01 Dec 2012

Corruption 101

A student's unexpected education


Corruption doesn't announce itself with a capital C. It is subtler and thornier than that—as one HBS student learned the hard way during a recent summer internship in Tanzania. In a new case detailing his experience, the student struggles to navigate the systemic abuses and institutional weaknesses that underlie corruption everywhere. As an emerging professional he must also carefully weigh the trust value of the personal relationships he is forming; his own comfort zone for ethical trade-offs; and the inherent uncertainties of making decisions without precise information, decisions that could affect many people. The case, "Against the Grain: Jim Teague in Tanzania," was written by the student (using a pseudonym) under the supervision of HBS associate professor Karthik Ramanna.

In a nutshell, the case goes like this: "Jim" accepts a summer internship as a loan officer from a social investment firm seeking a high-impact agribusiness project in rural Africa. A small company in Tanzania seems to fit the bill, but it faces health-safety issues with the potential to spread E. coli throughout the region. Another problem: It's not clear whether the local agency flagging the potential crisis is identifying a real issue or just seeking a payoff (it has a reputation for the latter). It's clearly a quandary for Jim's employer, but withdrawing investment at the 11th hour would also put many poor farmers' livelihoods in jeopardy.

Like many case studies prepared for classroom discussion, "Against the Grain" ends as a cliff-hanger: What should Jim do? The array of ethical choices forms the basis of class discussion in the required course Leadership and Corporate Accountability.

"Corruption can be defined as paying for a good or service in contravention of an ethical norm," says Ramanna. Economic tools of supply and demand can also be applied to studying the phenomenon of corruption. On the demand side, it is true that corrupt government officials sometimes garner a degree of sympathy from the public, legitimizing their bribe-taking. Some public employees, such as police, it can be argued, require extra income just to ensure a basic standard of living.

On the supply side, corruption prevails because people find themselves paying bribes under duress. Even when one's life is not at stake, says Ramanna, if paying a bribe makes the difference between waiting years or mere days for a permit or license, it is tempting to just pay up.

As the "Against the Grain" case suggests, pervasive corruption entails a spectrum of complex personal, societal, and economic phenomena without an easily identifiable response.

During Jim's hectic summer in Tanzania, as he spotted an increasing number of red flags, he had to consider not only his US employer and his HBS position, but also his local client, his client's employees and their families, customers throughout the region, and all the suppliers for the client's business including struggling farmers who depended on the business for their survival.

"There were so many moving parts and so little information," Ramanna comments. "The case is intentionally brief. We don't know whether the local agency Jim had to deal with was corrupt, and he didn't know either." Corruption is a problem that looms bigger than one person's ability to confront and resolve it, Ramanna says. Everyone who faces it feels some degree of helplessness. And Jim's helplessness was juxtaposed with the fact that, for all his relative youth and inexperience, he had been put into a position of remarkable power over the lives of so many people he barely knew or understood.

"The goodwill earned and accrued by earlier generations of HBS graduates has paved the way for the current generation of HBS students to enjoy access to incredible opportunities, yet with these opportunities comes a great deal of power," Ramanna says. "There is a central tension in the case between the student feeling at once helpless against a corrupt system and surprisingly powerful given his novitiate status. This is a moment that cries out for leadership; it is a moment that makes a leader."

Martha Lagace is a freelance writer for HBS Working Knowledge.


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