The FIFA corruption scandal is a teaching moment for managers who want to root out corruption.

“Rampant, systemic and deep-rooted.”

That’s how the U.S. Department of Justice described last month’s revelations of corruption at FIFA, soccer’s international governing body. The Zurich-based association organizes The World Cup, which is the world’s most-watched sporting event, generating billions in sponsorship and merchandizing revenues.

Coverage of the revelations has focused mostly on the personalities and “perp-walks” of the implicated individuals. I’ve found, however, that a focus on personal morality muddles executives’ understanding of what corruption is and how it can be managed.

Defining Corruption: A Systems Approach

When I run executive education programs on corruption, I find that many managers can’t clearly define what corruption is. And if you can’t define something, you certainly can’t manage it when you encounter it in your business engagements with suppliers, customers or regulators.

While many corruption definitions focus on dishonest abuse of power or moral depravity, I prefer the precision of the engineer’s definition:

Any organized, interdependent system in which part of the system is not performing duties as originally intended to, or performing them in an improper way, to the detriment of the system's original purpose.

That’s a mouthful, so I’ll break it down. The focus here is on a “system” in which there is a component that is failing. So a bridge, for example, is an interdependent system of engineered beams and trusses that, when whole and complete, will sustain your car as you drive across the river. But if part of the bridge is corrupt — say, one of the beams has rusted through — then part of the system can’t work as designed, and the bridge might collapse.

This “positivist” definition of corruption is quite precise, as opposed to muddled “normative” definitions that are morality or situation-based.

A business, agency or even national economy can be seen as organized, interdependent systems. Identifying corruption in such social systems is straightforward if you use a positivist definition: When the parts of social systems work as designed, all stakeholders can get the maximum performance — and thus maximum social benefit — from them.

The “parts” in social systems, however, are not mechanical; they are human decision makers that have certain decision-making rights and duties. When the decision makers exercise their duties responsibly, the system works as designed and society benefits. When they don’t, for whatever reason, they undermine the performance of the system and the achievement of its social goals.

Corruption Within the System

Using this definition, we can look at FIFA as an interdependent system composed of officials and decision makers. Their stated goal is “to develop football everywhere and for all,” [italics mine]. So if the organization is working as designed, FIFA’s stakeholders — all of them, including fans, players and communities — should benefit.

Instead, we found corrupt FIFA officials enriching themselves at the expense of everyone else, everywhere in the world. The performance of FIFA in pursuit of its espoused goals has been visibly degraded by the actions of individuals in positions of decision-making authority. Like a bridge with beams that have become corroded from the inside, the FIFA organization is currently in collapse.

Corrupting Other Systems

The engineer’s perspective on corruption also gives insight into role of corporate social responsibility. Social systems are actually composed of systems within other systems. Take that bridge again. It is actually part of a much larger network of tunnels, highways and toll roads that constitute a transportation system. When the system is whole and complete, it works at top performance and ensures that people, produce and products get to where they need to be at maximum efficiency. But when part of the system is corrupted, it lowers the performance of the whole and society suffers. Think of Bridgegate back in 2013, when in an act of political payback, New Jersey Governor Chris Christie’s staff closed two of the three eastbound lanes heading into New York on the Washington Bridge, creating what the USA Today called a “human debacle.” In this way, the corruption in one subsystem, the Washington Bridge, spread to undermine the function of other social systems dependent on a high-performing transportation system.

From this perspective then, we can understand corporate social responsibility and sustainability as ways of ensuring that corporate systems do not corrupt the larger social and environmental systems in which they are embedded. FIFA provides unfortunate examples of this type of corruption as well.

Brazil, for example, has some high-strung football fans, and high passions have tragically led to stadium bloodshed. Brazil leads the world in number of people killed in football match violence. This sad reality led Brazil to outlaw the sale of booze at soccer matches in an effort to reduce violence and enhance public safety.

But for FIFA and its sponsors — one of whom is Budweiser — the ban was unacceptable. FIFA secretary general Jérôme Valcke put it succinctly: “Alcoholic drinks are part of the FIFA World Cup, so we’re going to have them. Excuse me if I sound a bit arrogant, but that’s something we won’t negotiate.”

It did sound arrogant, but FIFA got its way and Brazilian politicians rolled over on the demands and lifted the ban. FIFA’s actions, in effect, corrupted the Brazilian political system in a way that served the interests of FIFA and its sponsors, but endangered the welfare of the Brazil’s citizens and sports fans.

What’s useful for this discussion is that FIFA’s demands and the Brazilian politicians’ response were not illegal. The change was made within the established political system. In the normative sense of “corruption,” this was not a corrupt episode.

But from the positivist perspective, FIFA’s demands were corrupting, because they did not benefit society as a whole or even help to “develop football everywhere for all.” The pressures put on Brazilian lawmakers were an example of how business corruption is socially corrupting: FIFA’s demands reduced the ability of the Brazilian government to protect its citizens, and impaired the social performance of the country’s institutions.

This is why corporate social responsibility and sustainability are vital perspectives for executives and global businesses. They force managers to consider the larger, systemic implications of how they pursue their parochial, short-term goals. While that does not guarantee they will act in the interests of the larger systems in which they operate, it does at least give them the mindset to do so.

4 Comments On: To Red-Card Corruption, You Have to Know What a Foul Is

  • Raj Thamotheram | July 7, 2015

    This is a great article about the FIFA corruption scandal and a learning moment indeed.

    And have you considered another systemic – and therefore difficult to see – situation, namely corporate capture of politics in the USA and other countries?

    I remember a former Chairman/CEO of E&Y called it “legalised corruption” which has since been echoed by Thomas Friedman (“legalised bribery”).

    So does the fact that the “foul” is legal make it any better? This is, after all, largely the result of buying or more accurately renting the legislators. Or is another case of where we have lost sight of the “foul” because it is happening day in and day out under our noses?

    Avaaz did a survey last year which showed that the thing its 6 million members worldwide are most concerned about is corporate political influence. Coming joint 2nd were inequality and climate change, issues which are themselves the result of governments favour vested interests over public interest.

    But strangely CSR practitioners don’t really seem to think political capture is an issue for them. And if it is, its only if its happening “over there”.

    Dealing with issues close to home is sensitive but do CSR practitioners who want to be relevant in the real world have a choice?

    Of course the same challenge can be made to ESG professionals on the investor side.

  • Abera Gada | July 8, 2015

    Thank you, this is a very interesting article and perspective.
    Is it possible to generalize and say the system or the sub system is corrupt because of the actions of individuals or groups? For example, individuals in the system can be rent seekers and enrich themselves as a result of the position they hold in the system. However, the system can continue functioning and meeting its goals and objectives. I think the challenge our current systems and institutions are facing is ‘greed’ and moral decadence of individuals.

  • Gregory Unruh | July 13, 2015

    Raj, Thanks or your thoughtful comments and important points about political influence, which I think we can agree is not technically illegal but is certainly corrupting both inside political systems and on the systems that are influenced by political decision-making.

    From a CSR perspective, I see corporate political strategy and influence peddling as a fringe sustainability issue for now. However, issues don’t stay on the fringe forever and accountability for corporate political activity is in the cards. I suspect demands for transparency will come first and then become part of standard CSR Reporting.

    Any thoughts on accelerating the process?

  • Gregory Unruh | July 13, 2015

    Thanks for your comment Abera. I think the engineering/systems approach provides a richer perspective that can get at the issues you point to. For example, you can have a system that is well designed but individual decision makers are corrupting its functioning in the way you describe. You can also have systems that are innately themselves corrupt. The political-economic system of slavery, for example, is a corrupt system by design.

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