Corruption, Social Sciences and the Law: Exploration across the disciplines 9780367186418, 9780429197352

Table of contents :
Cover
Half Title
Series Page
Title Page
Copyright Page
Table of Contents
Acknowledgements
List of Contributors
Foreword, Leah Ambler
Introduction
1. Corruption: The shape of the beast
Introduction
The nature of corruption and the key players
Forms of corruption
Administrative corruption and bribes
Political corruption
Crony-capitalism
Corruption in kleptocratic societies
Concluding remarks
Bibliography
2. The history of corruption and the benefits of a historical approach
Introduction
Conflicts of interest and the problem of defining public and private
Entrusted power
Gifts
The hybrid state and its contractors
Comparative histories
Conclusion
Bibliography
3. Bribery, corruption and the law
Introduction
Bribery and corruption – from a domestic to an international concern
From the United States to multilateral conventions and other initiatives
Increased enforcement against business
And anti-corruption reforms elsewhere?
Bibliography
4. Reduction of corruption as good governance
Introduction
What is corruption?
What is wrong with corruption?
What is governance?
The interaction of governance with corruption
Does governance require democracy?
Corruption as an institutional process
Forms of corruption
What is to be done?
Bibliography
5. Cui bono? Corruptors and the corrupted – corporate governance and corruption: The roles and responsibilities of the private sector
Introduction
Private sector corruption around the world
The role of multilateral frameworks in addressing anti-corruption
The role of corporate governance in anti-corruption
Boards and crisis management
Stewardship codes
Corporate lobbying
Revolving door politics
Partially closing the door and the responsibility of the private sector
Conclusion
Bibliography
6. Tackling corruption through corporate social responsibility
Introduction
CSR, law and anti-corruption: Concepts, scope and relationship
The anti-corruption CSR paradigm
Anti-corruption CSR implementation framework
Practical steps for anti-corruption in CSR
Conclusions
Bibliography
7. A political science perspective: From debate to détente
Introduction
Traversing the definitional minefield
The quantification of corruption: Traversing the methodological minefield
The importance of typology: Moving towards a broader debate
Analysing the causes of corruption
Conclusion
Bibliography
8. Discourse of corruption and anti-corruption
Introduction
Discourse of corruption
Discourses and corruption
Corruption and everyday talk
Constructing corruption
Discussion and conclusions
Bibliography
9. Corruption: A sociological approach
Introduction
The conceptual liquid
Ambiguous normativity
Functionalist background
Sociology of the normative
Study of scandals as dramatisation of corruption
Scandals as factors of evolution
Constructing social problems as politics
Political transformation of corruption into economic and social problems
Partial definitions
Bribery under communist rule and an anthropology of gifts
Is there a necessary relationship between power structures and corruption?
Conclusion: Do we gain by extending the concept?
Bibliography
10. The morality of corruption in organisations
Introduction
Individual motivations and moral order
Moral and individual standards forged at the organisation
Organisational motivations
Does morality matter at all?
Bibliography
11. Using systems thinking to understand and address corruption in the criminal justice system in fragile states
Introduction
What’s the problem with the way corruption is commonly understood?
Rethinking corruption: Systems analysis
Taking it to the field: Conducting a systems-based corruption analysis
From analysis to intervention design: Using the map
Kuleta Haki
Insights on corruption and anti-corruption
Conclusion
Bibliography
12. Social norms and attitudes towards corruption: Comparative insights from East Africa
Introduction
Behavioural influences based on sociality
Social practices and corruption
Analysis: The ambivalence of multiple normative frameworks
Conclusion
Bibliography
13. Corruption: Killing the beast
Introduction
Fight against corruption
Champion for the fight
Generic strategies
Incentives for corruption: Value of rents
Performance of government
Public administration
Civic institutions
Anti-corruption strategy
Conclusions
Bibliography
14. Explorations across the disciplines
What is corruption?
Legal frameworks
Practical implications
Bibliography
Index

Citation preview

Corruption, Social Sciences and the Law

The problem of corruption, however described, dates back thousands of years. Professionals working in areas such as development studies, economics and political studies, were the first to most actively analyse and publish on the topic of corruption and its negative impacts on economies, societies and politics. There was, at that time, minimal literature available on corruption and the law. The literature and discussion on bribery and corruption, as well as on the negative impact of each and what is required to address them, particularly in the legal context, are now considerable. Corruption and anti-corruption are multifaceted and multi-disciplinary. The focus now on the law and compliance, and perhaps commercial incentives, is relatively easy. However, corruption, anticorruption and the motivations for them are complex. If we continue to discuss, debate, engage and address corruption and anti-corruption in our own disciplinary silos, we are unlikely to significantly progress the fight against corruption. What do terms such as ‘culture of integrity’, ‘demand accountability’, ‘transparency and accountability’ and ‘ethical corporate culture’ dominating the anticorruption discourse mean, if anything, in other disciplines? If they are meaningless, what approach would practitioners in those other disciplines suggest be adopted to address corruption. What has their experience been in the field? How can the work of each discipline contribute to the work of whole and, as such, improve our work in and understanding of anti-corruption? This book seeks to answer these questions and to understand the phenomenon more comprehensively. It will be of value to researchers, academics, lawyers, legislators and students in the fields of law, anthropology, sociology, international affairs and business. Jane Ellis is a director, corporate governance specialist, independent researcher and legal adviser with expertise in corporate governance, risk management, whistleblower guidance, business ethics, anti-corruption law and competition law. Jane is a long-standing supporter of Transparency International and a former board member of the Australian chapter of Transparency International. She is an Australian-qualified lawyer who was formerly a partner in competition law with Ashurst in Sydney.

The Law of Financial Crime Series Editor: Nicholas Ryder Available titles in this series include:

The Financial Crisis and White Collar Crime- Legislative and Policy Responses A Critical Assessment Edited by Nicholas Ryder, Jon Tucker and Umut Turksen Countering Economic Crime A Comparative Analysis Axel Palmer The Global Anti-Corruption Regime The Case of Papua New Guinea Hannah Harris Financial Crime and Corporate Misconduct A Critical Evaluation of Fraud Legislation Edited by Chris Monaghan and Nicola Monaghan Corporate Liability for Insider Trading Juliette Overland Corruption in the Global Era Causes, Sources and Forms of Manifestation Lorenzo Pasculli and Nicholas Ryder Counter-Terrorist Financing Law and Policy An analysis of Turkey Burke Uğur Başaranel and Umut Turksen For more information about this series, please visit: www.routledge.com/TheLaw-of-Financial-Crime/book-series/FINCRIME

Corruption, Social Sciences and the Law Exploration across the disciplines Edited by Jane Ellis

First published 2019 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 52 Vanderbilt Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2019 selection and editorial matter, Jane Ellis; individual chapters, the contributors The right of Jane Ellis to be identified as the author of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record has been requested for this book ISBN: 978-0-367-18641-8 (hbk) ISBN: 978-0-429-19735-2 (ebk) Typeset in Galliard by Integra Software Services Pvt. Ltd.

Contents

Acknowledgements List of contributors Foreword, Leah Ambler Introduction

vii viii x 1

JANE ELLIS

1

Corruption: The shape of the beast

6

ARVIND K. JAIN

2

The history of corruption and the benefits of a historical approach

29

MARK KNIGHTS

3

Bribery, corruption and the law

47

JANE ELLIS

4

Reduction of corruption as good governance

59

HABIBUL HAQUE KHONDKER

5

Cui bono? Corruptors and the corrupted – corporate governance and corruption: The roles and responsibilities of the private sector

78

MARIE DELA RAMA, ALICE KLETTNER AND MICHAEL LESTER

6

Tackling corruption through corporate social responsibility

101

ONYEKA K. OSUJI

7

A political science perspective: From debate to détente SAM POWER

133

vi 8

Contents Discourse of corruption and anti-corruption

149

CHRIS MCVITTIE AND RAHUL SAMBARAJU

9

Corruption: A sociological approach

166

JACEK KURCZEWSKI

10

The morality of corruption in organisations

188

DAVIDE TORSELLO

11

Using systems thinking to understand and address corruption in the criminal justice system in fragile states

201

CHEYANNE SCHARBATKE-CHURCH AND DIANA V. CHIGAS

12

Social norms and attitudes towards corruption: Comparative insights from East Africa

223

CLAUDIA BAEZ-CAMARGO, ABEL DUFITUMUKIZA, EGIDIUS KAMANYI, SABA KASSA, ROBERT LUGOLOBI AND COSIMO STAHL

13

Corruption: Killing the beast

238

ARVIND K. JAIN

14

Explorations across the disciplines

260

JANE ELLIS

Index

270

Acknowledgements

My heartfelt thanks go to all the contributors to this book and their appreciation of what I hope to achieve through it. Thanks also go to Leah Ambler of the Anti-Corruption Division at the OECD who, in a personal capacity, sacrificed what little free time she had to review and contribute to this book. Finally, but certainly not least, my thanks to Peter Leahy who encouraged me in the development of the idea behind the book and its realisation.

Contributors

Leah Ambler OECD Anti-Corruption Division Arvind K. Jain John Molson School of Business, Concordia University Mark Knights University of Warwick Jane Ellis Director, corporate governance specialist, legal adviser and independent researcher Habibul Haque Khondker Zayed University, Abu Dhabi, UAE Dr. Marie dela Rama University of Technology, Sydney and LongView Partners, Sydney Dr. Alice Klettner University of Technology, Sydney and LongView Partners, Sydney Mr. Michael Lester University of Technology, Sydney and LongView Partners, Sydney Onyeka K Osuji School of Law, University of Essex Sam Power Lecturer in politics, University of Exeter Chris McVittie Queen Margaret University, Edinburgh Rahul Sambaraju Trinity College Dublin, University of Dublin Jacek Kurczewski Prof. Em., University of Warsaw, Institute of Applied Social Sciences, chair in sociology and anthropology of custom and law Davide Torsello Central European University, Hungary Cheyanne Scharbatke-Church Professor of practice, Fletcher School of Law and Diplomacy, Tufts University, Medford Diana V Chigas Senior international officer and associate provost, Tufts University, and professor of practice, Fletcher School of Law and Diplomacy, Tufts University Claudia Baez-Camargo Basel Institute on Governance

Contributors Abel Dufitumukiza Basel Institute on Governance Egidius Kamanyi Basel Institute on Governance Saba Kassa Basel Institute on Governance Robert Lugolobi Basel Institute on Governance Cosimo Stahl Basel Institute on Governance

ix

Foreword

Corruption, Social Sciences and the Law: Exploration across the Disciplines explores the who, what, when, why and how of corruption. Through the contributions of a host of esteemed authors from around the globe, it dissects and anatomises the phenomenon of corruption and our efforts to combat it. The international anti-corruption architecture has been in place for almost two decades but there is relatively little to show in terms of enforcement and behavioural change. This cross-disciplinary panorama could therefore not come at a better time: it illustrates the alternate causes and solutions to a phenomenon that is so difficult to define but yet universally accepted as unconscionable, if not always illegal. Corruption is, of its very nature, covert and complex and its manifestation is limited only to the bounds of human imagination. What is considered corrupt can also be heavily dependent on how it is described and the prevailing social norms at the time. In exploring the different forms that corruption can take, through both an historical and a cultural lens, this book takes us a step further in the fight against this scourge on humanity. It portrays corruption through a multifaceted prism beyond the traditional public/private divide which has dictated anti-corruption policy responses to date. It also explores how organisational constructs can impact on individual behaviour, to the extent of renegotiating our morality and propensity to bribe. The authors also challenge the legalistic approach that has dominated anticorruption discourse to date, going beyond criminalisation and enforcement, to highlight tensions between legal and social normative frameworks and explore other solutions and stakeholders in the anti-corruption universe. Through examining alternative forms of accountability, such as corporate governance and corporate social responsibility and identifying and empowering anti-corruption champions, this book proves that there is more to the fight against corruption than just crime and punishment. It also emphasises the need for nuanced approaches, such as systems-based corruption analysis, to take into account specific sectoral or sociological contexts. Many of the chapters break new ground, by exploring aspects of corruption from a different angle. The authors fearlessly tackle difficult but frequently raised questions, such as how to define, measure and address corruption. The

Foreword

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result is a volume full of new ideas and perspectives, breaking down many of the previously accepted approaches which have proven ill-suited to the ever-evolving and heavily contextual nature of this crime. It is a privilege to be able to introduce this edition, and to congratulate Jane Ellis, who led this ground-breaking research and convened and curated the chapter contributions, as well as to the various authors who have shared their insights, expertise and ideas. Rich with case studies from around the world and throughout the ages, Corruption, Social Sciences and the Law: Exploration across the Disciplines promises to be a key reference for anti-corruption advocates, practitioners, researchers, enforcers and law-makers alike. Leah Ambler OECD Anti-Corruption Division1

1 The author’s views do not necessarily represent the views of OECD member countries or States Parties to the OECD Anti-Bribery Convention.

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Introduction Jane Ellis

The problem of corruption, however described, dates back thousands of years. There are records of legislators in Ancient Greece prosecuted for engaging in corrupt conduct.1 Corruption, however, was considered generally to be a domestic problem; that is, corruption – be it in religion, politics, economics or local government – was a local concern, not one that transcended borders. This limited the focus of anti-corruption analysis by academics and professionals. It is only in the last 20 years that many world and business leaders have come to regard corruption as a problem that has international consequences.2 Professionals working in areas such as development studies, economics and political studies, were the first to most actively focus and publish on the topic of corruption and its negative impacts on economies, societies and politics.3 There was, at that time, minimal literature available on corruption and the law. Indeed, until the late 1990s, companies who bribed to secure contracts in foreign countries were still legally entitled to claim the bribes as business expenses for tax purposes.4 The agreement to, and signing of by Organisation for Economic Cooperation and Development (OECD) countries, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Anti-Bribery Convention) in 1997 significantly changed the legal and business attitude to corruption. The United Nations Convention

1 For example, see the discussion about the role of Solon of Athens and the scandal around his introduction of the cancellation of debts, in the section on The Seisachtheia in Ancient Greece: Social and Historical Documents from Archaic Times to the Death of Alexander the Great (3rd ed) Dillon, M. and Garland, L., Routledge, 2010, pp. 304–310. 2 Ably assisted with the establishment of Transparency International (see: www.transparency. org/whoweare/history/), the announcement by the World Bank of the need to combat the ‘cancer of corruption’ (see: www.worldbank.org/en/about/archives/history/past-presi dents/james-david-wolfensohn) (both accessed 30 August 2017). 3 See, for example, Da-Hsiang, D. L., ‘Corruption and allocation efficiency’ Journal of Development Economics Vol. 33(1), 1990, pp. 153–164 and Shleifer, A. and Vishny, R.W., ‘Corruption’ The Quarterly Journal of Economics Vol. 108(3), 1993, pp. 599–617. 4 A legal entitlement signatories to the OECD Anti-Bribery Convention had to abolish when implementing their obligations under the Convention. Bribes to secure contracts in a company’s own country was usually already illegal.

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Jane Ellis

Against Corruption (UNCAC), adopted by the UN General Assembly in 2003, expanded the anti-corruption efforts.5 The body of literature and discussion on bribery and corruption, as well as on the negative impact of each and what is required to address them, is now considerable. International organisations, such as the World Bank,6 United Nations,7 Transparency International,8 the Organisation for Economic Cooperation and Development9 and the World Economic Forum,10 issue statements on work each is doing and what each considers needs to be done to address corruption. In many countries, there are now laws that apply that prohibit the bribery of foreign public officials, which prosecutorial authorities are increasingly enforcing. Those same authorities are now demanding that organisations develop and implement anti-corruption policies and procedures and that these are actively monitored and enforced.11 The increased focus on corruption by the legal profession has been motivated by countries implementing laws under the OECD Anti-Bribery Convention and enforcing them. The increased enforcement from the mid-2000s of the Foreign Corrupt Practices Act 1977 by the United States Department of Justice and the introduction of the Bribery Act 2010 by the UK Parliament, in particular, both had a profound impact on organisations and their attitude to bribery and corruption.12 The United Nations Office of Drugs and Crime, which is responsible for UNCAC, seeks to replicate this impact in the public and judicial sectors, among others. This increased focus on corruption, particularly by legislators and prosecutors, is welcome. Greed often motivates acts of corruption, particularly what might be categorised as ‘grand corruption’. Prosecuting the perpetrators is likely to go some way to discourage such conduct, particularly if any ill-gained profits are confiscated. What might be categorised as ‘corrupt conduct’, however, is not limited to ‘grand corruption’ and, in fact, need not be motivated by greed. Other factors are likely to result in behaviour we, or others, might consider corrupt. In and of itself, therefore, to focus purely on the law and implementing procedures (for example, compliance policies and procedures) to comply with the

5 The UNCAC can be found at: www.unodc.org/documents/brussels/UN_Convention_A gainst_Corruption.pdf (accessed 6 October 2018). 6 www.worldbank.org/en/topic/governance/brief/anti-corruption (accessed 30 August 2017). 7 www.unodc.org/unodc/en/treaties/CAC/ (accessed 30 August 2017). 8 www.transparency.org/what-is-corruption/ (accessed 30 August 2017). 9 www.oecd.org/corruption/ (accessed 30 August 2017). 10 www.weforum.org/communities/partnering-against-corruption-initiative (accessed 30 August 2017). 11 See, for example, what the US Department of Justice requires for the purposes of the Foreign Corrupt Practices Act 1977: www.justice.gov/criminal-fraud/page/file/937501/download (accessed 30 August 2017). 12 Professional experience and observation of the author.

