by Johann Graf Lambsdorff, Kevin Grubiak, and Katharina Werner

From left to right: Johann Graf Lambsdorff, Kevin Grubiak, and Katharina Werner (photos courtesy of the authors)

There has been a long debate in areas such as development aid, procurement and compliance as to whether corruption or intrinsic motivation plays a greater role in determining the performance of corporate employees and public officials. One side, let us call it the deterrence-view, posits that containing corruption is a prerequisite for ensuring growth and development. Where corruption thrives, all efforts are futile. Aid money will seep into dark channels. Money intended for purchases will flow into overpriced deals. Employees sent to areas prone to dishonesty will be infected by a virus of fraud. Avoiding risks of corruption must then be the starting point for improvement. For example, the United Nations Convention Against Corruption (United Nations 2014: iii) states: “Corruption is a key element in economic underperformance and a major obstacle to poverty alleviation and development.” Many practitioners tend to adhere to this view, which emphasizes deterrence and a zero-tolerance strategy against corruption.

The other side, let us call it the intrinsic-motivation-view, regards the influence of corruption only of secondary importance. The biggest challenge is to get corporate employees and public officials to work, exert effort and show an appropriate level of intrinsic motivation. Whether they take gifts may not be critical to their performance. Intrinsic motivation might go hand in hand with a higher resilience against such corrupt temptations. The focus should therefore be put on management tools rather than on deterrence and control. In fact, a focus on deterrence might even risk crowding out this intrinsic motivation. It could give corporate employees and public officials the impression that they are not trusted. They are led to believe that corruption is widespread rather than the exception. Compliance and control undermine an adequate level of autonomy and suffocate performance.

In a recent paper “Intrinsic Motivation vs. Corruption? Experimental Evidence on the Performance of Officials”, we run a fair competition between the two views, involving 250 participants in two laboratories in Germany. The relative importance of intrinsic motivation or corruption can go either way. The design and our findings are illustrated below:

Graphical illustration: Design and results on bribery and the intrinsic motivation to correctly treat good and bad guesses.

Participants play in pairs of two and in two different roles, that of an Estimator and that of an Auditor. The Estimator can first transfer money to the Auditor (bribe). The Estimator then guesses the number of objects in a picture and the Auditor checks whether the Estimator’s guess is good enough to deserve a prize. The two participants repeat this across multiple rounds. An upfront bribe might be motivated in two ways. First, the Estimator might seek to avoid being treated unfairly by having the prize withheld by a malevolent Auditor who does not want to reward a good guess. Second, the Estimator may pay a bribe and hope for the prize even if the guess is bad. The Auditor, on the other hand, has the duty to award the prize only if the guess differs from her own estimate by 5 or less. She enjoys considerable discretion and autonomy in decision making. She further has to join effort with skill in order to master the task at hand. She does not receive extrinsic rewards for making correct decisions, nor penalties for making errors. The only motivation to do her duty and honor the quality of the guess is intrinsic.

We observe that paying a bribe substantially increases the probability of receiving the prize. As shown in the graph, the bars on the right, where a bribe is paid, are about 10 percentage points higher than those on the left, where no bribe is paid. The quality of the guess also positively influences the probability of receiving the prize as the bars in the back, where guesses are good, are about 40 percentage points higher than those in the front, where guesses are bad. The intrinsic motivation to judge the quality of the guess thus exceeds the influence of the bribe by an order of magnitude. This result lends credence to the second view, favoring intrinsic motivation over deterrence.

We changed the conditions of the experiment in a treatment in which the Auditor was punished for accepting a bribe with a 25% probability. This reflects the standard condition that corporate employees and public officials face sanctions for accepting gifts and bribes. Unsurprisingly, we find that the acceptance of bribes by Auditors diminishes substantially in comparison to the condition without punishment. The punishment is thus effective. However, it does not significantly affect the probability of awarding the prize in case of a bad guess, nor of withholding the prize in case of a good guess. The Auditor’s intrinsic motivation remains high and is not affected by the punishment.

This is a finding on which the two views would have provided contradictory conjectures. The deterrence-view suggests that bribes, once their acceptance is illegal, are less effective in influencing the award decision. This is also emphasized by the literature on expressive law, which holds that laws express social condemnation. The Auditor may regard the punishment as a reminder to focus on her duty and award the prize correctly. To the contrary, the intrinsic-motivation-view suggests that punishment negatively affects the Auditor. She would observe a loss of autonomy and feel less attached to her duty. This would induce her to focus less on the quality of the Estimator’s guess when deciding whether to award the prize or not. Our findings imply that both these views have merit and no one dominates the other at the aggregate level. At the same time, we observe differences at the individual level. There appear to be two types of Auditors. Intrinsic motivation increases for some Auditors, supporting the “expressive law” literature, while it decreases for others, supporting the “crowding-out” literature.

We conclude that punishing Auditors, corporate employees and public officials alike is an unproblematic tool for containing corruption. It is effective in reducing the acceptance of bribes and it does not have a detrimental impact on performance. At the same time, its role for performance is limited. This finding is in line with a number of recent studies that emphasize the importance of intrinsic motivation and the limited role of corruption. Taken together, these findings have several implications for corporate practice.

First, corporate policies should focus more on preserving employees’ intrinsic motivation and less on their corruptibility. Compliance officers, for example, should seek to help corporate employees to comply with laws and regulations and they should not cultivate a distrustful attitude towards their corruptibility.

Second, when recruiting qualified personnel, it is arduous to identify those that are less corruptible because applicants easily conceal such attitudes. The good news is that it may suffice to identify the intrinsically motivated applicants. Our findings in the treatment reveal that these belong to the type that is, on average, also less corruptible. A focus on intrinsic motivation may thus be sufficient to select those who resist bribery. This might, for example,  also be a recommendation for areas that are prone to corruption. The higher the risks of corruption, the higher the intrinsic motivation of the selected employees should be to be able to withstand corrupt temptations.

Third, the “tone at the top” should be of major importance for corporate policies. This is so because the tone at the top can be a strong driver of intrinsic motivation. Communication and an appreciative relationship between managers and employees can play an important role here. Intrinsic motivation can be fostered if the broader goals of policies and duties are clearly communicated. Managers should be given the opportunity to award bonuses or other benefits to their employees to express their appreciation, and they should be expected to devote time and effort to such a task. Such a policy would also change the perspective for compliance. For example, vetting suppliers for corporate conduct should put a particular emphasis on the tone at the top. Such a tone in a supplier company is a decisive factor both for the delivery of good quality and the willingness to refrain from bribery.

Johann Graf Lambsdorff and Kevin Grubiak are Professors and Katharina Werner is a Post-Doctoral Researcher and Assistant Professor at the University of Passau. This post was adapted by the authors from their article: Lambsdorff, Johann Graf and Grubiak, Kevin and Werner, Katharina, Intrinsic Motivation vs. Corruption? Experimental Evidence on the Performance of Officials. Available at SSRN: https://ssrn.com/abstract=4467433 or http://dx.doi.org/10.2139/ssrn.4467433.

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