Research Paper Example on Corporate Corruption

7 pages
1661 words
University of Richmond
Type of paper: 
Research paper
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1.0 Abstract

Corporate criminalities have become a common phenomenon affecting numerous corporations in different parts of the world. Past research has illustrated that the occurrence of some of the most critical corporate frauds has been as a result of the negligence and incompetency of such corporations board of directors. Moreover, most of such crimes are perpetrated by a member of the board of directors. This is principally because a director has a parallel influence on most operations in a corporation. As such, he/she is strategically positioned to influence major decisions that could result in the loss of funds in a corporation. In light of this revelation, this thesis will explain the roles of a director in an organization and his/her corporate criminal liabilities. This is in response to any form of financial criminalities that may face a corporation. This thesis will also issue a review of literature focusing on the duties of a director, corporate liability, corruption, Bribery Act, money laundering, board level responsibilities, corporate criminal liability and corrupt crime prevention measures.

2.0 Table of Contents

1.0 Abstract 2

2.0 Table of Contents 3

3.0 Introduction 4

4.0 Materials and Methods Employed 4

5.0 Literature Review 5

6.0 Results or Sources and Methods Discussion or Findings 8

7.0 Prevention Measures/Recommendations 9

8.0 Conclusions 10

9.0 References 11

3.0 Introduction

A corporate director is a person who is a member of a corporations board of directors. His/her primary role in a corporation is to take the responsibility of a companys affairs. A director together with other members of a corporations board of directors ensures that all operations in a corporation run seamlessly. It is also the role of a corporate director to ensure that all functions and efforts employed by the salaried stakeholders in a corporation are focused on promoting the attainment of the companys outlined objectives. Moreover, a corporate director is also tasked with the responsibility of ensuring that the corporations resources are not exploited through fraud or another form of financial criminalities.

Corruption is a core problem affecting numerous companies in different parts of the world globe. It causes the substantial loss of a companys financial resources and a consequential deterioration of the affected entitys operation. In most cases, acts of corruption or fraud are perpetrated by persons with a director title in the organization. This is because they can easily influence the decisions made in crucial departments within an organization. Some of the majorly affected departments, by the corrupt actions of a corporate director, include the finance and accounting departments. As such, it is essential for research aimed at clarifying the roles and liabilities of a corporate director to be carried out.

4.0 Materials and Methods Employed

In this research, journal publications detailing the negative effects of corporate corruption to a corporation will be employed. Moreover, a meta-analysis research method will be employed to review the various publications that will be considered fit for this research. Additionally, only qualitative publications focusing on corporate corruption will be considered for the research. Also, to enhance the precision of the attained findings, only publications authored in the last ten years will be considered fit for the research.

5.0 Literature Review

In order to significantly control the of corporate corruption cases perpetrated by corporate directors, it is essential for them to learn about the roles and responsibilities in a corporation. This is because corrupt directors at times insert undue influence on crucial departments of an organization. This is without the consent of all the other members of the board of directors. This phenomenon can be supported by a publication authored by Gabbionetta, Prakash, and Greenwood (2014). The authors argued that corporate corruption occurs when corrupt corporate directors ascribe probity as well as diligence to the behavior of other members of the board of directors. Consequently, this contributes to the occurrence of sustained corporate corruption.

To avoid such cases, all corporate directors must be informed about their roles in a corporation. There are several primary roles of a corporate director in an organization. First, a director is responsible for recruiting, evaluating, retaining, compensating as well as supervising a corporations chief executive officer (CEO) and general managers. Second, a corporate director is responsible for providing a direction to a corporation through enforcing the entitys mission, vision, and goals. Third, a corporate director is responsible for establishing a policy based system for governing all stakeholders in an organization. A corporate director should also govern the organization and also promote a good relationship between the corporation and its management leaders.

Additionally, a corporate director is charged with the fiduciary duty, which is focused on protecting a companys assets as well as its members investments. Ultimately, a corporate should also monitor and control the companys financial records. These roles portray that a corporate directors responsibilities are focused on protecting a companys assets but not corrupting its interests. Nevertheless, according to Gabbioneta, Prakash, and Greenwood (2014), there has been a great rise in cases of corporate corruption over the last 20 years. The authors attributed this phenomenon to the inability of experts and certified firms to recognize as well as publicize instances of corruption in corporations.