Introduction

3

law, is necessary but not sufficient. It reflects the fact that in many cases politicians, lawyers, economists and anti-corruption advocates determine the corruption/anti-corruption agenda.13 Many other disciplines, perspectives and experiences, however, also focus on corruption and anti-corruption. These are all equally valid but often are, if not actively excluded from the international debate on anti-corruption, not incorporated into the agenda. This book seeks to address these gaps. Corruption and anti-corruption are about human behaviour. As such, they are multifaceted and multidisciplinary. To focus on the law and compliance, and perhaps commercial incentives, is relatively easy. However, if we want to understand the phenomenon of corruption more comprehensively, there needs to be more sharing of expertise across management, academic and social science disciplines. That is, professionals and practitioners require some knowledge, or at least awareness, of corruption as understood by the law, management, economics, governance, history, anthropology, political science and sociology. This book starts with chapters that approach corruption from a perspective that is likely to be familiar to many. It then introduces a range of very different perspectives to corruption before completing with an analysis through which common themes are identified and applied. It starts with Arvind Jain ‘shaping the beast’ that is corruption. Jain notes that despite the increased interest in corruption and anti-corruption, our understanding of it and how it can be addressed remains fragmented. His chapter explores the various forms corruption can take, in particular from an economist’s perspective. The next chapter, Chapter Two, has Mark Knights placing corruption and anti-corruption in a historical context. Knights explores how modern corruption scandals reflect earlier ones and what we can learn from historical events. He notes how significant political and cultural changes in pre-modern Britain show that corruption informed the formation of the state, empire, market and the law. Chapter Three provides a high level overview of how the anti-corruption laws have developed in an international context. Jane Ellis explores the development and impact of multilateral conventions but more relevantly the enforcement of domestic laws that have extraterritorial reach. In Chapter Four, Habibul Haque Khondker considers corruption, governance and democracy, the tension that exists between them and the conflicting forms of measurement of each that have been developed. The role of the private sector, particularly multinational organisations, in corrupt conduct, is explored in Chapter Five by Marie Dela Rama, Alice Klettner

13 It also reflects the fact that the genesis of the anti-corruption agenda arguably is deeply rooted in western-based liberalism. See, for example, Siedentop, L., Inventing the Individual: The Origins of Western Liberalism, Harvard University Press, 2014.

4

Jane Ellis

and Michael Lester. They note the two faces of corruption – the corruptor and the corrupted – and query who ultimately benefits or loses from the exchange. Chapter Six considers the role of the private sector further with Onyeka Osuji exploring how corporate social responsibility (CSR) can be used as an effective solution to official corruption, especially in developing countries. Osuji notes that the misuse or abuse of power is ‘according-to-rule’ when the results expected from an act or decision are not prohibited or ‘against-the-rule’ when the results are prohibited by law, rules or regulations, and how CSR can be used to ameliorate this. Chapter Seven considers the difficulties of understanding the nature of corruption in the political science context with Sam Power examining how corruption is defined and measured and its causation. A very different approach to corruption is set out in Chapter Eight with Chris McVittie and Rahul Sambaraju considering the language that is used to describe it. They explore how, using language, individuals and agencies construct what counts as corruption and how they categorise others’ conduct as corrupt and do so to achieve particular social outcomes. In doing so, they highlight the potential difficulties this can generate when seeking to counter corruption in practice. In Chapter Nine, Jacek Kurczewski observes that the more literature there is on corruption, the less obvious are the interdisciplinary borders. Kurczewski explores corruption from a sociological perspective and assumes that the purpose of sociology is still two-sided. It describes what is seen in social life and seeks to unmask what is hidden behind it in order to share the understanding. Chapter Ten takes another different approach with Davide Torsello exploring normative and moral aspects of corruption from an anthropological perspective. Using ethnographic data collected over 2016 and 2017 as part of a large European Union research project, he explores how multiple moral standards can result in corruption being acceptable in situations that may be regarded as ‘grey’. The book then goes further off-piste in Chapter Eleven, with Cheyanne Scharbatke-Church and Diana V Chigas exploring the complex and adaptive nature of corruption in fragile states. The focus is on the criminal justice sector in Democratic Republic of the Congo, Uganda and Central African Republic. They apply a systems analysis approach to corruption to capture the complexity of how it occurs. The approach in both this and the following chapter can provide useful guidance to those governments and organisations that are serious about wanting to address corruption. Chapter Twelve has Claudia Baez-Camargo, Saba Kassa, Cosimo Stahl, Abel Dufitumukiza, Egidius Kamanyi and Robert Lugolobi setting out how three countries with very similar cultures have very different experience in addressing corruption. The focus is on interactions between citizens and low to mid-level officials in the health sectors of Rwanda, Tanzania and Uganda. In doing so, they consider the function of social networks in each context and how they might be used as entry points for nuanced anti-corruption approaches.

Introduction

5

In Chapter Thirteen, Arvind Jain explores the different approaches that have been used to ‘kill the corruption beast’. He covers the various elements deployed, the generic strategies used and the importance and difficulties that arise when choosing an anti-corruption strategy in any given society. The final chapter, Chapter 14, has Jane Ellis providing a summation of the key themes arising across these chapters and the tools derived from these that governments, business, civil society, legislators and regulators, among others, can adopt in their anti-corruption approaches.

1

Corruption The shape of the beast Arvind K. Jain

Introduction The study of corruption has experienced phenomenal growth within a relatively short span of time. Corruption is “ … acknowledged as a cause not only of persistent poverty and underdevelopment but also, increasingly, of many of the security challenges undermining global stability”.1 Despite the increased interest in the topic, our understanding of who gets involved with corruption and, more importantly, how it can be tackled remains quite fragmented. This chapter will describe various forms that corruption can take. The first section presents the economists’ view of corruption and the key participants involved in this process. The second provides an overview of the forms of corruption, which are then described in detail in the subsequent sections.

The nature of corruption and the key players Corruption involves collusion between two very specific participants in an economy. On one side is a member of the economic elite whose objective is to capture the largest possible share of rents from its resources. On the other side is the political elite, motivated by a desire to maximise its own welfare, who designs and administers the laws and regulations that govern the sizes as well as the distribution of those rents. The economic elite must motivate the political elite to shape the laws or regulations in its favour either by appealing to the public interest or by offering to share the rents with them. The latter of these two approaches amounts to corruption. Corruption belongs to the category of activities that are either illegal or considered unethical and the perpetrators generally like to keep them hidden.2

1 Chayes, S., The Structure of Corruption: A Systemic Analysis Using Eurasian Cases, Washington, DC: Carnegie Endowment for International Peace, 2016, p. 1. 2 Corrupt behavior is part of “hidden behaviour” that forensic economists have now begun to investigate in depth. Zitzewitz identifies various activities of interest and some common elements between corruption and those activities. Zitzewitz, E., “Forensic Economics,” Journal of Economic Literature, 50 (3), 2012, pp. 731–776 at pp. 731–732.

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The source of corruption is the power to make and administer laws and policies. The populace delegates these powers to a political elite with implicit instructions to enhance the welfare of the populace. To fulfil its mandate, the political elite must undertake three steps. First, it must assess what allocation of society’s resources would be optimal. It must then design policies, laws and regulations that would encourage that allocation. Thirdly, it must create an administrative apparatus (consisting of many bureaucracies, a security system and a judiciary) to ensure implementation. Corruption occurs when the political elite, or an appointed administrator, distorts any of the three aspects of this process in favour of the economic elite who will, in exchange, compensate them for their actions. The distortion lies in the fact that it is a decision that the populace, were it to be given the opportunity, is unlikely to have made. The essence of corruption involves “ … situations where politicians and public institutions serve private interests at public’s expense” through the misuse of powers they have been delegated.3 Organised crime will resort to corruption by intimidation of both administrators and the political elite when it believes it can get away with it. In some societies, organised crime may be at the centre of a corrupt system. Foreign governments have been known to support corrupt regimes when it suits their (domestic) economic or foreign policy interests and multinationals support corruption when it suits their investment and strategic interests.

Forms of corruption Corruption involves the misuse of power in exchange for (illegitimate) personal gain. Three aspects of this process determine the form and the degree of corruption. First, which powers – to make laws or to administer them – are being misused by corrupt officials and how blatant is the misuse? Second, how independent are the corrupt officials and the economic elite of one another and who has the ability to determine the extent of the misuse? Third, to what extent are corrupt officials able to circumvent controls and penalties that would have been built into the political system at the behest of the populace? Building upon these three determinants, this section will focus on two broad forms of corruption: administrative and political. Subsequent sections will explore the variants within each of these two forms.

3 Teachout, Z., Corruption in America: From Benjamin Franklin’s Snuff Box to Citizens United, Cambridge, MA: Harvard University Press, 2014, p. 2. For difficulties of defining corruption when it is seen as more than an economic transaction, see Granovetter, M., “The Social Construction of Corruption,” in Nee, V. and Swedberg, R. (eds.), On Capitalism, Stanford, CA: Stanford University Press, 2007, pp. 152–172. Banerjee et al. see corruption merely as “breaking of rules” because this approach “sidesteps the need to make subjective ethical judgments and thereby avoids the need to have a deeper discussion of cultural differences.” Banerjee, A., Mullainathan, S. and Hanna, R., “Corruption,” Working Paper 17968, National Bureau of Economic Research, 2012, p. 7.

8 Arvind K. Jain In the most visible form of corruption – administrative corruption4 – an administrator responsible for the implementation of policies may threaten to withhold services or to alter transaction costs associated with those services unless a bribe is paid. The official is motivated by the bribe; the client by the maximisation of rents or the minimisation of costs. The official may act alone or in concert with other bureaucrats or politicians to assess situations suitable for bribery. A politician with influence may initiate corruption by demanding that an administrator bend the rules. Political corruption arises when the political elite use their powers to distort the enactment or the enforcement of laws in order to create and share rents with the economic elite. Variants of political corruption depend upon both the extent of collusion between the two participants (the politician and the economic interest) and the mode of payment. This collusion between the two parties in most democratic and advanced economies may be “implicit” in that the obligations of the players on both sides of the transaction – manipulation or implementation of laws and the associated payment – may have evolved over time. Such economies contend either with “legal” corruption or with “cronycapitalism”. These two variants of political corruption tend to impose relatively minor costs on the economy. More serious forms of political corruption exist in “kleptocratic” societies when there is an “explicit” understanding as to how the political elite must allow the economic elite to increase the latter’s collection of rents and how those rents will be shared with the political elite. Corruption in such societies exists as “oligarchies” or as “grand corruption”. The four variants of political corruption involve progressively higher degrees of corruption and impose progressively increasing costs on societies. These variants do not have precise boundaries. They exist on a continuum of almost benign consequences for the society (legal corruption) to the life-sucking, parasitic destruction of the potential of the society (grand corruption). Regardless of the form it takes, corruption has many other characteristics. In what can be called a “dysfunctional system”, the decision of whether or not to be corrupt rests with the corrupt politician or bureaucrat. Prior to engaging in corrupt acts, officials would have assessed whether the benefits outweigh the potential risks and costs. Corruption, in this system, is not apparently or obviously condoned by the political leadership. Rather, a dysfunctional system reflects a system that has failed to enforce its laws. It lies at the opposite end of the spectrum from a “systemically corrupt economy” in which a few actors effectively control all policy-making and law-enforcement mechanisms and where corruption is seen as the modus operandi – a situation of an almost complete breakdown of the declared objectives of the system. Identifying it as “collusive corruption”, this type of corruption “ … is more destructive than

4 Since we include bureaucracies, law-enforcing agencies and judiciary, in describing this type of corruption, we will use the term “administrative” corruption to include corruption in bureaucracies, security agencies and judiciary as well.

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individual corruption because such behaviour destroys the organizational and normative fabric of the state … ”.5 In a systemically corrupt economy, it can be expected that most levels of the political and administrative hierarchy are corrupt, and that this has been fully sanctioned by the leadership.6 Within either of these two extremes, corruption may be considered “predictable” when it is known that bribes will have to be paid for some services and the services will be delivered. Where there is “unpredictable” corruption, the cost and performance guarantees of each corrupt transaction will have to be negotiated. Should a client have to deal with many officials in the latter system, it is highly likely that bribes will have to be paid to many officials.

Administrative corruption and bribes Administrative corruption becomes a possibility when a client must deal with a government bureaucracy whether to obtain services (health services, transfer payments, law-enforcement, license for building or driving etc.), meet certain regulatory requirements (tax payments) or compete for a contract being awarded by the government. The official has discretion over the allocation of services or contracts or, at the very least, over the costs associated with the allocation process. This discretion allows the official to extract a bribe, whether by threatening to withhold services or increase their cost. The size of the bribe is limited by the possibility of detection and subsequent penalties (including the loss of what may be a lucrative job).7 The level of corruption and its influence on the allocation of resources, wages and incomes depends upon some characteristics of the situation. A situation in which a bribe allows a firm to evade certain costs (such as paying taxes) results in a competitive advantage for the corrupt client, an income for the corrupt official and a loss for the government. In this situation, as Shleifer and Vishny have shown, corruption will spread because bribing lowers costs for the corrupt client and its competitors cannot afford to be honest if they wish to remain in the market.8 Moreover, the loser (the government) has difficulty detecting the corrupt act since there is no incentive for anyone to report the crime. This type of corruption is likely to become more

5 Pei, M., China’s Crony Capitalism: The Dynamics of Regime Decay, Cambridge, MA: Harvard University Press, 2016, p. 9. 6 Wade demonstrates complete breakdown resulting from the systemic corruption within the irrigation department in one of the provinces in India. See, Wade, R., “The Market for Public Office: Why the Indian State is not Better at Development,” World Development, 13 (4), 1985, pp. 467–97. 7 Banerjee et al. view corruption not as a crime and punishment issue but, rather, as one of internal economics of organisations. Corruption depends upon the definition and scope of the task that has been assigned to the bureaucrat. Op. cit. n. 3. 8 Shleifer, A. and Vishny, R., “Corruption,” Quarterly Journal of Economics, 108 (3), 1993, pp. 99–617 at p. 604.

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prevalent in a systemically corrupt economy because those who witness corruption and who could have potentially reported the corrupt act end up sharing the ill-gotten gains. A citizen who requires a licence or a service creates an opportunity for corrupt officials to demand bribes in order not to increase the costs (or delays) associated with delivery of the service. Bose’s model of this behaviour demonstrates that corrupt officials are deterred not only by the possibility of punishment but also by the presence of honest officials.9 His solution to this type of corruption is efficiency wages where higher compensation for the officials would remove the motivation to increase earnings through illicit means. Based on a study of corruption involved in obtaining drivers’ licences in one part of India, Bertrand et al. conclude that “ … corruption does not merely reflect transfers from citizens to bureaucrats but distorts allocation”10 and “(C)orruption in this study appears to undercut the very rationale for regulation”.11 Ahlin and Bose have demonstrated that when regulation is efficient, and when at least some officials are honest “ … productive applicants can have a lower willingness to pay (bribes) than unproductive applicants when they have better outside options”.12 They conclude that “ … bureaucratic competition may be most beneficial in developing countries”.13 Following on the theme of outside options that firms may have, it has been demonstrated that firms in Uganda that have alternate means of preserving their profitability tend to have greater “refusal power” and pay fewer bribes.14 In that same vein, Bai et al. demonstrate that firms in Vietnam whose property rights are protected and who have the ability to move their production to alternate locations are less likely to pay bribes. These authors believe that economic growth itself will lower the opportunities for public officials to demand bribes.15 Ayyagari et al. provide evidence that it is the innovators in the economy, widely recognised as the key to economic growth, who bear the larger burden of bribes.16 Innovators often need more government

9 Bose, G., “Bureaucratic Delays and Bribe-Taking,” Journal of Economic Behavior & Organization, 54, 2004, pp. 313–320. 10 See Bertrand, M., Djankov, S., Hanna, R. and Mullainathan, S., “Obtaining a Driving License in India: An Experimental Approach to Studying Corruption,” The Quarterly Journal of Economics, 122, 2007, pp. 1639–1676 at p. 1639. 11 Ibid, at p. 1671. 12 Ahlin, C.R. and Bose, P., “Bribery, Inefficiency, and Bureaucratic Delay,” Journal of Development Economics, 84, 2007, pp. 465–486 at p. 479. 13 Ibid, at p. 482. 14 See Svensson, J., “Who Must Pay Bribes and How Much? Evidence from a Cross Section for Firms,” The Quarterly Journal of Economics, 118, 2003, pp. 207–230. 15 See Bai, J., Jayachandran, S., Malesky, E. J. and Olken, B. A., “Firm Growth and Corruption: Empirical Evidence from Vietnam,” Economic Journal, 2017, doi: 10.1111/ecoj.12560. 16 See Ayyagari, M., Demirguc-Kunt, A. and Maksimovic, V., “Bribe Payments and Innovation in Developing Countries: Are Innovating Firms Disproportionately Affected?” Journal of Financial and Quantitative Analysis, 49, 2014, pp. 51–75.

