Shigeru Echigo, a former salesman at Deutsche Bank, found himself in front of the Tokyo District Court in April 2014. He pleaded guilty to spending the equivalent of $8,776 on entertaining a client, Yutaka Tsurisawa, a pension fund executive, to 'encourage' him to carry on buying Deutsche's investment products.

But Tsurisawa's portfolio included public pensions, making him a civil servant in the eyes of Japanese law – and if civil servants have this kind of hospitality lavished on them, they can expect to be charged with accepting bribes. Tsurisawa's punishment – apart from career ruin – was a suspended 18-month jail term and forced repayment of the money. When Echigo faced the court he pleaded a version of the Nuremburg defence – he was just following orders. "My actions as a salesman were part of systematic conduct based on instructions and consent of my bosses at Deutsche Securities," he told the court.

Echigo's example is just one end of a very long and murky spectrum, an instance of petty rather than grand corruption. If you want grand, they don't come any bigger than the $800 million the German-based corporate giant Siemens paid to settle a US Department of Justice and Securities Exchange Commission Foreign Corrupt Practices Act (FCPA) in December 2008. It paid the same amount to settle with German regulatory authorities.

The network of Siemens' corruption was so deeply entrenched that, during 2002-06, the German-based corporate giant ran an annual bribery budget of $40-$50 million, according to Reinhard Siekaczek, a former mid-level Siemens accountant who helped manage the payments for the telecommunications subsidiary he worked in. Siekaczek said: "We all knew what we did was unlawful … we thought we had to do it, otherwise we'd ruin the company."

Other than greasing palms, Echigo and Siekaczek shared a belief that their malfeasance was a business necessity. According to Sam Pope, who runs Kasalana, a global business intelligence and investigations consultancy, this is an all-too-familiar pattern. "Corruption often happens because people in the organisation are trying to advance the corporate goal, and they don't understand that what they are doing is criminal.International companies are often ultimately to blame, because they don't give their employees training and support to deal with this."

Vincent Ruggiero, a professor of sociology at Middlesex University who studies corporate crime, gives a more general context to the onset of financial crime: "The proliferation of business crime in recent years could be easily attributed to the excessive growth of the financial as opposed to the productive sector in advanced economies. Making profit quickly and constantly requires cutting corners, along with giving an appearance of good economic performance through the increasing value of shares against a background of poor productive performance."

In the course of their career most international business executives are likely to face precisely the same pressures or temptations as Echigo or Siekaczek – and a vast and ever-morecomplex legal spider's web is waiting to entangle them.

The US has led the way in tighter regulatory control over corruption, passing into law in 1977 the FCPA, now closely mirrored by many mature economies. The UK's Bribery Act came into force on 1 July 2011 and can similarly touch any national citizen who might engage in corrupt practices overseas. The OECD's Anti-Bribery Convention, which aims at reducing corruption in developing countries by encouraging sanctions against bribery in international business transactions, has now been ratified by 40 countries.

Even territories that are a byword for corrupt practices, such as China and India, now at least have stiff regulatory regimes in principle – and increasingly individuals in authority in corrupt countries understand the corrosive nature of corruption, and are trying to stamp it out.

The regulatory snares for the unwary can be extremely costly for those companies that either stumble into or deliberately turn a blind eye to corruption. "I had a European company as a client who, it turned out, had paid a $100,000 bribe on a $1m contract – a 10 per cent 'commission'. It then cost this company $74m to put it right. It was blocked from bidding for contracts within Europe; legal costs alone were $45m," says Pope.

CEOs leading companies into emerging markets can therefore flounder – with the kind of consequences Kasalana's Pope has encountered – if they don't give firm leadership and continuous training. Yet even now many CEOs are apparently willing to turn a blind eye when it comes to overseas territories. Dow Jones Risk & Compliance recently conducted a worldwide survey of 383 compliance professionals involved in preventing corrupt practices. Among the startling findings were that less than a third of companies surveyed thought it feasible to entirely ban 'facilitation' payments, even though giving money or goods to perform, or to speed up the performance of an existing duty, are a bribe and "should be seen as such", according to the UK's Serious Fraud Office (SFO).

