General
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UNIT 8: Fair Operating Practices
Key unit competence: To be able to analyse critically fair operatingpractices.
Introduction
In this unit, we will study some of the fair operating practices in business.
We all depend on certain businesses and business people to get our supplies
at home and in the office. We always hope that we get the best deals at
the grocers shop and wherever else we do shopping. This cannot happenwithout fair operating practices.
8.1 The concept of corruption
Activity 1
In pairs, discuss what you understand by the term ‘corruption’.
Corruption refers to a very broad range of behaviour that particularly has
something to do with power misuse. Corruption is an ill that is eating away
most societies of the world, especially in the African continent.
It involves the abuse of a position in order to gain an unmerited advantage
through means that are illegitimate, immoral or unethical. It can be for
personal gains or in favour of certain groups of people. It is mostly associatedwith bribery.
Exercise 1
Identify any corrupt practices in your community. Refer to any of themthat you witnessed. How was it handled by the authority?
8.2 Forms of corruption
Activity 2
1. In about five minutes, role play people carrying out an act of
corruption. The rest of the class should act as audience.
2. In pairs, discuss ways in which corruption is practised in most African
countries.
Acts of corruption may be petty or grand depending on the magnitude of
the resources misappropriated or the measure of the injustice undertaken.
Corruption takes many forms depending on the nature of the dishonest
behaviour practised. The forms can be analysed as follows:
1. Bribery – It is arguably the most common form of corruption. Bribery
involves two parties: the giver and taker of the bribe. A bribe is an illegal
payment given to a person either directly or indirectly for him/ her to act
in a certain way, or refrain from acting in his/her official capacity. This
can be to allow illegal businesses such as smuggling of goods or to be
exempted from legal procedures such as taxes or licences.
2. Embezzlement – This is theft or misappropriation of money and other
resources put under one’s responsibility but belonging to someone else.
Embezzlement of funds is common in political situations where public
money meant to be used in improving the standards of living of the
citizens is misappropriated and used in personal projects by government
officials. Apart from funds, human resource and public facilities can also
be embezzled by being used to serve purposes other than the legitimate
ones.
3. Nepotism – This is the practice of unfair distribution of resources or
treatment of people that involves favouring closely related people in
performance of one’s official duties. It can be giving individuals or groups
of individuals jobs, promotions, or even salary increment based on the
fact that they are related to you.
4. Patronage – This is whereby a public officer gives favours such as
employment in return for political support. For example, an aspiring
politician may use his influence to illegally help people acquire positions
in public offices in exchange for support in his/ her political ambitions.
5. Theft and fraud – Some officials steal state assets kept under their
watch or those assets made available to them by virtue of their positions
in government. Fraud involves using deception to convince the owner
of funds or assets to give them up to an unauthorised party. A good
example is where a person in authority misdirects company funds into
non-existent companies and then later transfers them into a personal
account. Acquiring publicly owned assets such as money through illegal
means is the most common form of corruption.
6. Institutional corruption – This form of corruption can happen where
conflicts of interest are not managed. Institutional corruption takes place
when those who are in charge of a project make decisions about those
projects in their own favour, not considering other people who are in dire
need and depend on those projects. For example if an official is foreseeing
a water project to help people in a dry locality have piped water, that
official may make the decision to have fewer pipes so that he can spend
less in the project and reserve more finances for him/herself.
7. Extortion and blackmail – Extortion and blackmail involve the use
of threats to gain access to another person’s information or property.
This can be the threat of violence or false imprisonment as well as
exposure of an individual’s secrets or prior crimes. A good example is
where an influential person threatens to go to the media if they do not
receive speedy medical treatment or where a person demands money in
exchange for continued secrecy.
8. Abuse of office/ discretion – This refers to the misuse of one’s powers
and decision-making facilities. Examples include a judge dismissing a
criminal case unjustly or a customs official using their position to allow
a banned substance such as drugs to be imported or exported with theintention of gaining financially from it.