Corruption 11 services and tend not to be organised in lobbying groups. These authors find that due to this exposure: … the odds of having to pay bribes are 1.36 times higher for innovating firms than for noninnovators. … innovators pay a higher percentage of their sales as bribes. … We do not find that innovating firms that pay bribes receive greater benefits in obtaining government services than firms that do not pay bribes.17 Let us consider the case of a client who needs services that must be purchased from different government departments. In dysfunctional corrupt systems with unpredictable corruption, various government departments may fail to coordinate their bribe demands with each other resulting in lower aggregate levels of bribes.18 As each department maximises its revenues, it fails to consider the decrease in clients’ aggregate demand because of the uncertainty associated with demands from various departments. Corruption levels become higher when the departments coordinate their activities within a systemically corrupt economy. Governments, however, can counter the spread of corruption by allowing competition between departments.19 If clients have the freedom to go to any hospital or obtain a permit from a number of competing offices, then officials have less leeway to act as monopolists. An important interaction between government and firms occurs when firms compete to win contracts being awarded by the government. Lien was among the first to build a formal model of corruption in this context.20 Corruption leads to economic inefficiency when there is uncertainty, for instance, about the payments that various competitors are likely to make or when an official discriminates between clients based on criteria other than the value of a bribe, such as those based on friendship or trust. As a result of this uncertainty, most efficient firms may choose not to offer the highest levels of bribes. The potential for corruption increases for firms bidding for contracts in foreign countries unless the laws in the foreign country, as well as those in the firm’s country of the origin, are enforced. Cheung et al. conclude that the consequences for firms that relied on bribes to obtain contracts around the world are significant. For the bribing firms “ … market capitalization increases by between 10.18 and 11.46 for each dollar of bribe they pay. Although firms bribing high-ranking politicians are awarded projects of larger size, (they have to pay larger bribes to secure these contracts”.21

Ibid, at p. 53. Shleifer and Vishny, op. cit. n. 8, at p. 606. Ibid, at p. 607. Lien, D. D., “Corruption and Allocation Efficiency,” Journal of Development Economics, 33, 1990, pp. 153–64. 21 Cheung, Y.L., Rau, R. and Stouraitis, A., “How Much do Firms Pay as Bribes and What Benefits Do They Get: Evidence from Corruption Cases Worldwide,” National Bureau of Economic Research, Working Paper 17981, 2012, p. 20.

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Organisation for Economic Cooperation and Development (OECD) countries are now placing greater emphasis on the enforcement of domestic laws against those firms that engage in corruption abroad, and there are examples of large multinationals that have resorted to such behaviour in the past.22 These laws may be having some positive effect. Jeong and Weiner examined firms’ behaviour for dealing with corrupt administrators abroad. Unsurprisingly, they found that strong domestic laws against bribing foreign officials discouraged firms from bribing Iraqi officials to purchase oil during the period when the United Nations had imposed an embargo on Iraq.23 Zeume demonstrates that the passing of the U.K. Bribery Act that imposed penalties on those UK firms that used bribes to obtain contracts abroad “ … leads to a permanent drop in the value of U.K. firms, while the value of non-U.K. firms competing directly with U.K. firms increases. Furthermore, the passage of the Act adversely affects U.K. firms’ economic activity in perceptively corrupt countries”.24 It has been suggested that administrative corruption may be beneficial for the economy because it allows firms to circumvent regulations.25 For Lui these benefits arise in the form of optimised waiting times achieved through offers of different levels of bribes.26 The argument of beneficial corruption, however, will hold only if the regulation were to be economically inefficient. Even if corruption represents a government failure27 and a bribe “greases the wheels of commerce,” the long-term and general equilibrium consequences of corruption overwhelm the temporary and localised benefits. Aidt points out that the regulatory failure that corruption supposedly corrects is not exogenous and “ … in fact, it may well be put in place and maintained by corrupt politicians precisely because of its corruption potential”.28

22 Sender, H., “Bribery: Lines Less blurred,” Financial Times, 18 July 2011, p. 7. 23 Jeong, Y. and Weiner, R.J., “Who Bribes? Evidence from the United Nations’ Oil-for-Food Program,” Strategic Management Journal, 33 (2), 2012, pp. 1363–1383. 24 Zeume, S., “Bribes and Firm Value,” The Review of Financial Studies, 30 (5), 2017, pp. 1457–1489 at p. 1481. 25 Starting from Leff, a long list of development economists saw corruption as a way around inefficient governments. See Leff, N.H., “Economic Development through Bureaucratic Corruption,” in Heidenheimer, A.J. (ed.), Political Corruption: Readings in Comparative Analysis. New York: Holt Reinehart, 1964, pp. 8–14. Aidt labels it as “efficient corruption” and summarises the faulty assumptions behind the claim that corruption can be beneficial. See Aidt, T.S., “Economic Analysis of Corruption: A Survey,” Economic Journal, 113 (November 2003), pp. F632–F652. This line of argument also ignores the potential misallocation that could result when firms extract large rents from monopolistic powers they are able to acquire with the help of corrupt officials. 26 Lui, F.T., “An Equilibrium Queuing Model of Bribery,” Journal of Political Economy, 93 (4), August 1985, pp. 760–781. 27 Acemoglu, D. and Verdier, T., “The Choice between Market Failures and Corruption,” The American Economic Review, 90 (March, 2000), pp. 194–211. 28 Aidt, op. cit. n. 25, p. F635. Aidt identifies other, less important, assumptions that invalidate the positive corruption argument. Corrupt officials will waste resources on search for corrupt clients with whom trust can be established since these contracts must remain hidden and

Corruption 13 Kaufmann and Wei provide empirical evidence to refute the idea that corruption helps. They recognise that “If bureaucratic burden and delay are exogenous, bribe payment may help firms to reduce the effective burden and delay they face”.29 More often, however, they find that “ … regulatory burden and delay are endogenously chosen by the bureaucrats.” When that happens, “(C)ontrary to the ‘efficient grease’ theory, we find that firms that pay more bribes are also likely to spend more, not less, management time with bureaucrats negotiating regulations, and face higher, not lower, cost of capital”.30 Based on field research in Peru, Hunt has shown that in situations where clients have no choice but to obtain services from the government, corruption hurts the victims of misfortune (such as crimes) more than the non-victims because they are likely to bribe more frequently and “ … the expense or disutility associated with the interaction compounds the original misfortune”.31 Kaufmann et al. confirm similar results for Peru when bribes act as regressive taxes.32 Hunt and Laszlo refute this conclusion and find that bribes act as a progressive tax in Peru because of the tendency of the rich to use the administrative services requiring them to pay bribes more frequently and these tend to be higher for them than those paid by the poor.33 The positive or efficient corruption theory has, for all practical purposes, been laid to rest. While corruption may help in one specific transaction, existence of corruption gives rise to more demands for bribes leading to higher levels of systemic corruption in the long run. With systemic corruption, bribes have the same effect as taxes.34 A central authority that can decide the level of bribe that a client must pay – with the bribe being distributed between various officials or departments – will set the bribe level to optimise total bribe revenues just as a tax authority will set the tax level to optimise tax revenues. The absence of uncertainty associated with bribes makes the cost of corruption a predictable cost like that of taxes. Administrative corruption could benefit the public purse if the wages of bureaucrats were reduced under the assumption that they would use their positions to supplement their income through bribes. Alternatively, wages could be set so high that the potential loss of income in the case of detection of corruption

29 30 31 32

33 34

cannot be enforced in courts and corrupt officials may adjust their supply to maximise bribes, not allocation of resources. Kaufmann, D, and Wei, S-J., “Does ‘Grease Money’ Speed Up the Wheels of Commerce?” National Bureau of Economic Research, Working Paper 7093, 1999, p. 15. Ibid, at p. 1. Hunt, J., “How Corruption Hits People When They Are Down,” Journal of Development Economics, 84, 2007, pp. 574–589 at p. 586. Kaufmann, D., Montoriol-Garriga, J. and Recanatini, F., “How Does Bribery Affect Public Service Delivery? Micro-Evidence from Service Users and Public Officials in Peru.” World Bank Policy Research, Working Paper 449, 2008. Hunt, J. and Laszlo, S., “Is Bribery Really Regressive? Bribery’s Costs, Benefits, and Mechanisms,” World Development, 40 (2), 2012, pp. 355–372. Shleifer and Vishny, op. cit. n. 8 at pp. 611–612.

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would deter all corruption. Would “fair” wages motivate bureaucrats to be honest? Recognising that the answer to the question of optimal wages could be empirical, Van Rijckeghem and Weder tested the relationship between corruption and wages for a sample of 31 countries.35 Their findings led them to conclude that bureaucrats’ wages would have to be two to eight times higher than comparable wages (in manufacturing, for example) for corruption to be (quasi) eradicated. Olken and Pande conclude that there is “ … little efficiency cost … ” associated with corruption36 partly because of their belief that payments associated with corruption may merely be transfers from one party to another and partly because their review of a number of studies fails to find a link between bureaucrats’ wages and the level of corruption.37 Ha, however, draws a more intuitive conclusion: increasing wages reduces corruption when wage levels are low but not when they are high.38 Fighting administrative corruption requires that we understand the source of corruption. As can be expected from the summary of studies presented above, generalisations about the conditions under which administrative corruption could exist or what could be done to control it cannot easily be made. The essence of this type of corruption is the monopolistic power of an administrator whose power depends upon the type of service the client needs, the alternatives available to the client and the strength of the process that restricts the bureaucrat’s behaviour. A client’s alternatives are based on the ability to both find other ways to satisfy the need and to obtain services from other bureaucrats. Restrictions on the bureaucrats include having systems in place to monitor corrupt officials, the presence of honest bureaucrats and competition within the administrative apparatus. It is possible to conclude that corruption increases when administrators are given more power, rather than less, in the absence of effective monitoring. Corrupt administrators, moreover, can expand the universe of regulations once they sense that there are opportunities for earning illicit income. Corruption decreases when clients are given choices. The presence of honest officials helps a great deal either by providing clients with alternatives and or by monitoring the corrupt officials. The level of honesty is likely to increase when bureaucrats are paid fair wages, especially when wage levels are very low.39

35 Van Rijckeghem, C. and Weder, B., “Bureaucratic Corruption and the Rate of Temptation: Do Wages in the Civil Service Affect Corruption and by How Much?”, in Abed, G.T. and Gupta, S. (eds.), Governance, Corruption, & Economic Performance, Washington, DC: International Monetary Fund, 2002, pp. 59–88. 36 Olken, B.A. and Pande, R., “Corruption in Developing Countries,” Working paper, Economics Department, MIT, 2012, p. 4. 37 Ibid, at pp. 23–24. 38 Ha, L.V., “Wage Differentials and Government Corruption,” Thesis, University of Groningen, The Netherlands, 2013. 39 This conclusion may not hold under all circumstances. Police officers in Ghana whose salaries were doubled became more corrupt, not less. See The Economist, “In theory, higher pay cuts corruption. In practice, the opposite happens,” www.economist.com/news/finance-and-eco nomics/21689642-theory-higher-pay-cuts-corruption-practice-opposite-happens-wages, 30 January 2016 (accessed 9 September 2018). It is possible that they began to demand more

Corruption 15

Political corruption Political corruption reflects the desire of the political elite to derive some personal benefit from their powers that include “ … creating laws, rules and regulations, appointing bureaucrats and making other decisions that influence how a society’s resources are allocated”.40 Within democratic societies, the process of delegating these powers (periodic elections) creates latitude and generates situations in which the elite has to balance conflicting interests. For the policymaking process of the political elite, the most important area of conflict is that between the interests of the general public and those of the economic elite. The political elite legitimately seek inputs from the economic elite and the public before making their policy.41 This process can be considered corruptionfree only when all three of the following conditions are satisfied:42 (i) The process of influencing decision-makers is open to all players and the criteria that the decision-makers use is public information. (ii) No secret or side payments are made. (iii) Neither the decision-makers nor those providing the inputs benefit from the income earned by the other. Political corruption occurs when the political elite’s grabbing hand leads it to “shape laws and budgets in ways that allow certain private entities to capture higher rents than what the principal, the populace, would have permitted”.43 Contrary to the “invisible hand” model of the state, the “grabbing hand” model does not assume honesty on the part of either the economic or the political elite.44 For our study of corruption, what matters is the motivation of the

40 41

42 43 44

either because their own expectations or “self-worth” increased or because their superiors began to demand more. Ghanaian citizens never expected that salaries would have anything to do with the level of corruption. See Chapter 11 of this volume where Scharbatke-Church, C. and Vigas, D. also discuss this finding. Jain, A.K., “Fighting Corruption: Contemporary Measures in Canada,” Canadian Foreign Policy Journal, 23, 2017, pp. 93–116. According to Committee for Economic Development, “Lobbying is the constitutionally protected petitioning of the government by its citizens.” See Committee for Economic Development, Crony Capitalism: Unhealthy Relations between Business and Government, Arlington, VA (www.ced.org), 2015, p. 6. Issacharoff discusses how recent legal rulings in the United States have fluctuated between considering money spent on lobbying as corruption depending upon whether there was a quid pro quo or not. He also reviews some views of the courts on lobbying expenditures on elections versus on influencing policy once a politician is elected. See Issacharoff, S., “On Political Corruption,” Harvard Law Review, 124 (1), 2010, pp. 118–142. See also Teachout, op. cit. n. 3 for a discussion of treatment of lobbying in United States legal system through the last century. Jain, A.K, “Corruption: A Review,” Journal of Economic Surveys, 15 (1), 2001, pp. 71–121. Jain, op. cit. n. 40 at p. 95. The “grabbing hand” model lays the responsibility for corruption almost entirely on the state. See Shleifer, A. and Vishny, R., “Perspectives on Government,” in Shleifer, A. and

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political elite as the agent. “If the agent is motivated by ideology … the resulting decision is not corruption”.45 Corruption involves the expectation of a reward from the beneficiary of the decision. Clientelism, that is, when “politicians provide private benefits to citizens conditional on their political support”46 may be viewed as the most benign form of political corruption. It is often called “legal” corruption. Even though the political elite make decisions that favour some voters at the expense of the remainder of the voters, their compensation for this distortion is not guaranteed and would only come much later. In most cases, politicians expect to receive support for their re-election from the voters who benefit from the decision. Bobonis et al. argue that such clientelism may be a response to the poverty and uncertainty faced by the citizens and hence not a sign of corruption.47 Legal corruption may be seen as a deviation from the idealised decisions of politicians outlined by Grossman and Helpman.48 An example of legal corruption may be the tax cuts introduced by President Trump and the Republicans in the United States in December 2017.49 The changes were meant to increase households’ incomes and spur investment and growth in the economy without increasing the debt burden of the economy. While the policy was presented as benefiting average households in a one-page analysis by the treasury department, an overwhelming majority of experts believed that the cuts would benefit only the very rich, not the vast majority of the public, with little consequences for the growth of the economy in the long term.50 Experts also disagreed with claims that the federal debt would not increase as a consequence of the tax cuts. Policy-makers expected that voters who benefitted would support their re-election while voters who lost would be persuaded to go along for ideological reasons.

Crony-capitalism Crony-capitalism “ … reflects the ability of powerful economic and financial interests to convince public officials to distort policy in their favour not because of ideology but because policy makers can expect economic rewards for their decisions”.51

45 46 47 48 49 50

51

Vishny, R. (eds.), The Grabbing Hand: Government Pathologies and Their Cures. Cambridge, MA: Harvard University Press, 1998, pp. 1–17. Jain, op. cit. n. 40 at p. 95. Bobonis, G.J., Gertler, P., Gonzalez-Navarro, M. and Nichter, S., “Vulnerability and Clientelism,” National Bureau of Economic Research Working Paper 23589, 2017, p. 1. Ibid See Grossman, G.M. and Helpman, E., “Protection for Sale,” The American Economic Review, 84, 1994, pp. 833–850. How some countries legalise avoidance of tax payments by moving income into offshore accounts also illustrates legal corruption. See Jain, op. cit. n. 40 at pp. 95–96. Galbraith, J.K., 2018, “What Trump’s Tax Cut Really Means for the US Economy,” www. project-syndicate.org/onpoint/what-trump-s-tax-cut-really-means-for-the-us-economy-byjames-k-galbraith-2018-01, 19 January 2018 (accessed 9 September 2018). Jain, op. cit. n. 40 at p. 96.

