The Causes of Corruption and Its Effects to the Company

Corruption implies some form of illicit and criminal behavior for personal enrichment such as for the purpose of preserving power. Nowadays, corruption is both a major cause and a result of poverty around the world. It occurs at all levels of society, from local and national governments, civil society, judiciary functions, large and small businesses, military and other services and so on. There are many causes and effects of corruption to the company.

First and foremost, expansion of market is the main cause of corruption to occur in a company. Most companies participate in corruption to assist themselves in their market expansion strategies. By bribing a few officials, they are able to establish operations and achieve their goals. If not for these bribes, those companies would not have received the necessary permits to set up operations. As for example, an official has the authority to allocate a commodity at a price below the market equilibrium level. Then rent seeking may occur and the official may be able to accept bribes which cause corruption to take place.

Besides that, profit maximization is also one of the causes of corruption. By selecting those countries with potentially a large expanding market with very little competition, some of the companies choose to bribe officials to enter these markets and reach their profit targets.

The effects of corruption to the company are felt in monetary terms from a business point of view as well as in social and political costs. In monetary costs, it effects the economic development and economic growth which shown to worsen poverty. Inefficient of world economy and serious obstacle for investment are also the effects of corruption. Last but not least, reduction in tax revenues and affected in price and quality of finished goods will also show the bad effects of corruption.

In a nutshell, corruption is a worlwide phenomenon with no end in sight. Specific steps should be taken by the company in order to curb corruption such as anti-corruption regulation, penalties, better salary structure, and employee training.


Done by: Nur Afdhallina binti Ismail (103204)