Corruption Control

Corruption is based on family, social and cultural history; cultural and economic development; bureaucratic traditions and political origins in the family companies. It varies from country to country, even from one region to another, from family to family, and from company to company. It is difficult to make a generally accepted definition of corruption, considering socio-economic conditions, political and institutional structure and other factors. 

However, different definitions have been made by international organizationsAccording to the World Bank, corruption is abuse of public power for private interests. The Bank Group recognizes that corruption comes in different forms. It might impact service delivery, such as when police officers ask for bribes to perform routine services. Corruption might unfairly determine the winners of government contracts, with awards favoring friends or relatives of government officials. Or it might affect more fundamental issues of capture, such as how institutions work and who controls them, a form of corruption that is often the costliest in terms of overall economic impact. Each type of corruption is important and tackling all of them is critical to achieving progress and sustainable change (The World Bank, 02.02.2020,) .

The concept of corruption according to the International Transparency Organization has been defined as the abuse of the entrusted power for private benefit (Transparency International, What is Corruption?, 02.02.2020) . They made a definition more comprehensive without limiting the concept to public power. The concept of special interest mentioned here is about money or valuable assets. But it also includes the increase in power and status. 

Successful anti-corruption efforts are often led by a 'coalition of concerned' – politicians and senior government officials, the private sector, and by citizens, communities, and civil society organizations. Increasingly, successfully addressing corruption will require the concerted attention of both governments and businesses, as well as the use of the latest advanced technologies to capture, analyze, and share data to prevent, detect, and deter corrupt behavior (The World Bank, 02.02.2020,) .

Corruption in family businesses is the use of money, authority, power, reputation, surname, and all related elements in the interest of the individual and / or micro family, leaving the family and company in the background.

In other words, unlike nepotism, which is also called favoritism; corruption in family companies is the use of power, money, surname etc. in an individual’s or their family’s own interests; the prevention of the application of the rules in the family and/or the company; the content of the rules and systems getting affected and its consequences for the family and / or the company. In family companies, we can see that, sometimes, shareholders; sometimes, big shareholders; and sometimes, family members who are responsible for finance are directly involved in corruption.

Corruption is a directly measurable variable. However, the number of indices focusing on corruption measurement has increased significantly in recent years. The widely used indices are makes significant contributions to global investors such as Transparency International's Corruption Perception Index, World Bank's Global Governance Indicators, Transparency International's Global Corruption Barometer (GCB) and Global Integrity Scale's Global Integrity Scale and PricewaterhouseCoopers' The Opacity Index.

There are a number of reasons for corruption. These are

• Uncertainty in terms of rules, systems and applications etc.: Uncertainities creates gaps and if these gaps are tried to be filled with the discretion of the family members, it may cause corruption.
• Abuse of power: Families and companies have power to enforce for making arrangements, operating rules, operating the sanctions. Family members may choose to abuse these powers and impose unfair treatment on other family members and stakeholders.
• Low income per capita: If he/she wants to have better living standards and especially other family members', relatives' and close friends' living standards are very high,  corruption may occur.
• There is a negative correlation between corruption and poor governance. Profitable companies and wealthy families tend to have less corruption and better functioning administrative systems and administrative structures. In addition, low income levels can be both the cause and the result of corruption.
• Weakness in the application of property rights and the rule of law: Weakly defined property rights blur the ownership of the family, company and individual, and the boundaries between them. The inefficiency of the family constitution and the company’s main contract may increase the likelihood of corruption.
• Closed systems. Closed systems may cause inequalities between families and individuals, and may threat the justice. This situation may cause high levels of corruption by taking over ownership and / or management of the company.
• Historical and cultural factors. Certain historical and cultural characteristics of families and companies may lead to a different explanation of corruption for families and companies. For example; In some cultures gift giving is a widely accepted behavior, while in some cultures it can be seen as a corruption behaviour.

In the struggle against corruption, family companies should try to find solutions that particularly suit their structural situation. In this context other shareholders and family members, family business management, family management with family members the interaction should be established; excessive bureaucratic procedures should be reduced; incentives should be distributed fairly; desicions and operations should base on legal regulations Furthermore, family and company should work with auditors; material and moral rights should be improved; a family forum and a family council should be created; family constitution should be regulated; work with the family office; assets should be managed. Otherwise, information about the family and the family business should be shared with transparency; accountability should be paid great attention; codes of ethic about family and work  should be created; justice should be given importance and systems should be supported with technological infrastructure. In addtion to these internal solutions, family companies should also try to make external solutions by cooperating with national and international organizations from outside of the family company.