Corruption 17 Crony-capitalism takes two routes: either the public policy is distorted or the economic elite is given favoured access to public resources. The most important areas of policy distortion include: laws that favour businesses at the expense of consumers, protection of industries from international competition, tax policies and the allocation of government budgets. Favoured access allows businesses to obtain finance, raw materials or supply contracts from the government at subsidised prices. Rewards for the political elite may come in the form of bribes, political contributions for themselves or for their parties, jobs for those close to the policy-maker or future promises or prospects of lucrative jobs for the policy-maker. Each time the political elite favours the economic elite, it is imperative that the action be presented as being in the best interest of the public. It has been difficult to create formal models of crony-capitalism. As in the case of legal corruption, policy distortions are always presented as being in the public interest. In some situations, it may be difficult to identify the link between the policy maker and the compensation being offered for the distortion.52 We are able, however, to illustrate the prevalence of this type of corruption, first with examples53 that delineate the different types of policy distortions disguised as public policy and the various forms of compensations, and then with empirical evidence of the benefits associated with political connections. The United States congress has resorted to policy distortion to favour the sugar industry in exchange for political contributions. Government contracts have been secured through bribery, such as in Brazil, or by political contributions, such as in South Korea. South Africa under Jacob Zuma is a perfect illustration of how bribes, contributions and lucrative jobs may have influenced a wide range of policy distortions as well as favoured access to society’s resources. These situations are described in more detail below. Teachout traces the attempts by framers of the American Constitution to avoid political corruption and laments the narrowing of the definition of corruption in contemporary American politics.54 Quiroz provides a long historical perspective on crony-capitalism in Peru.55 Jain presents a situation that demonstrates the difficulty of separating crony-capitalism from ideology: his summary of regulators’ behaviour prior to the 2008 financial crisis makes it difficult to conclude that the regulators’ decisions favouring the financial

52 The courts in the United States may be moving the direction of requiring clear link between the policies and the payments. The Supreme Court of the United States overturned the conviction of former Virginia governor Bob McDonnell in 2016 because the prosecution had been unable to demonstrate a clear quid pro quo between his decisions and the gifts, money and loans he had received from a businessman. Teachout’s chagrin is obvious: “ … corruption is not merely transactional, or quid pro quo: as it is sometimes called”. Op. cit. n. 3, at p. 4. 53 Each of these “stories” is summarised from published sources. To avoid cumbersome citations interfering with the reading, it should be assumed that the first article cited for each story is the source for most of the story. 54 Teachout, Op. cit. n. 3. 55 Quiroz, A.W., Historia de la corrupcion en el Peru. Lima: Instituto de Estudios Peruanos, 2013.

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services industry were motivated by promises of future payouts.56 The magazine, The Economist, has created an index of crony-capitalism.57 Through political contributions to important politicians, the sugar industry in the United States and the family with dominant interests in that industry, the Fanjul brothers,58 have ensured that the U.S. sugar program, which limits the import of sugar into the country, provides price support to producers and allocates markets, is not abolished.59 The sugar programme adds between $2.9–3.3 billion to the profits of the industry. It ends up costing consumers an average of about $10/year/person. These are ideal conditions under which crony-capitalism flourishes: the gains are large and concentrated in few hands – making it possible to share them with policymakers – while the cost is small and widely distributed so that no one really feels the pain. The cost of influencing politicians for this industry is quite small. In 2016, its total contributions to political campaigns amounted to $11.2 million.60 The Brazilian conglomerate Odebrecht has demonstrated that links with politicians need not be confined to the firm’s country of origin. According to the charges laid by the U.S. prosecutors, this company paid out $439 million in bribes to political leaders in nine Latin American and two African countries, in addition to $349 million to Brazilian politicians to secure 100 contracts that earned the company $3.3 billion in profits.61 Revelations of bribery have so far resulted in the jailing of one previous president of Brazil, Luiz Inacio Lula da Silva, the sitting president of Peru, Pedro Pablo Kuczynski and the previous CEO of Petrobras who had accepted bribes to award contracts to Odebrecht.62 In South Korea, corruption of the top political leaders is attributed to a culture of “imperial presidency”.63 “All four of South Korea’s living presidents

56 Op. cit. n. 40 at p. 97. Similar difficulties plague situations that Stockman, for example, describes as representing corruption in the United States. See Stockman, D., The Great Deformation: The Corruption of Capitalism in America. New York: Public Affairs, 2013. 57 The Economist, 2016, “Our Crony-capitalism Index,” www.economist.com/graphic-detail/ 2016/05/05/comparing-crony-capitalism-around-the-world (accessed 9 September 2018). 58 Wikipedia identified the net worth of Fanjul brothers in August 2017 as $8.2 billion. https://en.wikipedia.org/wiki/Fanjul_brothers (accessed 18 May 2018). 59 Rolnik, G., “Meet the Sugar Barons Who Used Both Sides of American Politics to Get Billions in Subsidies,” https://promarket.org/sugar-industry-buys-academia-politicians/, 19 September 2016 (accessed 18 May 2018). See McMinimy, M.A., U.S. Sugar Program Fundamentals, Congressional Research Service, www.crs.gov, R43998, 2016 for details of the sugar programme. 60 This amount may seem small but even with only two per cent of the value of U.S. crops, the sugar industry’s contributions exceed those of all other crops combined. See, Committee for Economic Development, op. cit. n. 41 at p. 12, Figure 1. 61 Dettoni, J., “How the Odebrecht Scandal Has Shaken Latin America,” www.fdiintelligence. com/Locations/How-the-Odebrecht-scandal-has-shaken-LatinAmerica?utm_campaign= March+2018+enews+3&utm_source=emailCampaign&utm_medium=email&utm_content=, 15 February 2018 (accessed 18 May 2018). 62 Ibid 63 Sang-hun, C., “In South Korea, Another Former President Lands in Jail,” www.nytimes. com/2018/03/22/world/asia/south-korea-lee-myung-bak-arrest-corruption.html, 22 March 2018 (accessed 18 May 2018).

Corruption 19 have now either been convicted of corruption offences, or are in jail being tried or investigated for such crimes”.64 The most recent president, Geun-hye Park, was impeached and is facing a trial in which the prosecution has asked for a jail term of 30 years. She is accused of having received contributions for a fund she created in exchange for helping Samsung expand its business. Jacob Zuma became president of South Africa in 2009. As early as 2003, the Gupta family, which had arrived in the country about ten years earlier, decided to bet on Zuma and developed strong links with him that ended up creating a system best described as “state capture” leading to “ … plunder of state resources for the benefit of politically connected individuals … institutional vandalism on a massive scale”.65 The family offered jobs as well as partnerships and memberships on the boards of several of their companies to Zuma’s children and one of his wives.66 In addition, the Gupta family paid bribes to the Zuma family. In exchange for these payments, the Gupta family obtained government contracts for supplying raw materials, advertising for the country and an important say in the appointment of key ministers. These appointees were expected to serve the interests of the Guptas and were even offered bribes for accepting the appointments and for subsequent decisions that favoured the family. In 2016, Forbes identified Zuma as the richest person in the country with a wealth of $13.2 billion. The wealth of one of the Gupta brothers at the same time was rumoured to be about $770 million.67 Connections developed through crony-capitalism create extra rents for the players. Fisman examined the effects the announcement of the Indonesian president’s illness had on those firms in which the president’s family had ownership interests.68 Between 1995 and 1997 firms controlled by President Suharto and his family accounted for almost about one-third of the output of the economy. These firms had benefited from the interventions of the president in what was a corrupt environment. Value created by the political connection with the president would have been lost had the president’s health not improved. Fisman finds that the news of the president’s illness resulted in the loss of value for the connected firms.69 Chekir and Diwan found that firms in Egypt were able to increase their size, power and borrowings, as well as their value, by about 20 to 30 per cent through political connections even though they were not among

64 The Economist, “The Presidential Curse,” 7 April 2018. 65 Pilling, D. and Cotterill, J., “The Selling of South Africa,” Financial Times Magazine, 2–3 December 2017, pp. 18–19. 66 Mcintosh, Jane, “South Africa’s Power Family, the Guptas: What You Need to Know,” www. dw.com/en/south-africas-power-family-the-guptas-what-you-need-to-know/a-40004896, 8 August 2017, (accessed 18 May 2018). 67 Ibid 68 Fisman, R., “Estimating the Value of Political Connections,” The American Economic Review, 91 (4), 2001, pp. 1095–1102. 69 Ibid, at p. 1099.

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the most efficient firms in the economy.70 Diwan et al. found that firms with political connections in Egypt “ … are more likely to benefit from trade protection [Tables 3 and 4], energy subsidies [Table 5], access to land [Table 6], and regulatory enforcement”.71 Much like previous studies of Egypt, they do not find a link between political connection and efficiency. These connected firms dominated those sectors of the economy that grew at lower rates compared with other sectors. In a study of the banking industry in Mexico, Agarwal et al. find that banks became the medium through which crony-capitalism was practiced.72 “Banks receive significantly more government borrowings with better credit quality” and then lend these funds to politically connected firms when “ … loan terms offered to politically connected firms are substantially better than those available to their counterparts” even when “political loans exhibit much worse performances ex-post. Such political lending is mainly offered by large and domestic banks … in politically connected firms with stronger links to the politician”.73 Crony-capitalism does not always go unnoticed by those who suffer as a result. Shotter reports on the uprisings in Eastern Europe resulting from perceptions that political connections have allowed a few to accumulate wealth since the overthrow of the communist regimes.74 The only country that has not seen these protests is the one that is seen as not having allowed crony-capitalism to grow – Poland.

Corruption in kleptocratic societies The elite in kleptocratic societies extend the concept of power beyond that of making laws and rules to that which controls mechanisms that are supposed to prevent misuse of power. Such mechanisms include elections through which the populace gives power to the political elite, requirements for the government to inform the public of its activities, free press, judiciary and the military. In kleptocratic societies, the elite learn to disable these control mechanisms to enhance their ability to misuse their policy-making powers. Attempts to manipulate these controls are not unique to kleptocratic societies. Chances are, however, that

70 Chekir, H. and Diwan, I., “Crony Capitalism in Egypt,” Working Paper, Harvard Kennedy School, 2013. 71 Diwan, I., Keefer, P.E. and Schiffbauer, M.T., “Pyramid capitalism: political connections, regulation, and firm productivity in Egypt,” Policy Research Working Paper WPS 7354. Washington, DC: World Bank Group, 2015. 72 Agarwal, S., Morais, B., Ruiz Ortega, C. and Zhang, J., “The political economy of bank lending: evidence from an emerging market,” Policy Research Working Paper WPS 7577, Washington, DC: World Bank Group, 2016. 73 Ibid, at p. 25. 74 Shotter, J., “Communism’s Legacy Stirs Unrest in Central Europe,” Financial Times, 23 March 2018, p. 4.

Corruption 21 these attempts will fail in the long run in societies with simpler forms of corruption, such as crony-capitalism. Kleptocratic corruption results from “ … the operating system of sophisticated – and successful – networks” which “ … frequently coalesce around a kinship kernel” that have “ … deliberately bent or crippled key elements of state function in order to capture important revenue streams, ensure impunity for network members, and provide opportunities to secure and flaunt the gains”.75 They manage to co-opt the international community: “In the interest of international security and for their own economic interests, developed-country governments and businesses turn a blind eye to the large-scale violation of the rights of citizens”.76 More international help comes as “Military and development assistance, the character of diplomatic relations, even foreign direct investment can contribute to an incentive structure that rewards corruption”.77 In situations of grand corruption, a dictator controls all the levers of political power and runs the economy more or less as personal property. The political elite and the economic interests become inseparable. In the past, Ferdinand Marcos in the Philippines, Francois (and Jean-Claude) Duvalier in Haiti, Mobutu Sese Seko in Zaire, Suharto in Indonesia, Saddam Hussein in Iraq, Nursultan Nazarbayev in Kazakhstan and Teodoro Obiang Nguema in Equatorial Guinea have controlled the fortunes of their countries. We can identify two stages of kleptocratic corruption: corruption in states where oligarchies dominate, and states controlled by a dictator. Oligarchies with large economic interests ensure that the political processes of the society serve their interests. The objective of an oligarchy “ … is to capture as large a part of a society’s wealth as possible. This network harnesses most of the levers of government power … thus maximizing gains for itself and ensuring compliance by the rest of the society”.78 The economic and political elite share the spoils between them often laundering their wealth to advanced countries.79 An example from Russia illustrates how the locus of power can change between the two elite groups. The origins of Russian oligarchic system may be attributed to the “loans for shares” scheme in 1995. Rigged auctions under this scheme resulted in seven wealthy Russians acquiring control over Russian natural resource assets at bargain basement prices. With these acquisitions, these wealthy

75 Chayes, op. cit. n. 1, at pp. 1 and 4. Dawisha summarises the essence of the strategy of a kleptocratic system with the example of Russia: “ … the state absorbs the risk, provides state funds for investments, and gives those close to the Kremlin massive monetary rewards”; Dawisha, K., Putin’s Kleptocrcy: Who Owns Russia? New York: Simon and Schuster, 2014, p. 2. 76 Jain, op. cit. n. 40 at p. 98. 77 Chayes, op. cit. n. 1 at p. 2. 78 Ibid 79 Especially to the U.S. and the U.K. because these two countries permit anonymous ownership of assets. See some details in Luce, E., “Western Complicity Keeps Russia’s Kleptocracy Afloat,” The Financial Times, 29 March 2018, p. 9.

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Russians may have controlled about 50 per cent of the economy.80 In 2000, shortly after coming to power, Putin had different ideas as to who should be in command of collecting the rents. Five of the original seven oligarchs were destroyed, presumably because they opposed Putin’s idea of who should extract the wealth and how it should be shared.81 A milder form of oligarchy may exist as decentralised-collusive corruption.82 In a decentralised system, politicians and administrators collude with business interests and the two parties share the profits that arise from this arrangement. Pei illustrates how collusive corruption works in China.83 At times an oligarchy may appear to be an example of crony-capitalism. Rijkers et al. demonstrate how Tunisia, under Ben Ali as president, may have operated as an oligarchy – without appearing to be one – directing state revenues to personal accounts at will: “ … between 2002 and 2009, underreporting of unit prices alone enabled Ben Ali–owned firms to evade 1.2 billion USD worth of import taxes more than other private firms would have”.84 Earlier research had demonstrated that the president used his powers to give competitive advantages to firms controlled by his family by imposing excessive regulations on the competition.85 The distinction between oligarchies and grand corruption may seem arbitrary but reflects the extent to which the economic elite can be separated from the political elite. “The difference between oligarchy and grand corruption may only be one of who dictates the terms. Oligarchs do not occupy political positions but keep most of the economic gains resulting from corruption”.86 They purchase the loyalty of politicians sharing their gains. A dictator shares what little he or she must with those who help maintain the system. Studies of kleptocratic corruption abound. Amadeo’s list of oligarchies includes Russia, China, Saudi Arabia, South Africa and Turkey.87 Burgis describes the role of a network called “Futungo” in controlling the levers of

80 Foy, H., “I Don’t Care If They Call Me An Oligarch,” FT Weekend, 15 April 2018, p. 3. 81 For a list of Putin’s cronies, see Table 6 in Dawisha, op. cit. n. 75, at p. 338. 82 See Di Tella, R., Dubra, J. and Luis Lagomarsino, A., “Meet the Oligarchs: Business Legitimacy, State Capacity and Taxation,” National Bureau of Economic Research Working Paper 22934, 2016. The authors equate oligarchs to the top 1 per cent earners to examine issues around public perception of the rich. 83 Pei, op. cit. n. 5. 84 Rijkers, B., Baghdadi, L. and Raballand, G.J.R.F., “Political Connections And Tariff Evasion: Evidence From Tunisia,” Policy Research Working Paper, WPS 7336, Washington, DC: World Bank Group, 2015, p. 5. 85 Rijkers, B., Freund, C. and Nucifora, A., “All in the Family: State Capture in Tunisia,” World Bank Policy Research Working Paper 6810, 2014. 86 Jain, op. cit. n. 40 at p. 99. 87 Amadeo, K., “Oligarchy Countries: With Examples From History And Today”, 2018, http://useconomy.about.com/od/US-Economy-Theory/fl/Oligarchy-Countries.htm (accessed 9 September 2018).

Systemically corrupt society

Administrative Corruption

Dysfunctional system

Y

They are indistinguishable

Y

Y

Y

All

Who else is involved?

Most likely

Maybe

Most likely

Organised Foreign crime economic interests Very rich

Economic elite

Grand corruption

Y

Y

Political elite

Y

Y

Bureau crats

Who plays the central role in corruption?

