Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public &...
Transcript of Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public &...
![Page 1: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/1.jpg)
Bridging Legal and Political Notions of 'Corruption:'
The Road Without This Bridge Indeed Goes
Nowhere
Dick Farkas, DePaul University
Inter-University Center, Dubrovnik
March 20111
![Page 2: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/2.jpg)
“Corruption is the key threat to good
governance, democratic processes and
fair business practices.” OECD
“Corruption is the single most severe
impediment to development and growth.”
Survey of 150 officials from 60 countries
Multidisciplinary approach essential !
2
![Page 3: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/3.jpg)
“Politics”
► Governing … management
induce constructive behaviors
prevent or punish negative behaviors
► “Corruption” by definition is negative
behavior from a systemic perspective
► Two dimensions: “demand side” &
“supply side”
![Page 4: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/4.jpg)
Forms of CORRUPTION
Selling influence
Violation of restraints
Selling decisions
Exercising powers
beyond designations;
crossing boundaries
Abusing privileged
information
Neglect of designated
responsibilities;
abdicating functions
Vote manipulation
Steering procurement /
contracts
Bribery
Hiring relatives
Collusion
4
![Page 5: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/5.jpg)
►SELLING
►ACTING
►FAILING TO ACT
“personal profit from exercise of public authority”
“impairment of integrity”
“inducement to wrong by improper or unlawful
means”
“a departure from the original or from what is pure
and correct” defined by ?
5
![Page 6: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/6.jpg)
Transitional Characteristics Poor infrastructure (very limited resources)
Complicated tax systems (unrefined / overlapping)
Confusing accounting standards (absent experience)
Absence of “rule of law” (cloud & line)
Politicization of the business sector (new phenomenon)
Weak enforcement agencies (resources & skepticism)
Frail stock market mechanisms (newness)
Stark VULNERABITY of small & medium size business
Government-private sector corruption = norm (legacy)
Corrupt behavior is accepted and is often
NOT questioned
![Page 7: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/7.jpg)
Result … political
Undermines stability and predictability
Evidences weakness of broader political
system
Undermines government legitimacy
Enhances distrust of officials
Public officials routinely expect to augment salary
Dissolves credibility of “rule of law”
CORROSIVE !
![Page 8: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/8.jpg)
Result … economic
Sustains non-competitive enterprises
Creates misallocation of resources
Exacerbates inequality in society
Increases cost of procurement
Deflects and deters foreign investment
Creates impression of NO choice;
competitive disadvantage
CORROSIVE !
8
![Page 9: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/9.jpg)
Some framing questions …
In political systems in “transition,” is there necessarily
more latitude for political behavior ?
What are reasonable expectations among the public when it
comes to a profit motive among those with public authority?
Is it possible to serve the public interest so significantly that
it is reasonable to ascribe some personal gain from that
same performance or those same services?
How can political systems find leadership with no financial
ambitions? or with no self-interested motives?
Is fear of prosecution or altruistic character the most
effective technique for achieving corruption free
politics?
9
![Page 10: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/10.jpg)
BIG PICTURE Explanations:
Transition from “cloud to line”ambiguity, connections, non-performance-based econ
Intrinsic tension between profit
maximizing and ethical behavior
Opportunity stemming from absence of
institutionalization
Low public expectations
10
![Page 11: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/11.jpg)
Optional ApproachesInduce constructive
behaviors
►Make policies & laws to
dis-incentivize:
highlight potential costs
►Model behavior
►Incentive compatibility
►Refocus goals: ethics
►Create new expectations
Punish negative
behaviors
►Make laws to remove
violators
●removal from public office
●cripple business
●replace exec. leadership
►Contingent on police &
judicial systems with
integrity!
![Page 12: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/12.jpg)
RemediesTransparency & Accountability but to whom?
