As JJB Sports’ former CEO faces fraud charges for taking £1m in bribes from suppliers, research suggests that most bribes are paid in developed countries, with the full knowledge of senior management.
A new report from the OECD has found that, of 400 deals analysed over a 15 year period, bribes typically amounted to 11% of the total transaction value – an average of US $14m. On paper, said the OECD, bribes often account for over a third of the profits made on a deal, and when the financial complexities are stripped away, probably account for much more.
The worst culprits were state-owned or state-controlled companies in wealthy and developed Western nations, not, as is often presumed, developing nations. The bribes typically went to employees of state-owned companies, customs officials, heads of state and politicians.
Just under a fifth of cases involved the mining industry, followed by construction (15%), transportation and storage (15%), and information and communication (10%).
The backhanders accepted by JJB ex-boss Chris Ronnie, who is being tried today on three counts of fraud and two of furnishing false information, are thought to have been privately offered and kept secret from the struggling retailer. In the majority of cases surveyed by the OECD, however, those at the top of the chain knew about and frequently endorsed the practice.
Defending his actions in the midst of a corruption scandal last year, Silvio Berlusconi said that “bribes are a phenomenon that exists and it’s useless to deny the existence of these necessary situations.”
The expectation that suppliers should hand over cash for contracts appears has become so commonplace that it is even being applied to small businesses.
Last week, British food manufacturing giant Premier Foods, which owns a number of well-known brands including Mr. Kipling, Sharwood’s and Oxo, was revealed to have written to its SME suppliers demanding payments of thousands of pounds in order to retain their “preferred supplier” status – with the threat of de-listing if they did not comply.
Many commentators have denounced such demands as institutionalised bribery, with dangerous ramifications for businesses.
“Driving a hard bargain with your suppliers is one thing, but demanding a cash gift under the threat of delisting, is downright unfair,” said John Allan, National Chairman of the Federation of Small Businesses.
“If the questionable practice being attempted by the likes of Premier Foods becomes the accepted norm, it may well sink those small firms without the cash reserve to prop up their larger customers.”