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From Europe, the business case for compliance

Managing corruption has added benefits for a company. In 2010, when faced with hundreds of incidents of bribing government officials across multiple nations, Panalpina, the Swiss leader in logistics, admitted a culture of corruption had emanated from its senior level management who “tolerated bribery as business as usual.”

In a 34-page statement filed during plea bargaining in a U.S. court, the company admitted dozens of employees throughout the Panalpina organization “were involved in various schemes to pay bribes to foreign officials.”

Panalpina has since recovered from the incident, corrected the culture and in doing so apparently increased its market share.

Siemens too has learned the hard way. The company where corruption was once entrenched — its former accountant, Reinhard Siekaczek, told the New York Times that between 2002 and 2006 he managed an annual bribery budget of between $40 million and $50 million — replaced its CEO with Peter Löscher who used the scandal to drive change in the way the company was operated, its culture and hiring practices. Not only did the new team manage to put in place an effective anti-corruption program but it also improved the substance of the company.

It’s a lesson for all organizations. If you rely on corruption you will be less competitive. The company will begin to adopt the attitude, “why should I develop a product when I can just buy access to market?” If you get rid of that attitude you become stronger and it is probably better to do so before a major crisis hits.

The full version of the article this post is based on can be found on INSEAD Knowledge here.


Gilles Hilary is an Associate Professor of Accounting and Control at INSEAD.

Francis Hounnongandji is the president of the French chapter of the Association of Certified Fraud Examiners.

Jean-Paul Philippe is former head of the French police’s anti-corruption unit.

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