Fight against Corruption Escalates

By Verschoor, Curtis C. | Strategic Finance, March 2010 | Go to article overview

Fight against Corruption Escalates


Verschoor, Curtis C., Strategic Finance


Transparency International, described as the global coalition against corruption, has released several reports detailing the pervasiveness of corruption and bribery within business across the globe. Despite some positive developments, there's still much progress to be made in creating a corruption-free world.

The fruits of a recently announced U.S. Department of Justice (DOJ) initiative to stop foreign corporate bribery resulted in the arrest for bribery of 22 top-level executives in the arms industry. The case was described as the largest prosecution ever of individuals for foreign corporate bribery under the 1977 Foreign Corrupt Practices Act (FCPA). Included in those arrested was the sales vice-president of Smith & Wesson, the largest manufacturer of handguns in the U.S.

Lanny A. Breuer, U.S. assistant attorney general for the criminal division, described the FBI stings that obtained evidence to support the arrests as "the first time we've used the technique of an undercover operation in a case involving foreign corporate bribery." He added, "The message is that we are going to bring all the innovations of our organized crime and drug war cases to the fight against white-collar criminals." Breuer noted, "International cooperation is growing every day and getting better and better."

The most prominent group organized to fight corruption on a global scale is Transparency International (TI). TI's mission is to create change leading to a world free of corruption. It defines corruption as the abuse of entrusted power for private gain. According to TI, corruption hurts everyone whose life, livelihood, or happiness depends on the integrity of people in a position of authority. Perhaps the group's best-known research product is its annual Corruption Perceptions Index (CPI), which ranks the perceived level of public-sector corruption in 180 countries and territories around the world as measured by expert and business surveys. In the 2009 report, the United States ranked 19th, a slide down from 14th at the beginning of the decade.

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In terms of paying business bribes, the 2008 Bribe Payers Index report from TI ranks Belgium, Canada, the Netherlands, and Switzerland as the least likely of 30 leading exporting countries to use bribes to win business abroad. Countries rated as most likely to use bribery as a sales tool are China and Russia. The U.S. falls in the middle.

TI's 2009 Global Corruption Barometer surveyed 673,000 households in 69 countries concerning their perceptions of and experiences with corruption.

The report showed that 53% of respondents believe the private sector of business to be corrupt, using bribes to influence public policy, laws, and regulations, up from 45% in 2004. "These results show a public sobered by a financial crisis precipitated by weak regulations and a lack of corporate accountability," said TI Chair Huguette Labelle.

TI also publishes an annual Progress Report on Enforcement of the Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention. The 2009 document shows that enforcement has been extremely uneven. There's active enforcement in only four countries and little or no enforcement in 21. The Report calls for increased efforts in countries with moderate enforcement because their level of enforcement isn't high enough to provide effective deterrence. Many senior executives were totally unaware of the contents of this global document. In November 2009, the OECD published a revised Recommendation of the Council for Further Combating Bribery of Foreign Public Officials in International Business Transactions. The United Kingdom introduced a strengthened bribery bill into Parliament in November 2009.

A more positive note is reflected in the TI Global Corruption Report 2009. It reveals "encouraging and real progress" toward stronger corporate integrity despite prominent corruption scandals and the "lack of transparency and accountability that has been shown to lie at the root of the financial crisis. …

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