Exercise 2
In about two paragraphs, write about four forms of corruption and citeAfrican examples where possible. Give your essay a relevant title.
8.3 The causes and effects of corruption
8.3.1 Causes of corruption
Activity 3
How does corruption affect the society?
Corruption starts within a person. The desire to make money or acquire
certain privileges lures people to accept bribes or do certain things for theirown gain and so they become corrupt.
The following are the major causes of corruption:
1. Ambiguity of laws - Most constitutional laws are not clear on matters
of corruption and this creates loopholes for people to get away with
corruption cases.
2. In most cases, corruption begins from the top officials and people in
positions of authority. This makes people feel secure in corruption deals.
3. Bribing provides an alternative to following long procedures. People
who can afford these alternatives would not take the trouble to follow
these procedures.
4. Poor enforcement of law on property rights leads to a misconception
that violation of these rights has little or no consequences.
5. Poor governance – The overall system of governance that has no place
for moral and ethical values kills any spirit of justice that would help
overcome corruption.
6. Personal greed and desire for money or wealth with no regard for
morality.
7. The desire to serve personal interests rather than public interest at work
place. This may be due to weak supervision in the public sector.
8. Lack of awareness on matters of law and the justice system in the wider
population. This renders people incapable of reporting incidents of
corruption. This is because if someone does not recognise a crime or
an act of injustice committed against them, then it is hard for them to
act or resist it.
9. Fear of victimisation. If one really needs a service and his/ her request
for the service is met by demands for a bribe, this person may fail to resist
offering the bribe out of the fear that resistance may cause difficulties in
achieving his/ her goals.
8. Some slogans encourage self–centeredness and therefore inspire
corruption. For example: ‘take advantage while you can’; ‘everyone
does it’ etc.
9. Systems that do not emphasise on accountability and transparency also
cause corruption.
10. Slow and unreliable judicial processes such that even when one gathers
enough courage to report corruption, the procedures involved take long
and may actually not be effective enough to discourage the crime. The
procedures are also costly to follow through.
12. There is lack of moral criteria in promotions. Promotion should be
based on proven integrity and responsibility but this is not always the
case. Promotions are at times based on corruption and this creates a
system built on the vice of corruption.
13. Lack of will to prosecute those in power. Most of the times reports on
corruption point at influential public figures whose cases are downplayed
as those in charge often feel like they have less power to penalize them.
In conclusion, the causes of corruption can be said to be built aroundpersonal, cultural, institutional and organisational factors.
8.3.2 Effects of corruption
Corruption is all about taking advantage of someone else’s condition and the
possibility of gaining from it. It becomes a social issue when it becomes an
assumed culture whereby people in a society cannot access public services
and resources without bribing those in authority. The result of this is that
the poor suffer more as they lack the social networks and funds to access
these services. National resources and opportunities therefore end up being
owned by those in power and those with the means. The gap between the
rich and the poor widens and oppression and exploitation become rampant.
What results is a society whose economic development is crippled as the
revenues supposed to develop the nation are misappropriated and unequal
distribution of resources denying a high percentage of the population an
opportunity to develop.
Corruption has far reaching negative effects from the individual level,
community level, national level, all the way to the international level. Theseeffects are:
1. Corruption undermines economic development, distorts political systems
and halts infrastructural development.
2. It kills a person’s sense of morality. Every act of corruption leads
to oppression of one party to benefit another. It is therefore an act of
immorality.
3. A system of corruption enhances social inequality as resources are
utilised by those in power and the rich.
4. It leads to political instability as leaders are not elected out of integrity
but through corrupt means.
5. Corruption undermines human rights. A society where people are
deprived of their rights lacks in peace and people are always in a struggle
for a dignified life.
6. At the community and national level, corruption slows down development
as resources meant to drive development projects are pocketed by the
ruling class.
7. Corruption encourages illegal activities and crime as criminals and law
breakers are able to bribe their way out. The rule of law is compromised.
8. The authority and integrity of public administration structures is
undermined.
