compared. Having open-ended questions will lead to data that will not be easy to analyse and will defeat the purpose of this research. The interviews with the targeted staff members will also have pre-determined questions, which will also force the interviewees into answering them in a way that can result in data that can be analysed using mathematical and statistical instruments in order to come to a conclusion regarding the research question.

The questionnaire will consist of two parts:

Section A: Demographical information

Respondents will be required to indicate their gender, age, department and tenure.

Section B: Testing the employees’ understanding of the SLB code of ethics

This section will be used to assess whether indeed the ethics framework is a good one, which employees understand to determine whether the SLB ethics framework can indeed be referred to as a good framework because the framework cannot be good on paper only but should be such that all the employees are aware of the code of ethics.

1.6.4 Data Analysis Methods, Techniques And Instruments

Once the data has been collected using the above methods, it will need to be analysed to answer the research question. The analysis will lead to a conclusion of whether a good ethics framework has reduced the number of corruption cases in the Standard Lesotho Bank. This indication will then be used to generalise and infer if this is the case for the SLB, then if it is, it will be implied that this is also the case for all organisations, hence the research question will be answered. Further studies will be needed as the population is relatively small and the conclusion will be based on only one organisation.

While qualitative research analysis looks at themes, quantitative research analysis involves the use of statistics to crunch numbers and figure out what those numbers mean in terms of answering research questions (Syed K M, 2016). Quantitative research is also usually deductive, it is based from existing theories and information that is already out there to help form research questions and how data is collected and how it is analysed (Syed K M, 2016). Since for this research the quantitative approach is going to be used, the analysis will be done on the results of the questionnaires using statistic methods to deduce whether the level of corruption in an organisation can be reduced by a good ethics framework.

1.6.5 Validity And Reliability

Reliability is the consistency of the measurement. This means when applying the same input, the output should always be the same. In short, it is the repeatability of your measurement. It is important to remember that reliability is not measured but estimated. Validity is about the accuracy of a measure. It is an indication of how sound the research is (Taherdoost H, 2016). In the case of this research, my research instrument is going to be a questionnaire. A questionnaire is one of the most widely used tools to collect data in especially social science research. The main objective of a questionnaire in research is to obtain relevant information in most reliable and valid manner. Thus, the accuracy and consistency of the survey/questionnaire forms a significant aspect of research methodology which are known as validity and reliability. (Taherdoost  H, 2016)

I am going to ensure my questionnaire’s validity and reliability by asking an employee from the Risk and Compliance Department (a subject-matter expert) to vet my questionnaire, once I have clearance from them, I will issue around five questionnaires as pilot questionnaires to test whether I will be able to get results that will help answer the research question.

1.7 Ethical Considerations

All the important ethical principles will be taken into consideration before the questionnaires are issued to the potential respondents, and before the interviews are conducted. These will ensure that all legal considerations are taken care of and that neither the respondents, the Standard Lesotho Bank, the researcher nor UNISA can be held liable for unethical practises. This will also ensure that the rights of all the stakeholders, especially the respondents, are protected. An ethical clearance certificate from the UNISA SBL Ethics committee will be obtained prior to data collection.  

1.7.1   Informed Consent

The participants will be made aware of the nature of the research and they will be given a form to sign to this effect.

 1.7.2 Protection From Harm

Participants will not be subjected to any physical or mental discomfort. The contents and recommendations of the research will be provided only to the Standard Lesotho Bank, and all information in this regard will be kept confidential.

1.7.3 Right To Privacy

All respondents’ right to privacy will be respected. They will have the right to protect their names and other personal details, as well as their responses as the form will not have any field where they are asked to input their name, surname, or personnel number to make sure of this.

1.8 Conclusion

Corruption is a worldwide problem that is costing the world. It leads to some very harsh consequences: companies going bankrupt, people losing their jobs, funds aimed at bettering the lives of the poor and destitute being diverted to grease the pockets of the already privileged politicians are but a few examples of the consequences. Many bodies have been formed to fight corruption, many corporates investing in anti-corruption initiatives, but is the answer to this problem in the ethics framework of the organisation? Can implementing a good ethics framework and ensuring it is well understood across the organisation reduce or eliminate this problem? That is the question I hope to have the answer for at the end of this paper. In the next chapter, the literature pertaining to these questions will be reviewed and discussed.

1.9  References :

Casimir A K C, et al, 2014, ‘Public Sector and Corruption in Nigeria: An Ethical and Institutional Framework of Analysis’, Open Journal of Philosophy, vol. 4, pp. 216-224.

Elkatawneh, Hassan, 2016, ‘Comparing Qualitative and Quantitative Approaches’, SSRN Electronic Journal.

Fleming, Sean, 2019, Corruption leaves many people far worse off and feeling marginalized  [Online] Available at: https://www.weforum.org/agenda/2019/12/corruption-global-problem-statistics-cost/

Halter M V, et al, 2009, ‘Transparency to reduce corruption?’ Journal of Business Ethics, vol. 84, no. 373.

Igwenagu, Chinelo, 2016, Fundamentals of research methodology and data collection.

Jalil et al, 2010, ‘Implementation Mechanism of Ethics in Business Organizations’, International Business Research, vol 3, no. 4, pp. 145-155.

Kimeu S, 2014, ‘Corruption as a challenge to global ethics: The role of Transparency International’, Journal of Global Ethics, vol. 10, no. 2, pp. 231-237.

Ortiz-Ospina Esteban and Roser Max, 2016, ‘Corruption’. Published online at OurWorldInData.org. Retrieved from: ‘https://ourworldindata.org/corruption’ [Online Resource]

Rose-Ackerman R, 2007, ‘Measuring Private Sector Corruption’, Anti-corruption Resource centre.

Sullivan J D, 2009, ‘The Moral Compass of Companies: Business Ethics and Corporate Governance as Anti-Corruption Tools’.

Syed Kabir Muhammad, 2016 Methods of data collection.

Taherdoost Hamed, 2016, ‘Validity and Reliability of the Research Instrument; How to Test the Validation of a Questionnaire/Survey in a Research’, International Journal of Academic Research in Management. Vol. 5. Pp. 28-36.

Transparency International UK, 2020, Corruption Statistics [Online] Available at:

https://www.transparency.org.uk/corruption/corruption-statistics/