Corporate Corruption and the HRM Function: Legal, Ethical, and Moral Perspectives

What is Corporate Corruption and how pervasive it is?

While we are all aware of corruption in the governmental and public sector entities, the lesser reported aspect of corporate corruption is something that does not yet get the coverage and attention it should.

This is because unlike corruption in other spheres and walks of life, corporate corruption incidents are usually managed and handled in lesser time so that the institution does not suffer too much damage to its reputation or affects employee morale.

Indeed, while corporate corruption is rampant, the fallout from business scandals result in the erring employees or senior executives forced to resign and face legal action.

Corporate corruption has many faces and they include mundane things like fudging expense bills and accounts, to the more serious aspects such as siphoning off money or stealing IP or Intellectual Property, and the extreme scenarios where senior executives are caught perpetrating frauds and gigantic con jobs in their firms.

Examples of corporate corruption include the Satyam scandal in India, the Enron scandal in the United States and others where large scale malfeasance led to the collapse or takeover of the firms to limit the damage and to contain the fallout from such incidents.

The Role of the HRM Function in Preventing and Pre-Empting Corporate Corruption

Thus, corporate corruption is as pervasive and persistent as corruption in other walks of life. So, what and how the HRM or the Human Resource Function and the HR managers should do when confronted with corporate corruption.

To start with, the HR managers have an ethical and moral responsibility towards the institution rather than to the individuals in the institution and hence, they should always place the interests of the former over the latter.

This means keeping a close watch on suspicious activities and monitoring the behaviour of those that the HRM function deems as indulging in unethical conduct.

Indeed, the HRM professionals are duty bound to act against corporate corruption as they too like Doctors who take the Hippocratic Oath have to be loyal to the larger interests of the entity.

This means that they should engage in what is known as a Wink and Nod culture wherein corruption happens and all that the HR managers do is to protect themselves and once the scandal breaks, behave as though they were not aware and then, do damage control.

In other words, prevention is the key aspect here as the HR managers must act to prevent rather than react once the incidents happen.

What Happens When the HRM Function is also Corrupt

Having said that, it is also the case that sometimes the HRM function is as deep in corruption like the other functions.

For instance, in many corporates, backdoor entry and recruitment that is unethical happens all the time wherein HR Managers in connivance with the management and the middle managers often recruit candidates who are unfit and mediocre just because they have either paid money to them or have done some material favours to them.

So, this presents a dicey situation for all the stakeholders as this means that everybody is suspect and no one is above the dirty tricks and the unethical behaviour.

In such cases, there is a need for Whistleblowers to report such behaviour to the senior management or anonymously to media and other employees so that action can be taken as needed.

Indeed, there is a moral responsibility on part of the HRM professionals to not engage in unethical behaviour and in case it so happens, then to act according to the dictates of their conscience.

In other words, there is a legal, ethical and moral responsibility on part of the HR professionals to be loyal to their integrity.

What Happens When Business Scandals Break Out into the Open?

While this might sound as preaching and sermonizing, it needs to be remembered that corporates are built over the years and transformed into institutions that are widely respected and revered and all it takes is for one single widely publicized scandal or incident to tarnish the good image that they have.

Take the case of the Indian IT (Information Technology) firm, Infosys, and its brush with corporate corruption.

For a firm that has been built on the foundation of morals and ethics, the events of the last few years have seen its reputation take a hit and a body blow and the consequent dip in employee morale is evident from the high rates of attrition that it is now facing.

Moreover, its iconic founders and their painstakingly built reputations too have taken a beating and the resultant cynicism has ensured that the entire India Inc. is now facing a crisis of credibility due to this and the other scandals that have come to light in recent years.

Thus, the HRM function does have a role in acting before it is too late and ensuring compliance with the laws of the land. If not for anything, they must act before they are forced by the media to do so.

Avoiding Cover Ups

Lastly, it is often the case that the HRM function is called upon to cover up scandals and corruption incidents after they are discovered.

This does not do anyone any good as such cover ups usually come at a price to the emotional health of the people involved as well as setting bad precedent for future behaviour.

Thus, it is our contention that the HRM professionals prevent and pre-empt corruption rather than covering it up post facto.

To conclude, these are challenging times for everyone and the HRM professionals might find it difficult to navigate the treacherous waters of corporates but rest assured, they can reach the shore safely if they follow the Lighthouse of morals and ethics.


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Authorship/Referencing - About the Author(s)

The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


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