Big Idea: Leading Sustainable Organizations

To Red-Card Corruption, You Have to Know What a Foul Is

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

Gregory Unruh Reading Time: 5 min 

Topics

Leading Sustainable Organizations

Corporate adoption of sustainable business practices is essential to a strong market environment and an enduring society. What does it mean to become a sustainable business and what steps must leaders take to integrate sustainability into their organization?
More in this series

“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.

©iStock.com/RSMcLeod

The crisis over corruption at FIFA offers useful pointers for managers.

©iStock.com/RSMcLeod

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.

Topics

Leading Sustainable Organizations

Corporate adoption of sustainable business practices is essential to a strong market environment and an enduring society. What does it mean to become a sustainable business and what steps must leaders take to integrate sustainability into their organization?
More in this series

About the Author

Gregory Unruh is the Arison Group Endowed Professor at George Mason University in Fairfax, Virginia, and the MIT Sloan Management Review’s Guest Editor for the Sustainability Big Ideas Initiative. He can be reached at unruh@mit.edu.

Tags:

More Like This

Add a comment

You must to post a comment.

First time here? Sign up for a free account: Comment on articles and get access to many more articles.

Comments (4)
Gregory Unruh
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.
Gregory Unruh
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?
Abera Gada
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.
Raj Thamotheram
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.