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David Hess
  David Hess
 

Award Winner Hess Discusses Current Research

11/10/2008 --

Assistant Professor of Business Law David Hess focuses his research on the role of the law in ensuring corporate accountability and on approaches that enable corporations to go beyond legal compliance to meet the expectations of society with respect to ethical behavior and sustainable economic development. His publications in this area analyze the proper structuring of sustainability reports to increase stakeholder influence and improve organizational learning. He recently took home the 2008 Faculty Pioneer Award from the Aspen Institute Center for Business Education. The annual recognition, dubbed the "Oscars of the business school world" by the Financial Times, celebrates MBA faculty who have demonstrated leadership and risk-taking in integrating social and environment issues into academic research, educational programs, and business practice.

Read more about Hess' award.

What are you thinking about?

Hess: I'm continuing my research on controlling corruption in international business. I'm looking at both government regulation and the use of voluntary initiatives by multinational corporations. This research includes not only bribe payments to public officials, but also private-to-private corruption, which involves corrupt payments between two corporations' agents.

Why is it interesting to you?

Hess: The topic interests me because corruption is such a harmful but enduring practice. Some people have stated that it's a paradox in that corruption is universally disapproved yet universally practiced. It's also important to remember that corruption in developing countries is harmful not to just economic development, but also to the realization of human rights and the attainment of sustainable development.

In the United States, the Department of Justice has stepped up enforcement of the Foreign Corrupt Practices Act in the last few years. However, most enforcement actions seem to be based on self-disclosure by the bribe-paying corporation and clearly only a very small percentage of those paying bribes are turning themselves in. The challenge is get to get more corporations to prevent the payment of bribes by their agents in the first place, and, if someone does pay a bribe, to disclose those actions. The recent case of the German company Siemens shows why this is such a difficult challenge. Siemens -- a conglomerate operating throughout the world and employing close to 500,000 people -- apparently had corruption thoroughly engrained in its culture. One report indicated that the company's own internal investigators identified over $2 billion in suspicious payments over the past several years. Apparently, these practices were so common that individuals at all levels of the organization either no longer questioned their appropriateness or felt powerless to oppose them.

Overall, we need to provide incentives for corporations to self-regulate, help them develop effective compliance programs that allow self-regulation to work, and find ways to help corporations like Siemens reform themselves. The legal, managerial, and ethical issues involved create many interesting and important research questions.

What implications do you see for industry?

Hess: Corporate officers recognize the business case for ending corruption. They see the costs that corruption imposes on operations and the damage it can do the company's reputation. Thus, there is a strong business case to end bribe payments. However, they also see their competitors paying bribes to win contracts. This makes it very difficult to ensure that employees refuse to pay when bribes are requested by customers and clients. It also means that collective action is required. All corporations must be committed to combating corruption and working together to solve this problem. Ending corruption is both pro-business/economic development and pro-human rights/sustainable development. Unfortunately, due to these collective action problems, breaking the cycle of corruption is a significant challenge and requires novel solutions.



For more information, contact:
Bernie DeGroat, (734) 936-1015 or 647-1847, bernied@umich.edu