By Kyoung-Hee Yu, Su-dol Kang, & Carl Rhodes
Corruption is a global problem and its prevalence is harmful to the effective operation of government and business, as well as to the proper functioning of democracy. In our paper published in the latest issue of Business and Society, we demonstrate how corruption networks adopt control mechanisms traditionally associated with formal organizations and how this is central to their effectiveness.
We might ask, for example, what do drug cartels in Mexico, the Italian mafia, and bribery systems in India’s irrigation works have in common? Firstly, they are networks—they comprise of multiple actors who exchange favors to increase joint and individual wealth. Secondly, they share the control features found in mainstream organizations (e.g. governments, Amazon, or Walmart), such as hierarchy and control over members. We argue that these two traits go a long way in explaining how corrupt activities endure.
Our study examined a corruption network in the maritime industry in South Korea before and after it was discovered through the tragic sinking of a ferry, the Sewol in 2014. 304 out of a total of 476 passengers drowned, including 250 high school students on a school excursion. When this was investigated, initial focus was placed on crew members fleeing the ferry as it sank. In the aftermath of the disaster, however, what was discovered was a chain of inspection failures, botched rescue efforts, and cover-ups by many different people. These people were all part of a corruption network including government officials, inspection agencies, the Coast Guard, rescue companies, and the ship owner and his employees.
By analyzing minutes of congressional hearings, investigative reports on the disaster, and media articles, our research uncovered that the corruption network possessed important organizational characteristics that allowed them to control multiple levels of actors – from congressional members down to front line workers in ferries. These characteristics included setting boundaries that defined network membership and managing exclusive exchange relationships between the members. An organizational hierarchy was also in place that allowed rent to be extracted from ships (by, for example, overloading) and passed up the chain. Organizational routines were also established that served the network, such as recruiting based on personal loyalties and avoiding experts.
When the corruption was discovered after the tragic sinking of the Sewol, the resilience of the network was tested. In investigating this, we found that when faced with existential threat, the hierarchy of the corruption network folded in, seeking to preserve and protect the most powerful members. Thus, the network manufactured a semblance of reform by scapegoating the lowest front-line operatives in its hierarchy. This brought about a receding of the organizational features of the corruption network. We argue that this adaptability is central to the perpetuation of corruption.
Previous research on corruption has tended to focus either on the ethical blindness of individuals or how corrupt practices continue inside formal organizations. Our work draws on both these insights, yet ties them to the incentives and norms that rule participation in corruption networks. By showing how a corruption network can develop and shed organizational characteristics over its lifespan we cast light on the secret to the longevity of corruption—its organisational features. Our findings suggest that, in addition to investigations targeting specific organisations, efforts to counter corruption should also address illicit relationships between organisations.
References:
Yu, K.-H., Kang, S.-D., & Rhodes, C. 2020. The Partial Organization of Networked Corruption. Business & Society, 59(7): 1377–1409.