Demand-side Remedies
Inspector General
Investigative authorities
Competitors monitor
International & European
control authorities
Supply-side Remedies
Corporate governance
Business Associations
Think Tanks
“Regulatory Webs”
![Page 13: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/13.jpg)
Corporate Governance
Complications: political sensitivities
legal inconsistencies
TRANSPARENCY in corporate transactions; responsibility
Sound corporate governance mechanisms target supply-side
corruption / corporate codes of conduct
Payments or gifts quickly exposed / become unsustainable
Nexus: legal parameters & business ethics =
corporate culture
Private sector is essential to effective anti-corruption
strategies
![Page 14: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/14.jpg)
Business Associations
Crucial to set standards /
a priori agreement
Creates collective security in face of
demand-side – while single private
sector actor ineffective in face of
solicitation
![Page 15: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/15.jpg)
Requisite Action by
Business Associations
Dissemination of information &
recommendations
Providing tools for training, prevention, due
diligence and information sharing
Advice, mechanisms and security for
collective action
Muscle for resisting extortion & solicitations
15
![Page 16: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/16.jpg)
Romanian Strategic Alliance of
Business Associations
Corporate governance = major challenge in post-Communist market environment –
weak or non-existent institutions
Small & medium size enterprises most vulnerable – limited resources
Key: building institutions – trade and business associations, chambers of commerce / industry
Corporate Governance Initiative for Economic Democracy & SABA create model for corporate governance & dialogue / promotion
![Page 17: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/17.jpg)
Corruption Study: SerbiaCenter for Liberal Democratic Studies
Profound consequences for public & private sector
Survey: 10% say corruption #1 priority
Majority think cause is “crisis of morality” due to growing poverty, lack of respect for the law, legacy of communism, inefficiency of public services
Corruption = circumnavigating legal obligations and norms , changing and misrepresenting them
Cite corruption in the judiciary, licensing, registration, inspection, tax administration, gov contracts, customs documentation, currency transactions
![Page 18: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/18.jpg)
OECD Convention (Nov. „09)
“widespread phenomenon” raising
serious moral and political concerns
“undermining good governance, econ
development, distorting competitiveness
Requires efforts by companies,
business organizations, trade unions
Accounting, indep. external audit,
internal control, ethics, cooperation in
investigations with integrity
18
![Page 19: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/19.jpg)
Four “key areas” in OECD
anti-corruption strategy
Fight transnational bribery
Corruption & business
Corruption & public education
Corruption & public procurement (gov)
Istanbul Anti-Corruption Action Plan (Sept ‟08)
19
![Page 20: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/20.jpg)
Complications
“small facilitation payments”
“tax loopholes” -- bribes deductable
protecting employees who report …
“off the books” accounts
inadequate scrutiny of third parties:
agents, intermediaries, consultants,
representatives, distributors,
contractors, suppliers, consortia,
joint venture partners
20
![Page 21: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/21.jpg)
Best Practice in Companies
Commitment from senior leadership
Clear, regular corporate policies / communication
Explicit rules for rank & file (top to bottom) / training
Oversight by indep monitoring bodies or internal
auditors reporting directly to Board of Directors
Tight financial procedures
Rewards for compliance & ethical behavior / all levels
Swift responses to reports of corruption
21
![Page 22: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/22.jpg)
Prevent & Detect …
Gifts
Hospitality; entertainment
Customer travel
Political contributions
Sponsorships
Facilitation payments
Solicitation & extortion
22
![Page 23: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/23.jpg)
Legal Remedies … one record
OECD report:
Cases “sanctioned under criminal proceedings”
1999 – 2009 148 individuals; 77 entities
in 13 countries
40 sentenced to prison; 1 company fined
€1.24M
280 ongoing investigations; 21 countries
23
![Page 24: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/24.jpg)
Most Engaged IOsand a critical part of the “regulatory webs”
OECD
Transparency International (“Integrity Pact”)
ACN (Anti-corruption Network for Eastern Europe and
Central Asia)
International Chamber of Commerce
(“Rules of Conduct”)
World Economic Forum
(“Partnering Against Corruption Initiative”)
“Convention Against Corruption” (123 signatories)
Also Hess & Dunfee‟s “C2” Principles
24
![Page 25: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/25.jpg)
Political Science & Business StudiesWhat Social Science has to Contribute
►“Soft Law”
►“Regulatory Webs”
►“Epistemic Communities”
25
![Page 26: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/26.jpg)
“Soft Law” Multitude of actors:
states, officials, regulators, NGOs, civil society, corporations
“In the absence of an international sovereign to
exercise coercive power, it has become necessary
to look to other means to control the behavior of
international actors.”
Soft law mechanisms often “discussed by scholars
in terms of state compliance with international law” Haas, Choosing to Comply, (The Role of Non-Binding Norms in the
International Legal System), „00
Braithwaite, “Enforced Self-Regulation: A New Strategy for Corporate
Crime Control,” Mich Law Review „82
26
![Page 27: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/27.jpg)
“Regulatory Webs”
“dialogue & persuasion” rather than coercion
Use soft power to shape corporate behavior
through “redefinition of interests and reputational
sanctions”
Webs become a locus of soft power influencing
the behavior of corporations without recourse to
explicitly coercive hard power.