Nevertheless, there are various laws and legislations that fraud detection experts and other companys stakeholders can employ to report or sue corrupt corporate directors. Such include the Bribery Act that created in 2010 in the United Kingdom (Kochan & Goodyear, 2011). The Act was engineered to enhance as well as update the UK laws on bribery and corporate corruptions dealings as a requirement brought forward by the 1997 OECD Anti-bribery Convention (Pieth, Low, & Bonucci, 2013). The Act imposes heavy penalties for all companies and partnerships that fail to prevent or report any forms of corporate corruption. As such, the corporations in the UK have a legal obligation of reporting all forms corruption that could be perpetrated by any company stakeholder, such as a corporate director.

Additionally, according to a journal publication authored by Tackett (2010), corruption is a major factor affecting numerous business organizations around the world. In his article, Tackett cites high-profile cases such as the Madoff scandal as well as other cases of bribery and corruption that is evident in the global business world (Tackett, 2010). According to Tackett, such acts of corporate financial criminalities are executed by corporate leaders as well as national politicians. Additionally, Tackett offers a comprehensive discussion of the various forms of corruption evidenced in most nations as well as the various methods of detecting and prevention such crimes. Apart from the corruption cases illustrated by Tackett (2010), other primary corruption cases by corporate directors include the Tesco Stores corruption case and the Stone Rose Legal Case.

The Tesco Stores corruption case that was perpetrated by members of the companys board of directors. The corruption scandal occurred between February and September, and it cost the corporation over 263m in the form of an accounting scandal (Butler, 2016). The crime was perpetrated by Carl Rogberg, Christopher Bush and John Scouler, who held the finance director, managing director as well as commercial director positions in Tesco UK (Ruddick, 2016). The three persons who were also members of the board of directors abused their power and position to steal millions of pounds from the Tesco Corporation in the UK. The instances of corporate theft can also be evidenced through the Stone Rose legal case where the manager was involved in money fraud that entirely compromised the financial performance of the business.

Moreover, according to a journal article authored by Dine (2008), the World Bank cited that corruption is the leading obstacle that is facing the economic and social development of numerous societies around the world. In the publication, Dine also cited the need to enact a corruption-free corporate culture in all companies to support a healthy corporate performance (Dine, 2008). Dine also illustrates that in response to the problem of corporate culture, numerous anti-corruption movements have been structured in different parts of the world, and they are focused on making market economies more efficient and development resources more accessible to corporations. Dines publication portrays the need to unveil all cases of corruption, especially those perpetrated by influential persons such as the corporate directors.

In most cases when corruption occurs due to negligence or criminality of members of the board of directors, the financial positions of the affected corporations are weakened. For startup partnerships and small corporations, money laundering by members of the board of directors result in the entire closure of the organizations. Additionally, the investors lose their investments, and most criminals bribe through the nations criminal justice system with part of the vast sums of funds they secured through corruption. Nevertheless, with the improved legal justice system today, the stakeholders affected by such corruption offenses can file legal suits against such criminals. Moreover, the uncorrupt members of the board of directors can also sue corrupt members in a court of law. This is an effective strategy of lifting the veil that shields the issue of corruption in numerous corporations.

Additionally, Dyck, Morse, and Zingales (2010) publication illustrate the procedures that can be employed to report cases of corporate fraud. Their journal article achieves this by analyzing a variety of fraud cases reported by the largest corporations in the United States between 1996 to 2004 (Dyck, Morse, & Zingales, 2010). According to the publication, it is evident that fraud detection does not only rely on the corporate governance members such as the investors, directors, and auditors. Instead, it also relies on other non-traditional players such as the employees, media, as well as other industry regulators. According to the authors, such persons have access to information that could aid in shedding light to cases of corporate corruption in various business organizations.

6.0 Results or Sources and Methods Discussion or Findings

From the literature review, it is evident that despite the measures that have been implemented by the government and corporations to eradicate cases of corporate corruption, the problem has increased tremendously over the past two decades. Additionally, corporate financial criminalities are mostly perpetrated by corporate leaders in conjunction with national politicians. Moreover, corporate corruption has become a leading obstacle facing the economic development of numerous companys in the...

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