Practicing What You Preach: A Lesson for Walmart's Bosses

Allegations that Walmart paid millions of dollars in bribes to build up its empire in Mexico should act as a warning sign to corporations everywhere. A culture of bribery in a subsidiary is unacceptable, but failing to deal with it would be even worse.

While it matters a great deal if a company has a strong code of conduct and anti-corruption program -- and in this regard Walmart does better than most public companies -- it is equally important how vigorously and effectively these are implemented.

A company's way of doing business is set at the top. Leaders have both the obligation and means to build a culture of integrity in their organization. Like any other aspect of human resources, there have to be incentives for carrying out the code of conduct, and sanctions for ignoring it. And when challenged to act, it's the actions that senior management take that count the most. With that in mind, senior managers must lead by example.

Transparency International has studied whether many of the world's largest companies have anti-corruption programmes in place and how transparent they are. We have found that best business practice calls for companies to monitor whether the anti-corruption programs are working.

What happened in Mexico shows that Walmart management may not have adequately monitored the effectiveness of its anticorruption policy. According to the reports in the New York Times it took an ex-employee who had left the company to step forward. We can applaud his action now, but it would have been better if this had been properly addressed with an independent investigation seven years ago, rather than asking in-house staff to do further digging.

It has been argued that bribery and corruption are business as usual in many countries around the world so double standards are in order. This is false. Managers who don't tolerate corruption in their back yards should never accept corruption in their overseas operations. If it is company policy not to bribe, and bribery is illegal under both US and Mexican legislation, senior management should make sure that bribes are not paid wherever in the world they do business.

Rather than being complacent, Walmart should have been even more vigilant in Mexico, which is ranked 100 out of 182 countries on the 2011Transparency International Corruption Perceptions Index. Our most recent surveys of the general public also show that Mexicans are asked for a bribe every one in ten times they deal with public processes or services and that poor Mexicans pay up to a fifth of their income on paying bribes to get public services.

Because Walmart is such a big player in the Mexican economy -- it is the largest private employer, with more than 209,000 employees -- it is uniquely placed to demand clean and transparent business conduct.

Both US and Mexican authorities should pursue criminal investigations into these allegations of misconduct. Their investigations must be independent and the results should be made public.

These issues highlight the critical importance of a robust Foreign Corrupt Practice Act. This is particularly important because some vested interests in America are currently in the process of trying to water down the Act, which makes it illegal for companies to bribe officials abroad. They complain that the rules are too costly to implement and too broad in scope. This case shows why this should not happen.

But legislation alone is not enough. Companies need a culture of integrity at the top. Walmart's top brass should take note.