Theoretical form of corruption that occurred on a

Theoretical Backgrounds

Bribery is perhaps the most traditional form of corruption that occurred on a routine basis throughout the business world. According to the World Bank (2004), bribes paid out by businesses, and other parties cost them above one trillion dollars a year, more than three percent of the total estimated world economy. Companies are not the only ones that involve in bribery, of course, but businesses have been singled out as one of the leading suppliers of the bribes that are paid today to corrupt government officials (Transparency International, 1997). Moreover, arranging, paying, and monitoring bribes are a time-intensive activity, so bribery also imposes massive non-monetary costs on businesses.

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Bribery is also increasingly becoming a significant concern for governments and corporations.  A company may deal with a request for a bribe in some countries. Research indicated that bribery is a key risk for businesses throughout the world. According to World Bank (2004), US$1 trillion is an estimate of actual bribe paid worldwide in both rich and developing countries, including Indonesia. Peoples who live in more dense countries, like in Indonesia, face a higher propensity of bribery. More specifically, an increase in the country’s population by one million is related to an increase in the tendency to be asked for a bribe by 0.01 percentage points (Mocan, 2004).

Indonesia has the world’s fourth-largest population, diverse languages, several religious traditions, and a difficult terrain that all make the country a complex and exciting place. This country has a larger Muslim population than any other country in the world with 88% of their population practicing the Muslim faith. Islam, the religion of most embraced by the Indonesian people, openly opposes to any condition of the violation of good ethics, such as bribery and do support the efforts to eradicate bribery. Surprisingly, in countries where the largest number of highly religious people, bribery is widespread. Still and all, this predominantly Muslim state should be very embarrassed by the fact that Indonesia is still measured one of the world’s most corrupt countries among the ten most corrupt countries listed in the 2012 Corruption Perceptions. Even though Indonesia has some laws and regulations that could be used to annihilate bribery, the country has largely unsuccessful to overcome this issue. In 2016, based on annual Corruption Perceptions Index, Indonesia’s ranking worse to 90th from 88th in 2015 (Transparency International, 2017). According to World Gallup Poll, in 2012, 88% of Indonesian citizens said corruption was widespread in the country’s government (Crabtree, 2013).

Indonesia has an enormous potential for growth due to its abundant natural resources, young and burgeoning population but only a few groups who feel the benefit because bribery system is the challenge. The large-scale bribery practices experienced by companies in many sectors and regions, however, led many companies to tolerate bribery as long as it secures their business and the profit margin still reveals a real gap. 

According to Corruption Eradication Commission (KPK) statistics, around 51% of corruption cases scrutinized by the commission engaged in bribery, which also exhibited a high supply and demand of bribery in Indonesia (Prabowo, 2016). As described by a survey, construction is mostly at risk of bribery, followed by mining and trade sectors (Thohary, Suyatmiko, & Yazid, 2015).

In Indonesia, bribery is a common practice because it falls under a gray zone to some degrees. Many business people undertake bribery standard practice even though it is formally illegal. Gratification, giving hospitality, expensive dinners and entertainment are quite normal business practices in Indonesia. Individuals involved in bribery believe that their actions were something different from criminal conduct like murder, battery, rape, assault, terrorism, kidnapping, arson, gang violence, and domestic violence. On the top of that, many people pay bribes because they think that it is not a big deal and everyone else is still doing it (Lawler, 2012).

Based on a global study by Ernst & Young in 2012, 60% of Indonesian respondents regarded earning cash payments to gain new business as an acceptable practice. Additionally, 40% of Indonesian respondents believed that providing entertainment to take over or retain business was also acceptable conduct. People assume that if other people do it, so they might just do it as well. Perceiving that the majority engages in bribe makes it much easier for someone to justify their bribe behavior. So, the more repeated people recognized the bribery behavior to be, the more potential they were to behave bribery in business (Köbis, 2015). However, bribery behavior is not necessarily solely selfish. It can be other serving towards the members of one’s group. Bribery may be determined by huge group-based moral concerns (Dungan, Waytz, & Young, 2014). Moreover, in bribe organization, many workers engage in bribery as a group to enrich their team at the cost of organization. In organizations with bribe individuals, many employees improve themselves on the expense of their company (Pinto, Leana, & Pil, 2008).

Despite an enormous academic literature on bribery, there is little evidence on the aspects that influence the degree of these bribes and the benefits that firms derive from them. This matter is not shocking because this type of activity is frequently undisclosed. Most of the literature has tried to quantify bribery indirectly, by depending on questionnaires or by constructing guides at the state-level employing survey evidence of corruption perceptions.

This dark side of an organization consists of both collective behavior and individual behavior. All organizations have problems that are inherently a combination of collective behavior and the individual psychological dispositions people bring with them.

The corporate that carries out foreign bribery found that their stock price declines 3.11% approximately on the first day that announcement of the bribery enforcement action is published and by 8.98% overall records related to the enforcement action (Karpoff, Lee, & Martin, 2012). Incidents in which a senior executive engaged the bribe had 64.9% more significant impact than those in which the bribery was lower down on the corporate (Serafeim, 2013). Conversely, other data show that the size of bribery does not matter when it comes to bribery (Serafeim, 2013). Rabl (2011) suggests the size of bribery and time pressure has no significant impact over bribery. Benefits of bribery for business are pass quickly. Far outweighed by the costs for businesses. In a word, any size bribe has a destructive impact on business in the long term.

Companies not only suffered from bribery but also played in violating business ethics. Bribery is one of the most commonly reported issues recorded by the Institute of Business Ethics’ media monitoring during 2013. They estimated for 13% of all the stories on business ethics. The sectors most frequently mentioned were extractives (70%), defence and security (63%), pharmaceuticals (47%) and broadcast/media (33%) (Kemp, 2014).

Issues of business ethics have increasingly become more crucial in organizations business settings. Bribery, as one of sources conflict of interests, is morally wrong from the business ethics perspectives. As stated by De Cremer  & Vandekerckhove (2016), business ethics have been discoursed and criticized by prescriptive approaches that are grounded in philosophical traditions.

Academic research on corruption includes bribery has typically focused on studying its macro causes and consequences. It has concentrated on its country-level and industry level (Heffernan & Kleinig, 2004; Cheung et al., 2012; Miller, Roberts, & Spence, 2004). On the contrary, bribery at the firm level are ‘underexplored’ (Pinto et al., 2008), including in Indonesia. Existential evidence has been sketchy on the direct performance impact of bribery mainly because it is hard to obtain empirical data on firm-level bribery. On little analysis of firm-level data, with firm-level evidence also being mostly gained from surveys (Hellman & Schankerman, 2000; Svensson, 2003; Cull & Xu, 2005; Fisman & Svensson, 2007; D’Souza & Kaufmann, 2010). All of these disciplines need effective tools to address the organizational contexts, behaviors, and processes that form bribery at the organizational level.

By focusing on organization-level bribery, it does not imply that individual level bribery is unimportant. In fact, organization-level bribery is carried out by executives or employees at various levels, who do so, partially or entirely, on behalf of the organization. Notwithstanding the foregoing, up to now, there has only been little research focusing on the person who acts bribery in organizations.

Bribery is an interdisciplinary phenomenon that requires an interdisciplinary approach. Discussing bribery from multiple standpoints not only enables a comprehensive understanding of this complex matter, where many questions remain unanswered but also allows for a deeper understanding of the organizational behaviors, contexts, and processes that form bribery at the firm’s level. This current study will explore the a psychological approach to the understanding of the meaning and how people act the way they do related to bribery and business ethics.