Corrupt business practices not only reflect poor corporate citizenship, they are bad for business. Wal-Mart, the world’s biggest retailer, is alleged to have made 441 improper payments totalling more than $24-million (U.S.) to officials in Mexico, more than six years ago. The company is also alleged since then to have tried to cover up evidence of the improper payments, according to an investigation by the New York Times. And it hired lobbyists to try to water down the United States law that bars attempts to corrupt foreign officials, the Washington Post reported. (Wal-Mart says it is co-operating with investigators and has hired someone to oversee global compliance with a federal anti-bribery law.)
Any business that works to undermine good governance by a pattern of bribery in a developing country such as Mexico commits a damaging and immoral act that Canada, the U.S. and other Western nations justifiably deem criminal. Mexico surely bears responsibility, too, if the allegations are true, but that responsibility in no way diminishes Wal-Mart’s duty to act ethically and honestly.
Corruption hurts business, as Congress concluded when it passed the Foreign Corrupt Practices Act, barring bribery by U.S. companies abroad, in 1977: “It erodes public confidence in the integrity of the free market system. It short-circuits the marketplace by directing business to those companies too inefficient to compete in terms of price, quality or service, or too lazy to engage in honest salesmanship, or too intent upon unloading marginal products. In short, it rewards corruption instead of efficiency. Corporate bribery also creates severe foreign policy problems for the United States,” by supporting “suspicions sown by foreign opponents of the United States that American enterprises exert a corrupting influence on the political processes of their nations.”
Globalization should not mean a race to the bottom in which businesses outdo one another in corrupt practices. Such routine corruption harms businesses everywhere by raising the cost of doing business, by making it impossible for small- and medium-sized businesses to compete and by weakening predictability and business confidence.
If the corruption allegations have merit, they are a black eye – self-inflicted – for Wal-Mart.