Ellickson, Order Without Law, „91
Braithwaite & Drahos, Global Business Regulation
27
![Page 28: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/28.jpg)
“dialogic mechanisms of corporate
regulations (through consultation between
corporations and regulators) enhance
compliance.” foster habits of compliance
Nurture redefinition of internal corporate
interests
“These webs operating through persuasion
rather than coercion, can effectively globalize
practice without recourse to state-propagated
rules.”
28
![Page 29: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/29.jpg)
Examples
Global Reporting Initiative (reporting processes)
Global Compact(voluntary initiative / observe 10 principles /
human rights, labor standards, environment,
corruption)
Dialogic webs “architecture for social learning network”
Pacts are designed to reintroduce
expectations of honesty
29
![Page 30: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/30.jpg)
“Epistemic Communities” Defined: Networks of individuals with shared
beliefs and expertise on a given issue.
Shared interest = process of regulation
Through expertise, they control the diffusion
of ideas and knowledge which can lead to
new patterns of behavior; influence how
problems are perceived; and the scope of
potential solutions … in the case of
corruption, this process involves the
recognition of corruption as a problem and
collective understanding of how to attack it.
30
![Page 31: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/31.jpg)
Fosters internal norms of behavior
“represents a significant improvement on
traditional coercive regulatory methods.”
►where management officials invest in
the creation of standards, they
demonstrate a greater likelihood of
complying with them.”
Tailor rules to corporate needs …
31
![Page 32: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/32.jpg)
Who?
Compliance professionals, regulators, public
interest groups, communities of professional
experts frame ethical & legal compliance and
social responsibility.
Emphasize compliance over profits
Proliferation of voluntarily signed corporate
codes on corruption
Increase in corporations reputationally
accountable for breaches
32
![Page 33: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/33.jpg)
Summary … “webs” use
Four mechanisms:
1. Redefining interests
2. Use of reputation as restraint on
behavior
3. Creation of intellectual resources
valuable to corporations
4. Habitual compliance incorporated into
organizational routines
33
![Page 34: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/34.jpg)
“Reputation” as restraint
Reputation acts as a restraint in situations of
complex interdependence and/or public pressure
Corporations take on obligations apparently
counter to their direct interests as part of a larger
benefit strategy
Reputation = valuable commodity – motivation to
reform (comply) – avoid consumer backlashes &
public scandal
Corporate execs often advertize their compliance
for peer status
34
![Page 35: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/35.jpg)
Two Primary Qualifications
1. Corporations or their executives may
NOT value their reputations
2. Corporations may respond with public
relations spin rather than genuine
reform of their behavior
►Reputation = one strand in a web of
regulatory influences
35
![Page 36: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/36.jpg)
Intellectual Resources
for corporations NGOs engage in a form of private capacity-
building, making it easier for corporations to
regulate themselves
The credible and authoritative information
provided is at a premium in a globalized world
where there is an oversupply of information
Experts are at the center of crucial
communication networks acquiring influence
as agents of new approaches Keohane & Nye, Power and Interdependence in the Information
Age, Foreign Affairs, „98
36
![Page 37: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/37.jpg)
Limits of Soft Power
Significant aspects of corporate practice
remain uncontrolled
Real gap between norms and behavior
“Operative” codes of profit-maximization
Webs are a useful but insufficient means
of controlling corporate behavior!
37
![Page 38: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/38.jpg)
Webs & Government
Model: corporations draft their own codes;
government approves and audits
Legal threats supplement and reinforce
the regulatory web
Keohane: “The dialogue built into the
regulatory web enhances accountability”
(electoral & hierarchical)
38
![Page 39: Bridging Legal and Political Notions of 'Corruption:' The ... · Profound consequences for public & private sector Survey: 10% say corruption #1 priority Majority think cause is “crisis](https://reader034.fdocuments.in/reader034/viewer/2022050219/5f65259832e39b7cfb3d1332/html5/thumbnails/39.jpg)
Conclusion
►The problem is threatening to society
►Solutions must use all disciplinary
insight
►Approaches must be politically,
economically and legally refined
►Success will ultimately be measured by
changes in the expectations and
attitudes of elites and the general public
39