Oligarchies

Captured states:

Crony-capitalism

Legal Corruption

Form of corruption

Nature of the corrupt state

Table 1 Players in different forms of corruption

Large share

Large share in gains from corruption

Bribes and political contributions

Reappointment

Bribes

Forms of payments

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domestic power and Angola’s wealth through corrupt deals with foreigners.88 Chayes dissects kleptocracies in Azerbaijan, Kyrgyzstan and Moldova.89 Johnson and Kwack describe how, by the late 19th century, the United States had allowed the development of “ … a powerful economic elite that held political power at all levels, with its supporters in substantial control of the Senate, the Republican Party, and the presidency”.90 Dawisha and Harding describe the nature of the kleptocratic regime in Russia, as does Magyar for Hungary.91 Table 1 summarises our discussion on how different forms of corruption involve different players in terms of who manipulates power and how corrupt officials are paid.

Concluding remarks Corruption must be viewed as the misuse of power by an agent who makes decisions that are different from those that would have been made by the principal. This misuse may lead to simple cases of administrative corruption or minor manipulation of laws and rules that result in income redistribution and some loss of economic efficiency. It is the more serious manipulations of power by those who control the political levers that result in stagnation of economies and political instability. Various forms of corruption do not have precise boundaries. Corruption in each society has followed a path determined by circumstances unique to that society. Yet, some common questions can be raised about each types of corruption. The objective of identifying different forms is to help devise strategies for fighting corruption.

Bibliography Abed, G. T. & Gupta, S. (eds.) (2002a), Governance, Corruption, & Economic Performance. Washington, DC: International Monetary Fund. Abed, G. T. & Gupta, S. (2002b), ‘The Economics of Corruption: An Overview’, in Abed, G. T. & Gupta, S. (eds.) Governance, Corruption, & Economic Performance. Washington, DC: International Monetary Fund, pp. 59–88. Acemoglu, D. & Verdier, T. (2000), ‘The Choice between Market Failures and Corruption’, The American Economic Review, 90 (March), pp. 194–211.

88 Burgis, T., The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers and the Theft of Africa’s Wealth. New York: Public Affairs, 2015. 89 Chayes, op. cit. n. 1. 90 Johnson, S. and Kwak, J., 13 Bankers: The Wall Street Takeover And The Financial Meltdown. New York: Pantheon Books, 2010. 91 Dawisha, op. cit. n. 75; Harding, L., How One Reporter became an Enemy of the Brutal New Russia Mafia State. The Guardian Books, 2012; and, Magyar, B., Post-Communist Mafia State: The Case of Hungary. Hungary: CEU Press, 2016.

Corruption 25 Agarwal, S., Morais, B., Ruiz Ortega, C. & Zhang, J. (2016), ‘The Political Economy of Bank Lending: Evidence from an Emerging Market’ Policy Research Working Paper WPS 7577. Washington, DC: World Bank Group. Ahlin, C. R. & Bose, P. (2007), ‘Bribery, Inefficiency, and Bureaucratic Delay’, Journal of Development Economics, 84, pp. 465–486. Aidt, T. S. (2003), ‘Economic Analysis of Corruption: A Survey’, Economic Journal, 113 (November), pp. F632–F652. Amadeo, K (2018), ‘Oligarchy Countries: With Examples From History And Today’, http://useconomy.about.com/od/US-Economy-Theory/fl/Oligarchy-Countries.htm. Ayyagari, M., Demirguc-Kunt, A. & Maksimovic, V. (2014), ‘Bribe Payments and Innovation in Developing Countries: Are Innovating Firms Disproportionately Affected?’, Journal of Financial and Quantitative Analysis, 49, pp. 51–75. Bai, J., Jayachandran, S., Malesky, E. J. & Olken, B. A. (2017), ‘Firm Growth and Corruption: Empirical Evidence from Vietnam’, Economic Journal. doi: 10.1111/ecoj.12560. Baksi, S., Bose P. & Pandey, M. (2009), ‘The Impact Of Liberalization On Bureaucratic Corruption’, Journal of Economic Behavior & Organization, 72 (1), pp. 214–224. Banerjee, A. Mullainathan, S. & Hanna, R. (2012), ‘Corruption’, Working Paper 17968, National Bureau of Economic Research. Bertrand, M., Djankov, S., Hanna R. & Mullainathan, S. (2007), ‘Obtaining a Driving License in India: An Experimental Approach to Studying Corruption’, The Quarterly Journal of Economics, 122, pp. 1639–1676. Bobonis, G.J., Gertler, P., Gonzalez-Navarro, M. & Nichter, S. (2017), ‘Vulnerability and Clientelism’ Working Paper 23589, National Bureau of Economic Research. Bose, G. (2004), ‘Bureaucratic Delays and Bribe-Taking’, Journal of Economic Behavior & Organization, 54, pp. 313–320. Burgis, T. (2015), The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers and the Theft of Africa’s Wealth. New York: Public Affairs. Chayes, S. (2016), The Structure of Corruption: A Systemic Analysis using Eurasian Cases. Washington, DC: Carnegie Endowment for International Peace. Chekir, H. & Diwan, I. (2013), ‘Crony Capitalism in Egypt’, Working Paper, Harvard Kennedy School. Cheung, Y. L., Rau, R. & Stouraitis, A. (2012), ‘How Much Do Firms Pay as Bribes and What Benefits Do They Get: Evidence from Corruption Cases Worldwide’ Working Paper 17981. National Bureau of Economic Research. Committee for Economic Development, (2015, October 14), Crony Capitalism: Unhealthy Relations between Business and Government. Retrieved from www.ced.org/reports/ single/crony-capitalism-unhealthy-relations-between-business-and-government. Dawisha, K. (2014), Putin’s Kleptocracy: Who Owns Russia? New York: Simon & Schuster. Dettoni, J. (2018, 15 February), How the Odebrecht Scandal has Shaken Latin America. Retrieved from www.fdiintelligence.com/Locations/How-the-Odebrecht-scandal-hasshaken-Latin-America. Di Tella, R., Dubra, J. & Lagomarsino, A. L. (2016), ‘Meet the Oligarchs: Business Legitimacy, State Capacity and Taxation’, NBER Working Paper 22934. Diwan, I., Keefer, P.E. & Schiffbauer, M.T. (2015), ‘Pyramid Capitalism: Political Connections, Regulation, and Firm Productivity in Egypt’, Policy Research Working Paper WPS 7354. Washington, DC: World Bank Group. The Economist, (2014, 15 March), Our Crony-Capitalism Index. Retrieved from www. economist.com/international/2014/03/15/planet-plutocrat.

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The Economist, (2016, 30 January), In Theory, Higher Pay Cuts Corruption. In Practice, The Opposite Happens. Retrieved from www.economist.com/news/finance-and-econom ics/21689642-theory-higher-pay-cuts-corruption-practice-opposite-happens-wages. The Economist, (2018, 7 April), The Presidential Curse. Retrieved from www.economist. com/asia/2018/04/07/cases-against-two-ex-presidents-of-south-korea-fit-an-alarm ing-pattern. Fisman, R. (2001), ‘Estimating the Value of Political Connections’, The American Economic Review, 91 (4), pp. 1095–1102. Foy, H. (2018), ‘I Don’t Care If They Call Me An Oligarch’, FT Weekend, 15 April, p. 3. Galbraith, J. K. (2018, 19 January), What Trump’s Tax Cut Really Means for the US Economy. Retrieved from www.project-syndicate.org/onpoint/what-trump-s-tax-cut-reallymeans-for-the-us-economy-by-james-k-galbraith-2018)-01. Granovetter, M. (2007), ‘The Social Construction of Corruption’, in Nee, V. and Swedberg, R. (eds.) On Capitalism. Stanford: Stanford University Press, pp. 152–172. Grossman, G. M. & Helpman, E. (1994), ‘Protection for Sale’, The American Economic Review, 84, pp. 833–850. Ha, L. V. (2013), Wage Differentials and Government Corruption, Thesis. The Netherlands: University of Groningen. Harding, L. (2012), How One Reporter became an Enemy of the Brutal New Russia Mafia State. London: The Guardian Books. Heidenheimer, A. J. (ed.) (1964), Political Corruption: Readings in Comparative Analysis. New York: Holt Reinehart. Hunt, J. (2007), ‘How Corruption Hits People When They Are Down’, Journal of Development Economics, 84, pp. 574–589. Hunt, J. & Laszlo, S. (2012), ‘Is Bribery Really Regressive? Bribery’s Costs, Benefits, and Mechanisms’, World Development, 40 (2), pp. 355–372. Issacharoff, S. (2010), ‘On Political Corruption’, Harvard Law Review, 124 (1), pp. 118–142. Jain, A. K. (ed.) (2001a), The Political Economy of Corruption. London: Routledge. Jain, A. K. (2001b), ‘Corruption: A Review’, Journal of Economic Surveys, 15 (1), pp. 71–121. Jain, A. K. (2017), ‘Fighting Corruption: Contemporary Measures in Canada’, Canadian Foreign Policy Journal, 23, pp. 93–116. Jeong, Y. & Weiner, R. J. (2012), ‘Who Bribes? Evidence from the United Nations’ Oil-forFood Program’, Strategic Management Journal, 33 (2), pp. 1363–1383. Johnston, M. (2001), ‘The Definitions Debate: Old Conflicts in New Guises’, in Jain, A. K. (ed.) The Political Economy of Corruption. London: Routledge, pp. 11–31. Johnson, S. & Kwak, J (2010), 13 Bankers: The Wall Street Takeover And The Financial Meltdown. New York: Pantheon Books. Kaufmann, D., Montoriol-Garriga, J. & Recanatini, F. (2008), ‘How Does Bribery Affect Public Service Delivery? Micro-Evidence from Service Users and Public Officials in Peru’, World Bank Policy Research Working Paper 4492. Kaufmann, D. & Wei, S. J. (1999), ‘Does ‘Grease Money speed up the Wheels of Commerce?’ National Bureau of Economic Research, Working Paper 7093. Leff, N. H. (1964), ‘Economic Development Through Bureaucratic Corruption’, in Heidenheimer, A. J. (ed.) Political Corruption: Readings in Comparative Analysis. New York: Holt Reinehart, pp. 8–14. Lien, D. D. (1990), ‘Corruption and Allocation Efficiency’, Journal of Development Economics, 33, pp. 153–164.

Corruption 27 Luce, E. (2018, March 29), ‘Western Complicity Keeps Russia’s Kleptocracy Afloat’, Financial Times, p. 9. Lui, F. T. (1985), ‘An Equilibrium Queuing Model of Bribery’, Journal of Political Economy, 93 (4), pp. 760–781. Magyar, B. (2016), Post-Communist Mafia State: The Case of Hungary. Hungary: CEU Press. Mcintosh, J. (2018), ‘South Africa’s Power Family, the Guptas: What You Need to Know’, www.dw.com/en/south-africas-power-family-the-guptas-what-you-need-to-know/a40004896. McMinimy, M. A. (2016, April 6), U.S. Sugar Program Fundamentals. Congressional Research Service. Retrieved from https://fas.org/sgp/crs/misc/R43998.pdf. Nee, V. & Swedberg, R. (eds.) (2007), On Capitalism. Stanford: Stanford University Press. Olken, B. A. & Pande, R. (2012), ‘Corruption in Developing Countries’, Working Paper, Economics Department, MIT. Pei, M. (2016), China’s Crony Capitalism: The Dynamics of Regime Decay. Cambridge, MA: Harvard University Press. Pilling, D. & Cotterill, J. (2017, 2–3 December), ‘The Selling of South Africa’, Financial Times, pp. 18–19. Quiroz, A. W. (2013), Historia de la corrupcion en el Peru. Lima: Instituto de Estudios Peruanos. Rijkers, B., Baghdadi, L. & Raballand, G. J. R. F. (2015), Political Connections And Tariff Evasion: Evidence From Tunisia, Policy Research Working Paper WPS 7336. Washington, DC: World Bank Group. Rijkers, B., Freund, C. & Nucifora, A. (2014), All in the Family: State Capture in Tunisia, World Bank Policy Research Working Paper 6810. Rolnik, G. (2016, 19 September), Meet the Sugar Barons Who Used Both Sides of American Politics to Get Billions in Subsidies. Retrieved from https://promarket.org/sugar-indus try-buys-academia-politicians/. Sang-Hun, C. (2018, 22 March), In South Korea, Another Former President Lands in Jail. Retrieved from www.nytimes.com/2018/03/22/world/asia/south-korea-lee-myungbak-arrest-corruption.html. Sender, H. (2011, 18 July), ‘Bribery: Lines Less Blurred’, Financial Times, p. 7. Shleifer, A. & Vishny, R. (1993), ‘Corruption’, Quarterly Journal of Economics, 108 (3), pp. 99–617. Shleifer, A. & Vishny, R. (1998a), ‘Perspectives on Government’, in Shleifer, A. & Vishny, R (eds.) (1998b), The Grabbing Hand: Government Pathologies and Their Cures. Cambridge, MA: Harvard University Press, pp. 1–17. Shleifer, A. & Vishny, R (eds.) (1998b), The Grabbing Hand: Government Pathologies and Their Cures. Cambridge, MA: Harvard University Press. Shotter, J. (2018, 23 March), ‘Communism’s Legacy Stirs Unrest In Central Europe’, Financial Times, p. 4. Stockman, D. (2013), The Great Deformation: The Corruption of Capitalism in America. New York: Public Affairs. Svensson, J. (2003), ‘Who Must Pay Bribes and How Much? Evidence from a Cross Section for Firms’, The Quarterly Journal of Economics, 118, pp. 207–230. Teachout, Z. (2014), Corruption in America: From Benjamin Franklin’s Snuff Box to Citizens United. Cambridge, MA: Harvard University Press. Van Rijckeghem, C. & Weder, B. (2002), ‘Bureaucratic Corruption and the Rate of Temptation: Do Wages in the Civil Service Affect Corruption and by How Much?’ in Abed, G. T. &

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Gupta, S. (eds.) Governance, Corruption, & Economic Performance. Washington, DC: International Monetary Fund, pp. 59–88. Wade, R. (1985), ‘The Market for Public Office: Why the Indian State Is not Better at Development’, World Development, 13 (4), pp. 467–497. Zeume, S. (2017), ‘Bribes and Firm Value’, The Review of Financial Studies, 30 (5), pp. 1457–1489. Zitzewitz, E. (2012), ‘Forensic Economics’, Journal of Economic Literature, 50 (3), pp. 731–76.

2

The history of corruption and the benefits of a historical approach Mark Knights

Introduction This chapter seeks to set out some of the history of corruption, stretching back into the pre-modern past. The aim is to show how modern corruption scandals resonate with these earlier ones – many of the same issues were at stake but occurred in a different form – and hence also to explore some of the ways in which a historical approach has value alongside the others that are investigated in this volume. The chapter will focus on pre-modern Britain, from the sixteenth to the nineteenth centuries, since this was a period of significant change and hence offers an opportunity to show that corruption was part of the process of the formation of the state, the empire, the market, and the law. Britain now has a reputation for being relatively incorrupt in its government and administration (if not in its financial sector) but this was not always the case and it is instructive to see why corruption flourished and how it was tackled. The conclusion will attempt to sketch some comparisons between the British experience and that of other countries – and this would be a productive future line of enquiry. More of a comparative historical approach than is attempted here would highlight the ways in which different historical trajectories have created certain national path dependencies and how these in turn have to be taken into account in policy solutions. Running through the chapter are some underpinning arguments. The first is that although the modern international framework for tackling corruption is relatively recent – with a swathe of directives and institutions established in the 1990s – corruption has been present in most societies and was certainly present in pre-modern Britain. Problems of conflict of interest, corrupt procurement, venality, abuse of office, unwarrantable gifts, undue influence, and challenges around accounting and transparency, for example, are certainly not modern phenomena: they all have long histories that are worth exploring to show how reform processes work. To be sure, corruption in the present may manifest itself in slightly different ways – the internet and globalisation have enabled new ways of acting corruptly, through online and trans-national mechanisms – but it is remarkable how many current issues and scandals have

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resonance with the past.1 And if it is true that past and present can talk to each other, many scholars working on corruption from a purely political science or economic perspective risk missing out on a mass of data that could be useful to them. A second thread running through much that follows may initially seem at odds with that trans-historical perspective: the definition of corruption has evolved and been contested over time and there has never been a single, universally accepted meaning of it. So pre-modern corruption can seem very different as well as similar. For much of the sixteenth, seventeenth, and eighteenth centuries, when Protestant Britons talked about corruption it was in a religious context: corruption was sin and associated with the doctrinal and institutional abuses of the Catholic church that necessitated protestant reformation.2 The pre-modern period was also heavily influenced by classical models, and often tended to think of corruption in terms of the decay of civic virtue and liberty.3 The meaning of corruption in the past could thus be very different from the narrow contemporary focus on the abuse of public office for private gain. But historicising evolving definitions of corruption has significant value. We can recognise that definitions have their own histories – they are not universal but emerged or gained dominance for particular reasons at particular times. Different conceptions of corruption as a religious problem or as an abuse of republican virtue gave way to a definition of corruption as the abuse of public office for private gain because of the way in which the British state and corporate institutions grew and necessitated clearer lines around what was public or corporate and what was private. Such shifts of meaning also reflect that there was considerable disagreement about politics, economics, morality, and values. Selfinterest, for example, was castigated in the seventeenth century but came to be seen as a valuable driver of the economy during the eighteenth.4 On the other hand, there was a degree of agreement, across time, about certain types of behaviour that were thought objectionable: making private profit at public expense or extorting an excessive and unfair profit or undermining impartiality of judgement through bribes. These violated all the different ways of thinking about what constituted corruption: the religious, the humanistic, and the abuse of office models.

