A Bitter Pill? Institutional Corruption and the Challenge of Antibribery Compliance in the Pharmaceutical Sector

Abstract

We investigate why top-down directives aimed at eradicating corruption are ineffective at altering on-the-ground practices for organizations that have adopted industry-wide "gold standards" to prevent bribery and corruption. Using interview and focus group data collected from leading multinational pharmaceutical firms, we unearth antecedents contributing to organizations' systemic failure to embed their anticorruption policies in business practice.We identify two tensions that contribute to this disconnect: a culture clash between global and local norms, especially in emerging markets and a similar disconnect between the compliance and commercial functions. To overcome these tensions, we suggest that organizations are likely to find it easier to implement a no gifts policy if they cease to rely on local agents embedded in local norms and that there needs to be strong evidence of boardlevel commitment to antibribery programs, innovative ways of incentivizing compliant behavior, and a fundamental rethinking of organizations' business model and remuneration practices.

Playing the Game: Unpacking the Rationale for Organizational Corruption in MNCs

“…Prior research in economics and management has suggested that whether firms engage in corrupt activities depends on the environment they operate in (Daboub, Rasheed, Priem, & Gray, 1995; Rodriguez, Uhlenbruck, & Eden, 2005; Shleifer & Vishny, 1993). Indeed, recent work suggests that there are many forms of organizational corruption, and they vary with different institutional environments (David-Barrett et al, 2017; Frei & Muethel, 2017; Torsello & Venard, 2016; Zyglidopoulos et al, 2017). As such, one class of conditions that enable organizational corruption is external.…”

“…For example, not all organizations have handy mechanisms to engage in bribe giving because of stringent procedures and controls (Lange, 2008). Indeed, many MNCs have stepped up compliance, making corrupt practices to benefit the organization hard to hide (e.g., David-Barrett et al, 2017) and subject to employee risks. Only in organizations that offer a fertile ground for organizational corruption would the practice translate into benefits.…”

“…There is an ongoing debate in the International Business (IB) literature about whether it is profitable for MNCs to engage in corrupt activities abroad (Cuervo-Cazurra, 2006; Cuervo-Cazurra & Genc, 2008; Khatri, Tsang, & Begley, 2006). On one hand, it is costly and carries the risk of penalties and reputational damage (David-Barrett, Yakis-Douglas, Moss-Cowan, & Nguyen, 2017), but on the other, payments to or connections with politicians could result in organizational benefits (Claessens, Feijen, & Laeven, 2008; Faccio, 2006) and not “playing the game” can put an MNC at a disadvantage when competitors do not follow such restrictions (Spencer & Gomez, 2011).…”

Business unusual: collective action against bribery in international business

“…One problem for transnational corporations (TNCs) in dealing with corruption risk is that they seek to comply with best practice international standards on anti-bribery and corruption compliance -not least because they typically fall under the jurisdiction of the FCPA, by virtue of issuing securities or doing business in the United States -but find it difficult to ensure that their employees comply with these standards. If they are operating in emerging markets where corruption risks are great and social norms about business practices different, often employing local agents that are embedded in these communities and cultures, this may expose the company to considerable legal and reputational risk [37]. In this context, adhering to and upholding EITI standards might be another way of demonstrating their commitment to international norms and business practices, helping them to raise awareness about their values and drive the message home to local employees.…”

“…They report that there is considerable value to them in being able to discuss the sensitive issue of corruption and bribery with peers who face similar problems. Compliance professionals from both the public and private sector benefit from learning how their peers cope with the common challenge of embedding anti-bribery policies in the face of apathy or outright opposition from co-workers that are unconvinced of the need to change practices [37]. Sometimes this has an international dimension, with company employees from one jurisdiction helping to train individuals operating in another jurisdiction.…”