1 A Cross-Cultural View of Corruption John Hooker Tepper School of Business, Carnegie Mellon University October 2008 There was an awkward silence after Terry Rhodes introduced himself to a group of government officials in a West African capital. The purpose of the meeting was to discuss the license that his company, Celtel International, needed to set up mobile phone service. Rhodes and his partner Dr. Mo Ibrahim founded Celtel in 1998 with a resolve to do business in sub-Saharan Africa by playing it clean. Thanks to persistence and an understanding of local politics, they had already set up phone service in a few neighboring countries without a single bribe. Rhodes hoped this meeting would clear the way to securing a license for which they had already paid the statutory fee of $750,000. Instead, the officials had little to say, and only later did Rhodes learn why. One of them had sent a fax that morning to Celtel’s Amsterdam headquarters. The fax listed the government representatives who would attend the meeting. Next to the names were monetary amounts, totaling about $50,000. These were payments demanded in exchange for attendance at the meeting. Further bribes would be necessary to close the deal. Due to poor telephone service, Rhodes was unaware of the fax when he met the officials. They looked as though they were expecting something, and when nothing was forthcoming, the meeting reached a deadlock. The corruption is obvious enough in this situation. Yet if we look at how business is practiced around the world, it is often not so clear what is corrupt and what is not. We typically identify corruption with side payments, cronyism, and nepotism, but all of these activities can be entirely legitimate if practiced responsibly in the right cultural context. Corruption is activity that corrupts—it undermines the system in which it occurs. Because business systems can work very differently, different kinds of activity corrupt them. Lee Kam Sheung started the Chinese food products firm Lee Kum Kee Ltd. (LKK) as a small oyster sauce business in 1888. By 2005 the family-owned company employed 3900 workers and was selling its products in 80 countries. Lee’s grandson Man Tat was Group Chairman and had appointed his four sons to serve as chairmen and/or CEOs of various divisions. Man Tat was aware of the importance of bringing managerial expertise into his growing company. He addressed this need partly by sending his sons to business schools in the U.S. and then persuading them to join the company. But he also set out to recruit non-family professionals as board members and high-level managers. He sought persons who, in his words, “were culturally attuned to the firm, and to family as CEOs of its