1 I write an occasional blog to explore some of these parallels, available at: http://blogs .warwick.ac.uk/historyofcorruption/ and a downloadable report for Transparency International is available at www.transparency.org.uk/publications/old-corruption-what-britishhistory-can-tell-us-about-corruption-today/#.W4eemPZFxoI. 2 See Knights, M., ‘Religion, Anti-Popery and Corruption’, in Braddick, M. and Withington, P. (eds.), Popular Culture and Political Agency in Early Modern Britain, Woodbridge, 2017. 3 For an overview of how corruption has figured in political thought see Buchan, B. and Hill L., An Intellectual History of Political Corruption, Basingstoke, 2014. 4 Hirschman, A., The Passions and the Interests: Political Arguments for Capitalism before its Triumph, Princeton, 1977.

The history of corruption

31

A third strand in what follows is that corruption is a lens through which wider societal developments and tensions are refracted, as much as a ‘thing’ in its own right. The history of corruption is the history of large shifts and developments in any polity/society – such as the growth of the state (and statefinanced war), religious and moral reformation, the emergence of financial markets, the evolution of legal cultures, and changes in cultural norms. History is particularly useful in trying to investigate these complexes of interacting strands, since it tries to offer holistic explanations. In other words, history suggests that the study of corruption will necessarily be expansive in its concerns. Indeed, unless it considers such a wider context it is unlikely to be very successful.5 A fourth underlying argument concerns the relationship between corruption and anti-corruption. These have always worked in tandem.6 Just as corruption is not new, so anti-corruption is not new – even though much of the recent literature seems to regard it as a problem of modernity. Studying the history of anticorruption is instructive. It had agency: it was often a tool in a contest for power and legitimised or delegitimised certain individuals and groups. It had – and still has – its own agendas, using particular definitions for particular reasons. But it also consisted of a series of innovations and experiments spread over a long period of time: attempts to ban the sale of office, for example, were begun in the medieval period but the sale of army commissions was only finally halted in 1871. There had been periodic campaigns against it and a series of scandals that provoked public discussion. Recognition of all this helps us to understand how change happens: whilst it can have revolutionary bursts of activity, it is often a wave-like and extensive process rather than a short-term event. Thinking historically about how change occurred in the past helps us to think about how it might happen in the present. For example, the historical data would suggest that whilst rapid change was possible at certain periods and in some fields more easily than in others (such as regulatory frameworks), cultural change took much longer and that policy-makers might need to look seriously at medium- and long-term objectives as well as very short-term ones. It is nevertheless true that historians have been rather slow to consider corruption. We have some excellent studies of particular moments and scandals but lack an overview accessible to other disciplines.7 What follows is therefore an attempt to provide some of that.

5 For a Council of Europe report emphasising the importance of a historical perspective and drawing on my work see http://website-pace.net/documents/18848/3421624/20170614PromotionIntegrity-EN.pdf/c01c68c2-5586-4390-877b-c42d8df40f99. 6 Kroeze, R., Vitoria, A., and Geltner, G. (eds.), Anti-Corruption in History. From Antiquity to the Modern Era, Oxford, 2018. 7 Useful studies, besides those already cited, include Aylmer, G., ‘From Office-holding to Civil Service: The Genesis of Modern Bureaucracy’, Transactions of the Royal Historical Society 5th series 30, 1980, pp. 91–108; Burns, A. and Innes, J. (eds.), Rethinking the Age of Reform: Britain 1780–1850, Past & Present Publications, 2007; Dirks, N., The Scandal of Empire: India and the Creation of Imperial Britain, Cambridge MA, 2006; Graham, A., Corruption, Party,

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Conflicts of interest and the problem of defining public and private What, then, were the types of corruption that prevailed in the past and how do these relate to the present? One key concern that unites both past and present is the uncertain boundary between the private and the public, and the potential conflict between them, especially in relation to office.8 In the pre-modern world power was often socially constructed: friendship, kinship, and patronage held sway; social status legitimised authority; and everyday behaviour such as gift-giving consolidated such ties.9 Law was important but it tended to reinforce the idea that office was a piece of private property rather than a duty to the public. The relatively weak state in the sixteenth and seventeenth centuries, without extensive finances, relied on a model of very low salaries and hence also on a system of private fees as ‘rewards’ for good service. The social and cultural nature of the early state blurred any line between public and private.10 The history of anti-corruption was thus in part one of attempting to draw clearer lines. There were many component parts of this process, which was achieved in some fields more easily than in others – clientage and crony networks, for example, did evolve but arguably endure as a common feature of modern corruption. The abuse of public office for private gain was, however, one of the areas that the expanding state did tackle, though it took several hundred years to define the boundaries in ways

and Government in Britain, 1702–1713, Oxford University Press, 2015; Harling, P., The Waning of ‘Old Corruption’: The Politics of Economical Reform in Britain, 1779–1846, Oxford, 1996; Harling, P. and Mandler, P., ‘From Fiscal-Military state to Laissez-faire state 1760–1850’, Journal of British Studies, Volume 32, 1993, pp. 44–70; Hellmuth, E., ‘Why does Corruption Matter? Reforms and Reform Movements in Britain and Germany in the Second Half of the Eighteenth Century’, Proceedings of the British Academy 100, 1999, pp. 5–24; Hurstfield, J., Freedom, Corruption and Government in Elizabethan England, London, 1973; Kramnick, I., ‘Corruption in Eighteenth-Century English and American Political Discourse’ in Matthews, R. (ed.), Virtue, Corruption and Self-Interest, Lehigh University, 1994; Kreike, E. and Jordan, W.C. (eds.), Corrupt Histories, Rochester, NY, 2004; Marshall, P., East Indian Fortunes: The British in Bengal in the Eighteenth Century, Oxford, 1976; Peck, L.L., Court Patronage and Corruption in Early Stuart England, Routledge: London, 1990. I am currently writing a monograph for Oxford University Press, Corruption in Office: Britain and its Empire c.1600–c.1850. 8 For a useful discussion see Chittolini, G., ‘The “Private,” the “Public,” the State’ in Kirshner, J. (ed.), The Origins of the State in Italy, 1300–1600, Chicago, 2009 (originally published in Italian in 1994). 9 Amos, I.B., The Culture of Giving in Early Modern England, Cambridge, 2008; Heal, F., The Power of Gifts: Gift Exchange in Early Modern England, Oxford, 2014; Knights, M., ‘Samuel Pepys and Corruption’, Parliamentary History, Volume 33 Number 1, 2014, pp. 19–35; Tadmor, N., Family and Friends in Eighteenth Century England: Household, Kinship and Patronage, Cambridge, 2001. 10 For an overview of the social aspects of the pre-modern state see Braddick, M., State Formation in Early Modern England c.1550–1700, Cambridge, 2000; Eastwood, D., Government and Community in the English Provinces, 1700–1870, Basingstoke, 1997.

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that we now recognise. Between the seventeenth and the end of the nineteenth centuries, office was reconceptualised: it changed from being a highly personal exercise of authority and a piece of private property that could be sold and made profitable through informal fees and the exploitation of public money, to a salaried, non-saleable and accountable duty which should not use public money for private purposes and which was thought of as a trust from the public that carried with it obligations of integrity, impartiality, and transparency. Of course a totally impersonal bureaucracy was never achievable and it was beyond the institutions of the state alone to draw the boundaries between the public and private – these were inherently cultural fields that needed widescale public discussion if shifts were to have any meaning and permanence. One way of thinking about the tension between the public and private is in terms of conflict of interest. It has been claimed by several commentators that this is an inherently modern concept whereas it has, in fact, enjoyed a very long history.11 The term ‘conflict of interest’, it is true, is relatively recent – the Oxford English Dictionary gives 1837 as the first usage, though examples can be found of much earlier usage12 – but the idea that two interests could be at odds with one another or compete in a way that perverted impartial judgement, with potentially or actual corrupting results, has a much longer history. It was a longstanding convention that judges should not preside over cases in which they had personal interests and the importance of acting for the public rather than the self was a trope of the civic humanist and republican tradition. Hirschman long ago described the way in which the language of interests became prevalent from the seventeenth and eighteenth centuries onwards.13 Once in usage, the idea that private interest damaged the public interest was frequently cited. To give an example, the East India Company was a semi-private, semi-public trading corporation made up of individual shareholders that frequently made payments to the state and, from the 1760s onwards, administered territory in India.14

11 Lankester, T., ‘Conflict of Interest: A Historical and Comparative Perspective’, [OECD paper], July 2007 at www.oecd.org/site/adboecdanti-corruptioninitiative/39368062.pdf, p. 1 (accessed 21 October 2018); Auby, J-B., ‘Corruption and Conflict of Interest: Some Comparative Comments’ in Cerillo-i-Martinez, A. and Ponce, J., Preventing Corruption and Promoting Good Government and Public Integrity, Brussels, 2017, p. 124: ‘As to conflict of interest, it is a genuinely contemporary concept.’ 12 The idea of conflicts of national interests was common in the eighteenth century – for example, see The Gentlemans Magazine Sept. 1743, xiii. 453 for a debate in 1743 about foreign policy: the Dutch knew ‘that some unavoidable Conflict of Interest may produce a contest that can only be decided by the sword.’ And conflict of interest was in use to describe personal distortions of impartiality by 1825 (see The Parliamentary Debates, xiii. 810 in a debate on judges’ salaries, 20 May 1825). 13 Hirschman, A., The Passions and the Interests, Princeton, 1977; see also Force, P., Self-Interest before Adam Smith: A Genealogy of Economic Science, Cambridge, 2003. 14 For an overview of the early Company see Stern, P.J., The Company-State: Corporate Sovereignty and the Early Modern Foundations of the British Empire in India, Oxford, 2011. For the post 1760s see Dirks, N.B., The Scandal of Empire, Cambridge MA, 2006 and Marshall, op cit n. 7.

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There was a four-way conflict of interest here between the Company, its servants, the national interest and the Indian interest. First, the interests of individual servants of the Company – who sought to make as much money as they could before returning to Britain – could be at odds with the Company’s interests, especially when they diverted its profits through corrupt activity or used its power for their own advantage. Second, the interests of the Company servants were also in tension with those of the British nation, especially when ‘nabobs’ returned with huge wealth enabling them to corruptly buy their way into parliament. Third, the Company’s interests could be at odds with the national interest, since it was not clear that pursuing aggressive colonising policies to grab territory was in the best interests of the nation as a whole. And fourth, the interests of both individual East Indiamen and those of the Company and those of the British nation could be at odds with the interests of colonised native tax-payers and merchants. Contemporaries applied the notion of conflict of interest to East Indian affairs. Thus in 1772 parliament investigated corruption in India, including the ways in which East Indiamen had bought the debts of Indian princes in order both to profit and shape Indian policy. As part of its report, parliament reproduced a letter from the Company in London to its servants in India, berating them for allowing this: … total Inversion of the Nature of our Service – it is avowing Private Interest diametrically opposite to the Company’s … The Honour and Dignity of the Company is so materially affected by those Proceedings that we expect you to impress our Servants with the due Sense of Distinction which arises between private and public Interest, so diametrically opposite in this Instance, and how incompatible their Conduct is with the Character of Faithful Servants to the Company.15 Thus, the making of rapid fortunes in India had: … served to establish a variety of interests, clashing with each other, among all ranks of persons interested in the society, distinct from all prospects of advantage from the joint trade, and even often repugnant to the interests of the nation.16 Measures against conflict of interest, and the corruption it produced, included a 1773 act of parliament prohibiting the servants of the Company from engaging in any private trade or accepting presents or bribes from the natives; the act also enshrined an earlier directive that officers of the Company had to take an oath to uphold this.

15 Commons Journal, xxxiii, 26 May 1772 report of committee into the East India Company, 842. 16 The Life of Robert Lord Clive, Baron Plassey (1786), 555–6.

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Entrusted power Conflict of interest was also central to the idea of a betrayal of entrusted power, which gained hold in the seventeenth and eighteenth centuries and which today forms the basis of Transparency International’s definition of corruption: ‘the abuse of entrusted power for private gain’. An office came to be regarded over the course of the seventeenth and eighteenth centuries as the result of a power entrusted by the public, to be used for the good of the entrusting people; consequently, breach or abuse of trust arose when the trustee acted in his or her self-interest. The idea of office as a trust had quite a specific history in Britain. The trust was a legal device originally developed to safeguard private property; but in the mid-seventeenth century it was applied to public office.17 This development was initiated when King Charles I, the highest officer in the land, was in dispute with his parliament and claimed that he was entrusted only by God. A lawyer, Henry Parker, refuted the king’s assertion, arguing that the monarch was entrusted by the representatives of the people in parliament and that all government was a form of entrusted power. This (and the ensuing civil war between royalists and parliamentarians) opened the way for a more radical and very rapid application of the concept to include all office-holders, including members of parliament but also others wielding authority and particularly those who handled public money. As the concept of office as a trust became widely accepted – in Britain’s colonies as well as at home – it followed that an officer had legal responsibilities to the public and that this included honest and transparent accounting of public money. This was the issue at the heart of a legal case in 1783, which even today defines the law on misconduct in public office. An accountant, Charles Bembridge, was prosecuted for failing to disclose £48,000 (the equivalent of over £4m today) owed to the state by the Paymaster General Henry Fox, Lord Holland. The case is important for having defined what a public officer was and what constituted abuse of office.18 The judge, Lord Mansfield, argued that Bembridge ‘was a trustee of the public and the Paymaster’, and if he knew of an omission from the public accounts and failed to disclose it: … his motive must have been corrupt. That he did know was fully proved and he was guilty, therefore, not of an omission or neglect but of a gross deceit. The object could only have been to defraud the public … a man accepting an office of trust, concerning the public, especially if attended with profit, is answerable criminally to the King for misbehaviour in his office; this is true by whomever and in whatever way the officer is appointed.19

17 Knights, M., ‘Corruption as the Abuse of Entrusted Power’, in Parisi, N. and Potesta, G., (eds.) Jus Gentium Europaeum, Naples, (2018). 18 A case of 1704 established that a ‘publick officer is indictable for misdemeanor in his office.’ 19 Howell, T.J. (ed.), A Complete Collection of State Trials (1817), xxii. 1–160; Roscoe, H. (ed.), Reports of Cases Argued and Determined in the Court of King’s Bench (1831), iii. 331; Sutherland, L.S. and Binney, J., ‘Henry Fox as Paymaster General of the Forces’, English

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Bembridge was condemned to be imprisoned for six months and fined £2650, the sum he received for (literally) making up the accounts.20 Bembridge was prosecuted for an embezzlement; but the idea of bribery was also becoming more urgent as the state and corporations grew in size and resources.21 Bribery was initially an offence applicable to the judiciary; but again over time it became applied to state and corporate officers, who had more usually been prosecuted for extortion and exaction rather than bribery. We can chart changing attitudes to bribery through an analysis of officers and giftgiving, which lay on the fault-line between public and private interests.

Gifts Gifts were inherently ambiguous and open to accusations of corruption – both in the past and present.22 Gifts were a common, legitimate, and time-honoured way of deepening personal relations, and rewarding an officer with a gift or favour was quite routine in an age when salaries were low and officials relied on fees and ‘favours’ for their income. But gifts were also problematic, since a marketised and self-interested gift seeking a quick return could be seen as a bribe. ‘He that gives for his own ends, makes his Gift a Bribe, and the receiver a Prisoner’, warned an early-seventeenth-century text that was still being republished in the 1690s.23 Unless freely given, gifts could also be regarded as evidence of extortion. As Felicity Heal observes, ‘the meaning of gifts is dependent upon context and upon the understanding of the agents engaged in exchange.’24 It was thus very difficult to legislate against what some saw as extortion and corrupt inducement but which their recipients could defend as innocent gifts. This was a problem in electioneering, since the lavish hospitality or gifts given to voters became a key concern of reformers. As competition for membership of parliament increased – in part because it was seen as offering access to patronage and office – corruption and bribery at the polls increased. A raft of legislation was enacted from the late-seventeenth century onwards to try to proscribe it and prosecutions for electoral corruption did help to refine the concept of

20

21 22 23 24

Historical Review vol 70, 1955, pp. 229–57; Horder, J., ‘R v Bembridge’ in Handler, P., Mares, H. and Williams, I. (eds.), Landmark Cases in Criminal Law, London, 2017, pp. 81–102. Some said that for an intended fraud of £48,000, ‘so trifling a confinement, in which he could enjoy all the luxuries of life, was no punishment at all’ [Callender, J.T., The Political Progress of Britain, or, An Impartial History Of Abuses In The Government Of The British Empire In Europe, Asia, and America (Philadelphia, 1795, 3rd edition), i. 85]. For a magisterial overview see Noonan, J.T., Bribes, Berkeley, 1984. Op cit n. 9. Quarles, F., Wisdom’s Better Than Money: Or, The Whole Art of Knowledge and the Art to Know Men (1698), p. 132. Heal, F., The Power of Gifts, Oxford, 2015, p. 150.