9. Corruption leads to depletion of national wealth. Selfish individuals use
the national resources for personal advancement. They convert public
wealth to private property.
10. It also causes inflation. It is responsible for increased costs of foods and
services as the revenue that would have been used to subsidise these
necessities is misappropriated.
11. Corruption leads to unequal allocation of resources which leads to
imbalance in economic development. Some regions are improved while
others remain marginalised.
12. It discourages people from working together for the common good. This
may lead to frustration and general apathy among the public which can
create a weak civil society that is not unified.
13. Corruption results in social inequality and widens the gap between the
rich and the poor, causes civil strife, increased poverty and lack of basic
needs like food, water and drugs.
14. It also causes jealousy, hatred and insecurity.
Corruption is therefore is a bad practice. It undermines the legitimacy of
a government, weakens state structures, reduces productivity and hindersnational development.
Exercise 3
What do you think should be done to corrupt officers in your country?
8.4 Fair competition
Activity 4
Debate on the following motion: ‘Fair competition and respect are
unattainable in modern society.’
Fair competition means that the same rules and conditions are applied to all
participants and that the actions of some do not affect the ability of others
to compete. People can only compete fairly when all the advantages and
opportunities are equally provided to all competitors.
In trade, fair competition means a situation where business people compete
on balanced factors such as price, quality and service. This means that there
is no monopoly of business; rather, there is opportunity for all who are
interested in the business.
Healthy competition can improve a country’s economic performance. Open
business opportunities reduce the cost of goods and services and thereforecontributes to improving the economy.
8.4.1 Advantages of fair competition
1. It leads to friendship among competitors.
2. Respect for one another.
3. It promotes honesty and fairness in business transactions.
4. It encourages teamwork.
5. It promotes economic growth and poverty reduction. It can lead to
significant reforms in the business world due to increased competition.
6. Fair competition helps consumers to get a good deal and contentment for
what they spend. It ensures that good quality products are produced.
7. Fair competition leads to the urge of being better in the market. It
encourages competitors to innovate. This reduces pressure on costs and
produces more returns due to efficiency in production.
8. It lowers prices for consumers.
9. It enhances technological advancement.
10. Consumers have a wider variety to choose from; hence they become
more informed on different qualities of products that can be available.
11. There is availability of products in different prices, and therefore allclasses of people are catered for.
8.4.2 Justification for fair competition
If there was only one airline that was offering international transport, no
matter the quality of the services that it would offer, travellers would have
no option but to use it. This kind of airline can be said to be a monopoly.
However, if the market was open and there were many other options for
air travel, this airline would be forced to ensure that its services are of good
quality for it to survive in the transport industry. This would ensure thatconsumers get value for their money.
Exercise 4
Discuss with your partner the ways in which your society tries to be fair
to everybody.
8.5 Respect of property rights
Activity 5
1. What is happening in this
picture?
2. Who do you think the pens
belong to?
3. Who has the right to the
pens?
In most cases, disagreement over who owns property or how property
ought to be used leads to strife and at times violence. These disagreements
arise from disrespect for property rights or unclear definition of ownership.
Property rights determine how a resource or property is owned and used. A
property can be owned by an individual, a group of individuals, an associationor the government.
Property rights are made necessary by the fact that many people live together
either in a family, a community or the wider society. If each person lived
alone, then there wouldn’t be a need for property rights. In essence, property
rights help to ensure a peaceful coexistence among members of a family or
community as they ensure that ownership to property is defined.
Apart from ownership, property rights also determine the relationship of
other parties linked to the property. Violation of these rights is punishable
and this reduces incidents of disrespecting others property rights.
A person’s property rights can be said to have been violated when:
• someone destroys the property
• someone uses it without permission from the owner
Property such as land can also be infringed upon when:
• Someone grabs the property (such as land)
Property rights enable a property owner to have control over the property in
the following ways:
(i) The right to use the property - this means that a property owner has
the right to decide whether and how to use the property. For example, if
someone owns a piece of land, it is within their right to decide whether
to put the land to use or not and how to use it.
