There have been mixed responses to the latest release of the Corruption Perception Index (CPI) by Transparency International. For many, any report on corruption is about government and has nothing to do with the man in the street. In fact, many consider government to be synonymous with corruption, with those “outside of government” having little or no role in helping to raise the country’s CPI above 50. This attitude must change before we can conquer what many refer to as the corruption monster that is eating away the moral fabric of Jamaica. More of us must join in echoing the words of Pratibha Patil, former president of India: “Corruption is the enemy of development and of good governance. It must be got rid of. Both the government and the people at large must come together to achieve this national objective.” This is a rallying cry that must resonate across all sectors.
The cost of corruption is too high for individuals and businesses to adopt an indifferent or apathetic attitude towards it, believing that its tentacles will not affect them. According to the World Economic Forum and UN officials, corruption costs the global economy up to US$2.6 trillion to US$3.6 trillion annually, representing about 5.0 per cent of global GDP. The report stated that developing countries have been affected to the tune of US$1.26 trillion per year. All hands must be on deck in the fight against corruption, including family owned businesses (FOBs).
FOBs play a complex and significant role in the fight against corruption. They must not be numbered among those who believe that they can stand on the sideline, having no active role in helping to rid Jamaica of the dark cloud of corruption. This is easier said than done, given the balancing act of managing the dynamics of family, business, and ownership. The dual, and often conflicting, structure of interests in their decision-making processes poses a challenge in navigating the corruption landscape. Balancing the interests of family, owners, and businesses – an intersection unique to FOBs – is not a trivial undertaking. Reconciling corporate goals with differences among founders (parents), children, or spouses, and non-family part owners can prove difficult, especially in the absence of documented values and principles to guide the business, as is the case with many FOBs in Jamaica.
Positive ethical operations
Empirical studies have found that FOBs often maintain more positive ethical operations, placing greater emphasis on integrity and honesty compared with their non family owned counterparts (NFOBs). However, the paradox of FOBs being found to be major conduits for corrupt practices cannot be erased by these findings. While studies show FOBs, on average, to be more ethical than NFOBs, their tendency to be inward looking can become a secretive “black box”. FOBs are usually shaped by rational and emotional goals that lead some families to behave ethically while others behave unethically. A deep dive into the findings shows that FOBs do not always agree with others on what is deemed corrupt. For example, it is not always easy to convince FOBs that nepotism is a form of unethical behaviour and a conflict of interest, especially since it is not inherently criminal when practised in the private sector. This is compounded in a society that seems not to frown on companies that hire the unqualified and prioritise personal gain and connections over merit and competence – practices that ultimately undermine fair competition. The close-knit, private, and often centralised approach to managing business can also make FOBs vulnerable to corruption.
Notwithstanding this paradox, several researchers maintain that FOBs possess a distinct identity, with the capacity to integrate elements from both family and business systems to institute guardrails against corruption. FOBs are known to place a premium on non-financial objectives aimed at safeguarding family values and the “good name of the family”. Many FOBs tend to prioritise family values and reputation over purely financial objectives. This is manifested in emotional bonds among family members, inclusion of family values in business practices, and the preservation of social status. Effective measures used by FOBs to guard against corruption include
• Placing family values and the “good name of the family” above profit at all cost.
• Emphasising attitude and approach over aptitude in hiring. “Hire for attitude, train for skill.”
• Establishing governance structures aligned to FOBs such as a family business constitution, family council, and family office (for larger FOBs).
• Implementing independent boards of directors or external advisers to reduce owner-management collusion.
• Formalising codes of conduct.
• Instituting whistleblowing mechanisms that are secure, anonymous, and independent of family connections.
Researching and working with Jamaican FOBs since 2004 has not revealed support for “eye popping” corruption, but one must not assume they are devoid of practices that can depress Jamaica’s CPI. It is important for FOBs to engage the additional layer of accountability to family and uphold the family name as part of the mechanism to keep them in check. In joining the fight against corruption, FOBs must echo the words of one CEO: “Operating within the boundaries of the values and ethical principles of my family is far more important for the family than to make abnormal profits.” A commitment to operate ethically and avoid corruption has contributed to that business’s success.
Ultimately, FOBs that separate family interests from business interests establish strong governance structures and maintain a reputation for integrity will become powerful and reliable partners in the fight against corruption. One is not expecting FOBs to be the “moral disinfectant of any society”. However, given that many FOBs are driven by the moral compass of the family, it is not unreasonable to expect them to lead the fight against corruption in Jamaica. There are many FOBs in Jamaica that are allergic to corruption – there is scope to increase this number.
More anon.
Lawrence Nicholson, PhD, is a senior lecturer at the Mona School of Business & Management, The University of the West Indies, and a former director of the RJRGLEANER Communications Group. He is passionate about FOBs, as reflected in his writing on the topic, including his book Understanding the Caribbean Enterprise: Insights from MSMEs and Family Owned Businesses. Send feedback to lawrence.n.08@gmail.com.