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bribery. Sylvester Douglas, a lawyer who specialised in election cases, thus provided a definition of bribery in 1774 that was still being quoted in the nineteenth century: Wherever a person is bound by law to act, without any view to his private emolument, and another, by a corrupt contract, engages such a person, on condition of the payment or promise of money or other lucrative consideration, to do such act, in the manner which he shall prescribe, both parties, by such contract, are guilty of bribery.25 On the other hand, the attempts to end electoral largesse proved repeatedly ineffectual until the late-nineteenth century, since personal and partisan interests were too much at stake. More success was had with defining when gifts were acceptable in office, rather than as a way into office. Again the East India Company is useful here, showing how corporate and state concerns could work in tandem. Anxieties about the huge fortunes made by officers of the Company in India, which they claimed were ‘presents’ from native princes, reached a crescendo in the second half of the eighteenth century, not least because returning East Indiamen were able to buy their way into parliament. A parliamentary inquiry in 1772 concluded that over £2m (about £175m today) had been distributed to East Indiamen in the immediate aftermath of Robert Clive’s military success in 1757. Clive justified his own part of these gains by making a distinction between honourable and dishonourable presents: When Presents are received as the Price of Services to the Nation, to the Company, and to that Prince who bestowed those Presents; when they are not exacted from him by Compulsion; when he is in a State of Independence, and can do with his Money what he pleases, and when they are not received to the Disadvantage of the Company; he holds Presents so received not dishonourable: But when they are received from a dependant Prince; when they are received for no Services whatever; and when they are received not voluntarily; he holds the Receipt of such Presents dishonourable.26 Neither the Company nor parliament found these arguments convincing, perhaps because the size of the gains appeared excessive.27 The former wrote in 1765 to forbid the acceptance of any further presents, introducing a covenant binding officers not to accept gifts over 4000 rupees and to seek approval for

25 The History Of The Cases Of Controverted Elections (4 vols., 1802), ii. 400. Douglas’s definition was cited by The Jurist, 3 July 1841. 26 Lord Clive’s vindication, to the Select Committee on East India, reported to the House of Commons, 26 May 1772. 27 Clive estimated his total worth in 1767 at £401,102. Marshall, op cit n. 7 at p. 236.

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anything over 1000 rupees, which was then to be handed over to the Company.28 This had been necessary, as even Clive and his colleagues admitted, ‘to prevent the Abuse of the customary Indulgence to receive presents’, an indulgence that had ‘certainly been extended to the most shameful Oppression and flagrant Corruption’.29 In 1770 there was an expanded version of the covenant requiring all East Indiamen to report to the Company ‘all and every Deceits, Wrongs, Abuses, Breach of Orders, Inconveniencies and Hindrances, which he AB shall know, understand, hear or suspect to be done’; to keep proper accounts; and not to accept ‘any Gift, Reward, Gratuity, Allowance, Compensation’ from anyone they traded with.30 The 1773 Regulating Act enshrined in law a general prohibition of presents and also barred East Indiamen from engaging in private trade altogether.31 Both the Company and parliament therefore took a series of increasingly stringent measures to define the limits of gift-giving. Yet it took several more generations before this became an accepted norm: an important prosecution in 1829 removed Sir Edward Colebrooke, the most important British official in Delhi, for his illegal acceptance of presents, though he warned that the proscription of such social practices undermined the ties between the British and the Indians, for whom gift-giving also held important social functions.32 One of the costs of successful anti-corruption in this instance was a growing sentiment that although there may be a few bad apples amongst the British, the Indians were systematically corrupt and therefore needed clean colonial governance. As this survey of the evolution of some of the lines between private and public suggests, the limits of office in both state and corporation did become more defined but the process was a lengthy, bumpy, and uncertain one, that had to counter cultural practices as much as institutional resistance.

The hybrid state and its contractors Public and private also worked out in relation to the state itself, which was something of a hybrid, just as a corporation such as the East India Company

28 This was ineffective, since in 1765 a further £112,000 was distributed among East Indiamen even after the letter’s arrival. The new payments were prompted by the death of Mir Jafar. The text of the covenants is set out in the First Report from the Committee Appointed To Enquire into the Nature, State, and Condition of the East India Company, 1772, pp. 174–176. 29 Report from the Committee Appointed to Enquire Into the Nature, State and Condition of the East India Company, 1773, Appendix no.86, point 14. 30 First Report from the Committee Appointed To Enquire into the Nature, State, and Condition of the Fast India Company, 1772, pp. 176–179. 31 13 Geo. 3 c. 63. 32 Colebrooke, Sir E., Papers Relative to the Case at Issue between Sir Edward Colebrooke Bt and the Bengal Government, London, 1833, p. 185, 191.

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exercised many powers (taxation, justice, levying forces, and declaring war) that we would now associate with a state. The overlap between public and private power was most clearly discernible in the realm of the armed forces. Britain rose to ‘great power status’ in the late-seventeenth century, after the revolution of 1688 propelled it into major European conflict. This necessitated the development of what historians call a ‘fiscal-military’ state: a state that was capable of raising sufficient quantities of finance to enable it to sustain large-scale warfare.33 The creation in 1694 of the Bank of England (a private corporation that loaned the government money) and the development of the national debt were two important dimensions of this. But the fiscal-military state did not have the resources to remit money around the world to fight war or to supply its armed forces with clothing or with food and supplies. The state therefore contracted with private agents who could supply these public goods. Just as today private providers play a large role in supplying the state, so in the pre-modern world, individuals and networks of merchants were deemed to be essential. But given that very large amounts of money were involved (especially given the expansion of the British empire over the pre-modern period), procurement became an obvious honey-pot for the corrupt. Those accused of corruption nevertheless questioned how far that label could be applied, since essentially they were providing both a public service and making a private profit, things that they argued were not at all incompatible. The blurred boundaries of the state itself thus led to a long history of corruption in procurement – something which has endured to the present day. There are many examples of military budgets and accounts being abused – as we saw earlier in the Bembridge case. An example from the Caribbean can illustrate these points and also show the murkiness of rapid fortunes. Henry Lascelles held public office on Barbados as ‘collector of the customs’ (incurring allegations of corruption in its administration) but he also traded privately in partnership with his half-brother Edward, mainly in sugar and rum though also in shipping and slaves, as well as lending money; he was also contracted by the government to supply the navy with the victuals and other goods it needed during the wars of Jenkins’ Ear (1739–42) and Austrian Succession (1742–8).34 In other words, he held a purely administrative post in the revenue division of the government (until 1734 when he returned to England); a semi-public post as a contractor to the government; and engaged in purely private enterprise. He thus tried to reconcile (or not, as we shall see) public, semi-public and private interests.

33 Brewer, J., The Sinews of Power: War, Money and the English State 1688–1783, Cambridge MA, 1989. 34 Pares, R., ‘A London West-India Merchant House, 1740–1769’ in Pares, R. (ed.) An Historian’s Business and Other Essays, Oxford, 1961; Smith, S.D., Slavery, Family, and Gentry Capitalism in the British Atlantic: The World of the Lascelles, 1648–1834, Cambridge, 2006.

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The money that his office brought him (including illicit profit) then funded his other procurement ventures, enabling him to develop the complex supply chains that a contractor needed. Lascelles was almost bound to make money. ‘He has those advantages that he will make mon[e]y lett what will happen, its plaine what ever step we take, he has an Interest therein’ noted one observer.35 Of these, the victualling contracts were probably the most lucrative. As he put it in 1741, ‘The victualling in my time was a Branch of business which through good management (I reckon) I chiefly made my fortune by’.36 As David Hamilton puts it, the naval contracting in the Caribbean in which Lascelles excelled ‘highlights the blurring of lines between the public and the private by showing the extent to which the British fiscal-military state was dependent on (and interconnected with) the private agendas of individual entrepreneurs around the Atlantic World’.37 Lascelles routinely paid ‘gratuities’ to ship captains to victual at Barbados rather than Antigua, because this reduced his costs; and he took a half cut of the profits arising from a naval hospital, as part of his contract with the Sick and Wounded Board, making sure that it was ‘very worth their while’ for captains to be complicit in his scheme.38 This attitude was of a piece with what he is said to have exclaimed when summoned in 1719 to answer his critics: ‘Damn em, they are all a Pack of Pimping Fellowes and I am able to buy them all’.39 Wealthy enough to feel confident about buying people, by his death (suicide) in 1753 he was worth over £400,000 (about £46m in today’s money), making him one of the richest men of his day and establishing the fortune behind the magnificent opulence of Harewood House in Yorkshire. Lascelles had not been formally convicted of corruption but several investigations into his own and his brother’s practices left claims to repay money to the state. Simon Smith concludes that much of Lascelles’s wealth ‘was acquired legitimately’40 and that he was probably not any more corrupt than his contemporaries.41 This in turn nicely problematises what constitutes corruption and how we measure it, issues which were faced in the past as well as the present.

35 PRO C103/130, George Hamilton to Capt. Richard Pinnell, 3 August 1738, cited by Smith, S., An Introduction to the Lascelles & Maxwell Letter Books (1739–1769), Microform Academic Publishers, 2003, p. 17. 36 Rhodes House Library, Pares Transcripts, Box H356, Henry Lascelles to Edward Lascelles, 20th April 1741, cited Smith, An Introduction, 23. 37 Hamilton, D.J., ‘Private Enterprise and Public Service: Naval Contracting in the Caribbean 1720–50’, Journal for Maritime Research, vol. 6 no.1, 2004, p. 38. 38 Ibid, pp. 44–55. For the profits that could be made through naval office see Gwyn, J., The Enterprising Admiral: The Personal Fortune of Admiral Sir Peter Warren, Toronto, 1974. 39 Cumbria Record Office, Barbados Council Book no. 4, 14 May 1718–19 Jan 1720, f.174 40 Smith, op cit n. 34 at p. 63. 41 Ibid at p. 71.

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Comparative histories This chapter has explored the history of corruption in pre-modern Britain, focusing on the multi-faceted problem of drawing lines between public and private interests, a challenge that is still very much present today. Whilst it has been shown that the concept and boundaries of office in the state and corporations changed, it has also been evident that shifts were generally slow, and glacial in some fields. So, it seems fitting to conclude with some remarks about the nature of anti-corruption and the reform process more generally, as well as comparing the British experience with that of other nations. Anti-corruption in history has worked in different ways. At the micro level, scandals involving individual misbehaviour generated a good deal of public debate – facilitated by Britain’s relatively free press from the lapse of prepublication licensing in 1695 onwards – and occasionally some reforms to address the abuse that had been exposed. Thus, a double scandal in 1809 surrounding the mistress of the duke of York, Mary Clarke, who was accused of selling offices, and the East India Company, also accused of venality, led to legislation against the sale of office.42 Individual whistle-blowers were, on the other hand, often unsuccessful and persecuted,43 though charismatic campaigners had more impact. Reform was pushed on more quickly by groups and institutions. Whig party support for parliamentary reform was important in 1832, for example, though an un-politicised institutional audit of each government department, begun in the 1780s, gradually led to a series of reforms across government that replaced informal fees with salaries, got rid of sinecures and pensions, and instituted better accounting processes.44 Nevertheless macro factors were key. Administrative and political reform generally coincided with what contemporaries called ‘moral reform’ – often very religiously motivated campaigns to restore ideals of godly behaviour that included probity and integrity. Reform was thus a characteristic of both the ‘puritan revolution’ of the 1640s and Evangelical activity in the late-eighteenth and early-nineteenth centuries. Reform also often followed financial crisis or war and was especially acute when war had gone badly. War increased the national debt and hence stimulated calls for retrenchment and more efficient government. Paradoxically, war both expanded the scope for corruption and acted to constrain it. Not all countries followed Britain’s path, which was determined by a series of particular national processes – Protestant reformation (extending far beyond the sixteenth century), two religio-political revolutions in the seventeenth century, imperial expansion from the seventeenth century, state formation that drew on social constructions of authority, a strong legal culture and tradition of judicial

42 Clark, A., Scandal: The Sexual Politics of the British Constitution, Princeton University Press, 2005, Chapter 7. 43 Knights, M., ‘Parliament, Print and Corruption in Later Stuart Britain’, Parliamentary History, Volume 26 Number 1, 2007, pp. 49–61. 44 Harling, op cit n. 7.

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independence, early party and popular politics, strong parliamentary government, a free press and so on – that gave the country a distinctive national character and set of values. Other countries, with different histories, took different paths. Denmark, today a country with a reputation for very low corruption, achieved anti-corruption successes through its absolutist monarchy (the reverse of the British parliamentary model), between 1660 and 1849, though there were some similarities in the influence of Protestant values, the establishment of a rule of law, the development of a fiscal-military state and the experience of military defeat (which in 1658 propelled the country towards absolute monarchy).45 Denmark’s great rival, Sweden, followed still another path, though opinion is somewhat divided about the speed of change there. Andreas Bågenholm argues that even before the nineteenth century, Sweden had a relatively wellfunctioning administration with a good legal framework that was in part the result of a parliamentary system in the eighteenth century. The revolution of 1809, which overthrew the absolute monarchy established in 1772 (that had nevertheless reinforced the rule of law and given centralising agency to reforms) led to further refinements rather than starting afresh.46 In this view, the evolution of Swedish anti-corruption was a long-running story – and anti-corruption was merely one element in a bigger process of increasing state efficiency and state formation. Bo Rothstein, on the other hand, has argued that reforms in Sweden were something like a ‘big bang’, achieved within a relatively short space of time – a thirty year period from 1840, which nevertheless drew on earlier frameworks.47 The French story is different again: revolution in 1789 transformed a corrupt ancien regime, sweeping away a system of venality, and introducing (again as the result of large-scale war) a legal code and strong centralising but reforming force. In Spain, and its empire, by contrast, the very slow pace of reform has been emphasised, so that the ingrained nature of early-modern corruption helps to explain the persistence of corruption today.48 Alfonso Quiroz’s study of Peru thus covers the period from the mid-eighteenth century to 1990 to show the enduring nature of the historical problem.49 In Italy, too, Jean-Claude Waquet concluded, the ancien regime state was too weak to enforce anti-corruption

45 Jensen, M.F., The Question Of How Denmark Got To Be Denmark - Establishing Rule of Law and Fighting Corruption in The State Of Denmark 1660–1900, The Quality of Government Institute, Working Papers Series, 2014:6; Jensen, M.F., ‘Statebuilding, Establishing Rule of Law and Fighting Corruption in Denmark, 1660–1900’ in Kroeze et al., op cit n. 6. 46 Bågenholm, A., ‘Corruption and Anti-corruption in Early-Nineteenth-Century Sweden’, in Kroeze et al., op cit n 6. 47 Rothstein, B., ‘Anti-corruption: The Indirect “Big Bang” Approach’, Review of International Political Economy, Volume 18 Number 2, 2011, pp. 228–250. 48 Pietschmann, H., ‘Burocracia y Corrupcion en Hispano-America Colonial: Una Aproximacion Tentativa’, Nova Americana, Volume 5, 1982, pp. 11-37. 49 Quiroz, A.W., Corrupt Circles: A History of Unbound Graft in Peru, Baltimore, 2008.

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measures and a public service ethos failed to take hold. In the United States of America, by contrast, a relatively weak central state was compensated for by a revolutionary repulsion for the corrupt Britain from which the new republic had broken free and anti-corruption measures were included in the constitution.51

Conclusion This brief overview of national experiences of corruption suggests both that the paths taken towards anti-corruption were very different and that the pathdependencies created by national cultures were also different. Both absolutist and parliamentary systems were capable of reform, but in all cases anticorruption was part of the story of state formation. Where the latter was weak, or where abuse was built into the system, corruption thrived. Although the universal values of the Enlightenment did play a part, from the mid-eighteenth century onwards, local logics continued to play a very significant role. In all cases, the process of reform was usually lengthy and shaped by the historical experience. This suggests that modern policy has to take into account the time necessary for mentalities as well as institutions to change – and that means a process of extensive public discussion as well as training for officials – and for measures to be fitted to the national, or sub-national, culture. Anti-corruption is historically contingent: there is no single history and hence also no single solution. We should expect each country to take a different path towards anti-corruption rather than a single, one-size-fits-all approach. If that is right, history offers an important data-set for other disciplines to explore.