(ii) The right to earn income from the property - an owner of a property
may decide to hire it out or put it to personal use.
(iii) The right to transfer the property to others - this is where someone
decides to sell his/ her property to someone else or even give it withoutany financial returns.
(iv) The right to enforcement of property rights - this means that one
who owns a property has the right to exercise all the rights pertainingownership of that property.
Advantages of property rights
1. Property rights provide security for the future. This is in matters of
inheritance of his/her property. When someone is the owner of a
property, he/ she has the right to transfer ownership to an individual of
choice. Once ownership has been transferred, the property rights protect
the new owner such that no one else can claim the property.
2. Property rights also act as a catalyst for socio- economic progress as
people want to work hard to own their own property. If all property were
communally owned, people would not find much prestige in owning
property.
3. The boundaries of how a property should be used also enhance peace
and harmony in the society.
4. It is a source of prestige and gives one a higher social status.
However, property rights may lead to greed for property, capitalism, inequalityand corruption.
Exercise 5
What makes it difficult for people to realise their full property rights?
8.6 Extended work
Imagine you have started a small business in your village. How would youpromote fair competition in your business?
8.7 Unit summary
Forms of corruption
1. Bribery
2. Embezzlement
3. Nepotism
4. Patronage
5. Theft and fraud
6. Institutional corruption
7. Extortation and blackmail8. Abuse of office
Causes of corruption
1. Ambiguity of laws
2. Long procedures in carrying out a transaction (bureaucracy)
3. Poor enforcement of law on property rights
4. Poor governance
5. Personal greed and desire for money or wealth
6. The desire to serve personal interests rather than public interest8. Lack of awareness on law and the justice
Effects of corruption
1. It undermines economic development, distorts political systems and
halts infrastructural development.
2. It kills a person’s sense of morality.
3. It enhances social inequality as resources are utilised by those in power
and the rich.
4. It leads to political instability as leaders are not elected out of integrity
but through corrupt means.
5. It undermines human rights.
6. It slows down development as resources meant to drive development
projects are pocketed by the ruling class.
7. It encourages illegal activities and crime as criminals and law breakers
are able to bribe their way out.
8. The authority and integrity of public administration structures is
undermined.
9. It leads to depletion of national wealth.
10. It also causes inflation.
11. It leads to unequal allocation of resources which leads to imbalance in
economic development.
12. It discourages people from working together for the common good.
13. It results in social inequality and widens the gap between the rich and
the poor, causes civil strife, increased poverty and lack of basic needs
like food, water and drugs.14. It causes jealousy, hatred and insecurity.
Advantages of fair competition
1. It leads to friendship among competitors.
2. Respect for one another.
3. It promotes honesty and fairness in business transactions.
4. It encourages teamwork.
5. It promotes economic growth and poverty reduction.6. It ensures that good quality products are produced.
8.8 Test your competence
1. Read the case study below then answer the questions that follow.
Gasore had shop in his village. He had to travel for long distances to get
goods to sell in his shop. For this reason, he sold the goods at his shop at
double the expected price. Most villagers did not like this but had no other
alternative.
However, Gasore was very kind to his customers. He always packed the
goods they bought for them with a smile. He also sold only approved goods
and refused to deal in goods bought in the black market. For this reason, the
villagers loved him.
Questions
a. Identify any unfair operating practices that Gasore engaged in.
b. What are the fair operating practices that Gasore practised?
c. In what way do you think the fair business practices benefitted the
people of Gasore’s village?
2. Read the story below then answer the questions that follow.
There once lived a king who ruled in far island. He made all laws for his
people. He distributed land to his people and dictated who could own what.
He argued that everything in the island belonged to him. For this reason, he
would take people’s property at will.
Sometimes he would take other people’s cattle for his private party. He would
also take their land and give to foreigners who brought him goods. This made
the people of the island unhappy.
Questions
a. Do you think the king respected property rights? Explain your answer.b. What are the effects of not respecting property rights?