Recently, the Central Anti-Corruption Bureau (CBA) pointed out that 23 February is Nationwide Bribe-Free Day. Corruption is one of the biggest threats to the economy, and hampers economic growth, disrupts business, and decreases society’s income. Corruption is usually associated with the taking of a bribe by a public official, and these are the scandals that attract attention. Meanwhile, corruption in business draws less attention, and this is unfortunate. 

The quiet relation to corruption of officials

Managerial corruption takes many forms. It may be giving a bribe (active corruption) or taking a bribe (passive corruption). The essential element is someone’s abuse of power or breach of duty. This can lead to material damage to a business or other organizational unit, an act of unfair competition, or unlawful preferential treatment. The person who breaches their duty or abuses their power must do so in exchange for personal or material gain, or promised personal or material gain. This could constitute passive managerial corruption. The perpetrator must hold a management position in the firm or other organizational unit that suffers a loss due to their conduct, while it is also sufficient if the perpetrator is an employee of that unit, or a contractor to the unit on a service agreement or agreement for a specified work.  Meanwhile, the making of a promise of material or personal gain, or providing that person with material or personal gain, may constitute active managerial corruption. Both types of corruption are crimes, for which the penalty is imprisonment for between three months and five years.

Managerial corruption – more likely than we think

Under the Criminal Code, there is a multitude of prerequisites for an act to constitute managerial corruption, which might give the impression that it is difficult for an offence of this kind to occur. Nothing could be further from the truth. The cases heard by courts concerning managerial corruption have included cases of misconduct when selecting a business counterparty, or a bank employee not reviewing loan applications (the benefit thought to be received was use of a fitness club free of charge). Other cases have included promises of money to a company president for causing a company to withdraw from real property leases, or better employment conditions of employees without legitimate reason.

Better safe than sorry

The risks related to managerial corruption are severe, as the company concerned could suffer significant material loss, for example when an offer is selected that is detrimental. Organizational problems may also arise in a company if employees are found to have bribed business counterparties. Therefore, it is advisable to ensure that a solution is in place that mitigates the risk: a customized compliance system.