According to Harriet Kemp of the Institute of Business Ethics: "If someone is determined to commit fraud, they will do their best to evade anti-fraud measures. But if a company has a culture of openness, where staff are not afraid to speak up if they have any concerns or see something suspicious, then this can be great risk management. It can be hard to find a dark place to hide if the sun is shining!"

Many corporations and their leaders rest content on regulation; if rules ban certain practices, then the company will adhere to the rules and everything's as it should be. But that misses the point of regulation, which is fundamentally a compliance-driven approach; resilience against wrong behaviour requires not just living within the rules, but a top-down embodiment of ethical behaviour, and continuous internal assessment that all employees understand and respect – or else. Says Kemp: "An ethical culture allows for the right decisions to be made when there is no obvious rule to follow. When a situation is not so clear and is less obviously covered by rules, employees will look for guidance, especially where there is discretion in decisions.

In rules-driven compliance cultures, employees may flounder if there is no rule covering what to do next. Focusing on the right behaviours within a culture based on values is more likely to encourage employees to feel they can make decisions by considering the consequence to the organisation of not doing 'the right thing' as a basis for action."

Transparency International (TI), the Berlin-based international NGO that monitors and publicises corporate and political corruption, describes corruption as "the abuse of entrusted power for private gain". It damages everyone who depends on the integrity of people in a position of authority. Jermyn Brooks, an international board member of TI, argues that in the corporate world: "The problem of corruption often comes about when CEOs say one thing but are prepared to turn a blind eye to the practices of senior managers and staff operating in very difficult environments. That's a slippery slope."

In the US, CEOs and boards who argue that their problems stem from just 'one bad apple' in their corporation will find little sympathy from US lawyers or the American judicial system. The US attitude – which emphasises 'voluntary disclosure' ('fess up' and it will go easier on you) – is that there's no such thing as a bad apple; it's the lack of enforcement of a company's compliance system that is at fault, permitting the bad apple to get away with it. "Companies need to send a very tough message from the top down," argues Brooks. "They need to provide good anti-corruption training, good monitoring of all staff, and ensure they have good internal controls, such as not permitting individuals to control large sums of money."

But how do CEOs combat corruption when their company – which may employ tens of thousands of individuals globally – pushes into markets where corrupt practices are endemic? Says Brooks: "There are many ways that clever businesspeople can convince corrupt counterparties to do honest deals. For one thing, don't compromise your own ethical standards, or give up too quickly. In our experience, from the minute you go in you need to state firmly, clearly and repetitively that what you are being asked to do will result in you being subject to personal prosecution in your own country. This can often take six to 12 months of persistent discussion. But once they are convinced that you mean what you say and will not be moved from that, they stop asking for bribes." Required reading for all CEOs overseeing global corporations ought to be the handbook TI recently updated – 'Resist: Resisting Extortion and Solicitation in International Transactions'.

Harriet Kemp emphasises that taking a successful stand against corruption in the workplace is not a one-off matter. "This is not something that can be done by simply having a code of ethics in place and some online training. There need to be constant reminders, awareness campaigns, news stories and examples made, both of expected behaviour and of what will not be tolerated. Above all, leaders at all levels must demonstrate the desired behaviour, because people take their lead from what they see others doing, not what they are told."

While petty corruption, if discovered, can ruin an individual, grand corruption can be grandly damaging. In the Siemens case, the whole leadership team was forced to resign. The company implemented a zero-tolerance approach to bribery, which involved pulling out of markets where bribery was the norm. Fines hit companies where it hurts the most – the bottom line. But restoring reputation and trust is a much longer-term challenge; much harder to do than paying a fine.

Gary Mead

Gary Mead is a business journalist and former commodities editor of the Financial Times

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