Who benefits from what? The two-fold perception of corruption in the Czech business sector

What is the business ethics like in the Czech Republic? Corruption is common in the domestic business environment, the most problematic being the public procurement sector. Nonetheless, according to the latest survey of Transparency International – Czech Republic, managers of medium- and large entreprises face the same problem in the business-to-business relations: here, unfair and unethical conduct is not an exception either. At the same time, the attitude towards corruption in the Czech business world is inconsistent, as the corrupt conduct is judged according to who benefits therefrom. A corrupt employee, who has cheated on his firm, is sacked. Who has unethically helped the firm benefit, is likely to be connived with.

Corruption as a competitive advantage: current profits first
Unethical conduct definitely pays off in the Czech Republic. 4/5 of interviewees are convinced that corruption in business relations represents a competitive advantage. On the other hand, if a company is caught bribing, its reputation will deteriorate. However, the reputation loss can affect the welfare of the company according to half of the interviewees only. Hence, the reputation of a company and the welfare thereof are not currently interwoven in the Czech Republic.

The twofold perception of corruption in the Czech business world is risky. Almost all managers (96%) concur that a sanction should follow, if a company is harmed by an unethical conduct. If the opposite is the case, that is, if the company makes profit out of its employees’ corrupt behaviour, then it is alright. What is more, 1/3 of the managers think such behaviour should not be punished. Tolerance and acceptance of corrupt practices even increases, if it is a matter of survival for the company to win a certain deal. Should a corrupt employee steal from his or her firm, he or she takes the risk of being made redundant or at least a subject of a disciplinary proceedings. Who participates in corruption, bringing thereby profit into the company, is safe.

Business environment
The business environment in the Czech Republic is improving, but is by no means ideal. Managers of medium and large enterprises suppose that the conditions for doing business are much more favourable now than they were in the 1990s, although there is a room for improvement. The business environment still makes unethical practices possible, and who wants to hold out has to become adapted to this. To run business in an ethical way is, indeed, possible, but more difficult than in an unfair way. According to the entrepreneurs, business legislation is ambiguous and poorly enforced, negatively affecting the environment. The conditions are influenced by attitudes developed in the past, and further reinforced by the course of the currently publicised cases of corruption.

Passive resistance or active change?
The entrepreneurs see unethical practices especially in the public procurement sector. The change that can contribute to the improvement of the business environment must be of a systemic nature and led from above. The social conditions could be changed by positive examples given by both political and business leaders. As long as the leaders behave correctly, the rest will follow. Who behaves in an incorrect way, must be punished in a due way and become a deterrent to the potential followers. Unfortunately, most of the managers take a passive approach: I myself behave in an ethical way, that is all I can do.

Codes of conduct: an effective tool?
3/5 of the surveyed companies have implemented internal ethical norms or instructions. These take manifold forms: from unwritten rules of the company’s culture, internal norms, ISO standards, to written and binding codes of ethics. However, all the codes of conduct remain an empty shell, unless the management of the firm leads the employees by example, adhering strictly to them, and consequently monitoring of the employees’ conduct. Leadership by example and open communication are the best instruments to improve the ethical environment of a company.

How the Britons see it?
The main difference between Czech and British managers’ perception of the ethical issues can be found in the following: the utility of unethical conduct, the assessment of corruption as a competitive advantage, the importance of having a good reputation for the welfare of the company, and the codes of conduct.

Managers of British firms see business in a much longer perspective. That is why most of them deem unethical practices detrimental in the long run (4/5 of British managers in contrast with the half of the Czech ones). In the same line, a lower fraction of British managers (compared to the rate of the Czechs) consider corruption a competitive advantage. Yet, more than half of the British think it is.

The reputation loss risk in connnection to the welfare of the company is assessed higher by the British managers than by the Czech ones – the former ranked it second right after a war in the home country.

Codes of ethics are more important for the British than for the Czechs. The British, too, differentiate between “good” and “bad” corruption, that is, judge it in accordance with the benefit for the company. On the other hand, they are much stricter with regards to its treatment: half of them is convinced that an unethical conduct, from which the firm benefits, should be punished.

As for the business ethics, Czech Republic ranks within the EU among the former Eastern block. The situation in the Czech Republic is comparable to that in the new EU members states according to the half of the interviewees. Old EU member states have a very good image concerning the business ethics. 70% interviewees think that the conditions are better there than in the Czech Republic, and 2/3 of the interviewees claim that firms from these countries behave in an ethical way.

Further information:

For detailed information about the survey see the TIC web pages: www.transparency.cz.

Press contact:

Adriana Krnáčová
Transparency International - Česká republika
Tel: 266 790 117
Fax: 284 682 872
E-mail: krnacova@transparency.cz