Governance and Corruption Constraints: The Business Ethics Glass Ceiling in Middle East Corporate Governance
46 Pages Posted: 3 May 2010
Date Written: April 1, 2010
This paper argues for a model of a corruption constraint on organizational growth and development in the form of a business ethics glass ceiling. Although the problem of corruption‘s negative impact on economic growth is well documented, this paper‘s contribution is to propose a cohesive model to show how corruption combines with other influences such as weak corporate governance to act as a serious constraint on the business growth of local firms. This previously unidentified barrier to business success is marked by corruption and the model particularly applies to small and medium-sized and family businesses in the Middle East and North Africa (MENA). These businesses are vital to the economic growth and political stability of that region, but corruption makes it difficult for them to grow, overcome a financing gap, and become stronger organizations. Corruption also drains firm resources and warps normal incentives like transparency and accountability that encourage expansion because firms may choose to appear unprofitable to avoid corruption. As a result, the growth of these businesses is limited when they remain poorly run and small in size as they attempt to avoid an onslaught of corruption. This short-term coping strategy fosters the glass ceiling constraint that is the subject of this paper. The business ethics glass ceiling is formed by several factors. These influences are weak corporate governance, social and cultural aspects, and political and economic pressures. This paper focuses on the role of corporate governance and first describes the constraints and the place of these businesses in MENA, before using the regional example of Lebanon to demonstrate the stunting nature of the corruption-influenced ceiling and its role in producing a financing gap. Finally, the paper presents recommendations for breaking through the glass ceiling and provides suggestions for additional research on the intersection of corruption and ethics constraints in emerging markets.
Keywords: corporate governance, corruption, business ethics, small and medium enterprises (SMEs), family-owned enterprises, and Middle East and North Africa
JEL Classification: D63, G3, G34, K22, K33, K42, M14, O12, O17, O53
Suggested Citation: Suggested Citation