Bibliography Amos, I.B. (2008), The Culture of Giving in Early Modern England, Cambridge. Auby, J-B. (2017), ‘Corruption and Conflict of Interest: Some Comparative Comments’, in Cerilllo-i-Martinez, A. and Ponce, J. (eds.) Preventing Corruption and Promoting Good Government and Public Integrity, Brussels. Aylmer, G.E. (1980), ‘From Office-holding to Civil Service: The Genesis of Modern Bureaucracy’, Transactions of the Royal Historical Society, 5th series, vol. 30, pp. 91–108. Bågenholm, A. (2018), ‘Corruption and Anti-corruption in Early-Nineteenth-Century Sweden’, in Kroeze, R. Vitoria, A. and Geltner, G. (eds.) Anti-Corruption in History. From Antiquity to the Modern Era, Oxford. Braddick, M. (2000), State Formation in Early Modern England c.1550–1700, Cambridge. Braddick, M. and Withington, P. (eds.) (2017), Popular Culture and Political Agency in Early Modern Britain, Woodbridge.

50 Waquet, J-C., Corruption: Ethics and Power in Florence, 1600–1770 translated by Linda McCall, Philadelphia, 1992. See, however, Geltner, G., ‘Fighting Corruption in the Italian City-State’ in Kroeze et al., op cit n. 6. 51 Teachout, Z., Corruption in America. From Benjamin Franklin’s Snuff Box to Citizens United, Harvard University Press, 2014.

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Brewer, J. (1989), The Sinews of Power: War, Money and the English State 1688–1783, Cambridge MA. Buchan B. and Hill, L. (2014), An Intellectual History of Political Corruption, Basingstoke. Burns, A. and Innes, J. (eds.) (2007), Rethinking the Age of Reform: Britain 1780–1850. Callender, J.T. (1795), The Political Progress of Britain, or, An Impartial History of Abuses in the Government of the British Empire in Europe, Asia, and America, Philadelphia, 3rd edition. Cerillo-i-Martinez, A. and Ponce, J. (2017), Preventing Corruption and Promoting Good Government and Public Integrity, Brussels. Chittolini, G. (2009), ‘The Private, the Public, the State’, in Kirshner, J. (ed.) The Origins of the State in Italy, 1300-1600, Chicago (originally published in Italian in 1994). Clark, A. (2005), Scandal: The Sexual Politics of the British Constitution, Princeton. Colebrooke, Sir E. (1833), Papers relative to the Case at Issue between Sir Edward Colebrooke Bt and the Bengal Government, London. Commons Journal, xxxiii, 26 May 1772 report of committee into the East India Company. Cumbria Record Office, Barbados Council Book no. 4, 14 May 1718-19 Jan 1720, f.174. Dirks, N. (2006), The Scandal of Empire: India and the Creation of Imperial Britain, Cambridge, MA. Dirks, N.B. (2006), The Scandal of Empire, Cambridge, MA. Eastwood, D. (1997), Government and Community in the English Provinces, 1700–1870, Red Globe Press. First Report from the Committee Appointed to Enquire into the Nature, State, and Condition of the Fast India Company, (1772). Force, P. (2003), Self-interest before Adam Smith: a Genealogy of Economic Science, Cambridge. Geltner, G. (2018), ‘Fighting Corruption in the Italian City-State’, in Kroeze, R., Vitoria A. and Geltner G. (eds.) Anti-Corruption in History. From Antiquity to the Modern Era, Oxford. Graham, A. (2015), Corruption, Party, and Government in Britain, 1702–1713, Oxford University Press. Gwyn, J. (1974), The Enterprising Admiral: The Personal Fortune of Admiral Sir Peter Warren, Toronto Hamilton, D.J. (2004), ‘Private Enterprise and Public Service: Naval Contracting in the Caribbean 1720–50’, Journal for Maritime Research, vol. 6 no. 1, pp. 37–64. Handler, P., Mares, H. and Williams, I. (eds.) (2017), Landmark Cases in Criminal Law, London. Harling, P. (1996), The Waning of Old Corruption: The Politics of Economical Reform in Britain, 1779–1846, Oxford. Harling, P. and Mandler, P. (1993), ‘From Fiscal-Military State to Laissez-faire State 1760–1850’, Journal of British Studies, vol. 32, pp. 44–70. Heal, F. (2014), The Power of Gifts: Gift Exchange in Early Modern England, Oxford. Heal, F. (2015), The Power of Gifts, Oxford. Hellmuth, E. (1999), ‘Why Does Corruption Matter? Reforms and Reform Movements in Britain and Germany in the Second Half of the Eighteenth Century’, Proceedings of the British Academy 100, pp. 5–24. Hirschman, A. (1977), The Passions and the Interests: Political Arguments for Capitalism before its Triumph, Princeton. Horder, J. (2017), ‘R v Bembridge’, in Handler, P. Mares, H. and Williams, I. (eds.) Landmark Cases in Criminal Law.

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Howell, T.J. (ed.) (1817), A Complete Collection of State Trials, London. Hurstfield, J. (1973), Freedom, Corruption and Government in Elizabethan England, ondon. Jensen, M.F. (2014), The Question Of How Denmark Got To Be Denmark - Establishing Rule of Law and Fighting Corruption in The State Of Denmark 1660 – 1900, The Quality of Government Institute, Working Papers Series, 6. Jensen, M.F. (2018), ‘Statebuilding, Establishing Rule of Law and Fighting Corruption in Denmark, 1660–1900’, in Kroeze, R. Vitoria A. and Geltner, G. (eds.) Anti-Corruption in History. From Antiquity to the Modern Era, Oxford. Knights, M. (2007), ‘Parliament, Print and Corruption in Later Stuart Britain’, Parliamentary History, vol. 26, no. 1, pp. 49–61. Knights, M. (2014), ‘Samuel Pepys and Corruption’, Parliamentary History, vol. 33, no. 1, pp. 19–35. Knights, M. (2017), ‘Religion, Anti-popery and Corruption’, in Braddick, M. and Withington, P. (eds.) Popular Culture and Political Agency in Early Modern Britain, Woodbridge. Knights, M. (2018), ‘Corruption as the Abuse of Entrusted Power’, in Parisi, N. and Potesta, G. (eds.) Jus Gentium Europaeum, Naples Kramnick, I. (1994), ‘Corruption in Eighteenth-Century English and American Political Discourse’, in Matthews, R. (ed.) Virtue, Corruption and Self-Interest, Bethlehem, PA. Kreike, E. and Jordan, W.C. (eds.) (2004), Corrupt Histories, Rochester, NY. Kroeze, R. Vitoria, A. and Geltner, G. (eds.) (2018), Anti-Corruption in History. From Antiquity to the Modern Era, Oxford. Lankester, T. (2007), Conflict of Interest: A Historical and Comparative Perspective [OECD paper]. Retrieved from www.oecd.org/site/adboecdanti-corruptioninitiative /39368062.pdf. Marshall, P. (1976), East Indian Fortunes: The British in Bengal in the Eighteenth century, Clarendon Press, Oxford. Matthews, R. (ed.) (1994), Virtue, Corruption and Self-Interest, Bethlehem, PA. Noonan, J.T. (1984), Bribes, Berkeley. Pares, R.A. (ed.) (1961), An Historians Business and Other Essays, Oxford. Pares, R.A. (1961), ‘London West-India Merchant House, 1740–1769’, in Pares, R. (ed.) An Historians Business and Other Essays, Oxford. Parisi, N. and Potesta, G. (eds.) Jus Gentium Europaeum, Naples. Peck, L.L. (1990), Court Patronage and Corruption in Early Stuart England, London. Pietschmann, H. (1982), ‘Burocracia y Corrupcion en Hispano-America Colonial: Una Aproximacion Tentativa’, Nova Americana, vol. 5, pp. 11–37. PRO C103/130, George Hamilton to Capt. Richard Pinnell, 3 August 1738, cited by Smith, S., (2003), An Introduction to the Lascelles & Maxwell Letter Books (1739-1769), Microform Academic Publishers. Quarles, F. (1698), Wisdom’s Better Than Money: Or, The Whole Art of Knowledge and the Art to Know Men, Oxford. Quiroz, A.W. (2008), Corrupt Circles: A History of Unbound Graft in Peru, Baltimore. Report from the Committee Appointed to Enquire Into the Nature, State and Condition of the East India Company, 1773, Appendix no.86, point 14. Rhodes House Library, Oxford, Pares Transcripts, Box H356, Henry Lascelles to Edward Lascelles, 20th April 1741, cited by Smith, An Introduction to the Lascelles & Maxwell Letter Books (1739–1769), Microform Academic Publishers, (2003).

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Roscoe, H. (ed.) (1831), Reports of Cases Argued and Determined in the Court of Kings Bench, London. Rothstein, B. (2011), ‘Anti-corruption: The Indirect Big Bang Approach’, Review of International Political Economy, vol. 18, no. 2, pp. 228–250. Smith, S.D. (2006), Slavery, Family, and Gentry Capitalism in the British Atlantic: The World of the Lascelles, 1648–1834, Cambridge. Stern, P.J. (2011), The Company-State: Corporate Sovereignty and the Early Modern Foundations of the British Empire in India, Oxford. Sutherland, L.S. and Binney, J. (1955), ‘Henry Fox as Paymaster General of the Forces’, English Historical Review, vol. 70, pp. 229–257. Tadmor, N. (2001), Family and Friends in Eighteenth Century England: Household, Kinship and Patronage, Cambridge. Teachout, Z. (2014), Corruption in America. From Benjamin Franklins Snuff Box to Citizens United, Harvard University Press. The Gentlemans Magazine Sept. 1743, xiii. 453. The History of the Cases of Controverted Elections (4 vols 1802). The Life of Robert Lord Clive, Baron Plassey, (1786). The Parliamentary Debates, xiii. 810 in a debate on judges’ salaries, 20 May 1825. Waquet, J-C. (1992), Corruption: Ethics and Power in Florence, 1600–1770, translated by Linda McCall (ed.), Philadelphia.

3

Bribery, corruption and the law Jane Ellis

Introduction In 2008, global giant Siemens AG reached legal settlements with authorities in the United States1 and Germany2 in which it agreed to pay to the authorities a total of US $1.4 billion in fines. Siemens was fined for paying more than US $1.4 billion in bribes to government officials to secure business contracts in different countries around the world. It was a pattern of bribery described by the US Department of Justice (DoJ) in its press release as ‘unprecedented in scale and geographic reach’.3 Siemens’ conduct contravened the anti-bribery laws of both the United States and Germany even though its conduct occurred in other countries. How can the laws of one country or more apply to a national of one country when they do business in another country? What is the genesis of such anti-bribery laws? And why the seeming focus on business conduct as opposed to that of government officials or politicians in the countries where the bribes occurred? This chapter provides an overview of the (recent) history of international anticorruption conventions and domestic laws that have extraterritorial application.4 It then goes on to consider how they have been applied and what it means for cross border engagements.

1 United States Department of Justice press release, ‘Siemens AG and Three Subsidiaries Plesae Guilty to Foreign Corrupt Practices Act Violations and Agree to Pay $450 Million in Combined Criminal Fines’, at www.justice.gov/archive/opa/pr/2008/December/08-crm-1105. html (accessed 24 September 2018). 2 www.siemens.com/press/en/pressrelease/?press=/en/pressrelease/2008/corporate_commu nication/axx20081219.htm (accessed 24 September 2018). 3 Op cit n. 1. 4 For an understanding of the historical development of anti-corruption laws, at least in the United Kingdom, see Chapter 2 of this volume: The history of corruption and the benefits of a historical approach; and Chapter 9 of this volume: Corruption: A sociological approach.

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Bribery and corruption – from a domestic to an international concern Anti-corruption laws, and in particular anti-bribery laws, are not new. In most, if not all, countries bribery is illegal and conduct that compromises the integrity of the civil service and the judiciary likewise is often prohibited.5 As has been explored elsewhere in this volume, bribery and corruption and the fight against both are themes that have a long history.6 The focus of these laws was and remains domestic. That is, the laws apply only to conduct that occurred within the country in which the laws were made. How well they are enforced depends on the strength of the government and its preparedness to promote the rule of law. Some countries are better at this than others. It was the United States in the 1970s that introduced an anti-bribery law that applies to organisations and people who bribe government officials in other countries. The United States in the mid-1970s was a country in crisis. It had experienced Watergate, which resulted in the resignation of Richard Nixon as president and a significant erosion of trust in the political administration. The Watergate investigations found evidence of secret and illegal domestic political contributions made by US companies. The US Securities Exchange Commission (SEC) became interested in these secret contributions when it became evident that such payments violated federal securities laws. The SEC extended its investigations beyond the shores of the United States to payments made in other countries. These investigations revealed further securities violations by some of the US’s most well-known and, in some cases, iconic companies – such as Gulf Oil, Mobil Oil and Lockheed Martin – all of which were found to have paid political contributions and bribes to foreign public officials to secure contracts. Many of these payments were substantial and they had not been reported to shareholders. What was of particular concern to Congress was that one of these companies – Lockheed – had been the recipient of a US $250 million federal loan guarantee to help it avoid bankruptcy. Such payments most likely breached the local anti-bribery laws of the countries in which they were paid. However, there was no prohibition in the United States on US companies paying bribes or any other form of secret payment in other countries. It was recognised that corrupt payments to foreign government officials or politicians were not unique to US business. However, the US Congress believed it was its responsibility to address the problem and to provide global leadership. In the debates that followed, it considered various options available to it, including imposing mandatory disclosure requirements of all and any payments made by US companies, regardless of where they were made. In the end, the change in administration from that of Gerald Ford to Jimmy Carter in January 1977

5 Colonised countries inherited the anti-bribery laws or at least laws that sought to prohibit the misuse of public office from the colonising countries. 6 Op cit n. 4, both chapters.

Bribery, corruption and the law 49 determined the outcome of the debates, and the Foreign Corrupt Practices Act (FCPA) was passed in late 1977.7 In brief, the FCPA prohibits any person or company that has a connection with the United States from paying a bribe to a foreign public official in order to secure a business advantage. The lobbying by US business in the lead up to and passing of the FCPA was fierce. This did not stop once the FCPA was passed and in force. US business was concerned that the FCPA created hurdles for it that were not experienced by its (non-US-connected) competitors. It argued that a ‘level playing field’ was required if US companies were to be competitive. It was the threat of prosecution, however, that was of particular concern to US companies. Authorities seemed to tacitly agree with this concern. The FCPA, although in force since 1977, was seldom prosecuted or enforced until well into the 2000s.

From the United States to multilateral conventions and other initiatives US companies, and tacitly US authorities, believed it was possible to achieve a level playing field only if the FCPA was revoked or if other countries (where competitors to US companies had headquarters) introduced comparable legislation. Revoking a law that prohibits bribery is somewhat problematic. As such, the focus turned to the latter option. Up to and for most of the 1990s, corruption was a topic that generally was excluded from any agenda, business or otherwise. Despite the FCPA, paying bribes was regarded as a price that had to be paid by businesses, including US companies, to invest in some countries and/or to facilitate development. While bribery was most often an offence under local laws, bribes paid in other countries by OECD- (Organisation for Economic Cooperation and Development) based businesses to secure business were often treated as legitimate business expenses and indeed often were claimed as tax deductions. It was in this context that negotiations for the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Anti-Bribery Convention), encouraged by the US administration and dedicated individuals within the OECD, commenced in 1989. The development of civil society movements targeting bribery and corruption also was significant, particularly that of Transparency International (TI). Established in 1993 by a former World Bank official, Peter Eigen with nine allies, Transparency International is now one of the most highly regarded anti-corruption non-governmental organisations in the world. It has a presence in more than 100 countries and significant political influence.8

7 For a detailed history of the FCPA, see: Koehler, M., ‘The Story of the Foreign Corrupt Practices Act’, Ohio State Law Journal, Vol. 73, No. 5, 2012. Available at SSRN: https://ssrn. com/abstract=2185406 (accessed 24 September 2018). 8 For information on TI and the work it does, see: www.transparency.org/ (accessed 24 September 2018).

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A further catalyst was the then president of the World Bank, James Wolfensohn, publicly acknowledging in 1996 that ‘we need to deal with the cancer of corruption’.9 It brought corruption out from the ‘domestic closet’ of governments and international organisations into the realm of public international debate. The increasing ventilation of corruption issues made it equally increasingly difficult for governments to avoid their responsibilities. As such, in 1997 after 10 years of negotiation, the OECD Anti-Bribery Convention was signed by all OECD members states (plus seven others) and came into force in 1999.10 In brief, the OECD Anti-Bribery Convention requires signatories to introduce laws that, among other things: •

• •

Prohibit the providing or offering to provide a benefit or undue advantage to a foreign public official, either directly or through an intermediary, with the intention of influencing the decision-making of the foreign public official to secure an improper business advantage11 (prohibited conduct); Make prohibited conduct as well any conduct that constitutes complicity, including incitement, aiding and abetting or authorisation of prohibited conduct, a criminal offence;12 Extend liability for prohibited conduct to legal persons.13

The OECD Anti-Bribery Convention is quite targeted. It is aimed at business, particularly the conduct of international enterprises; the prohibition is quite specific;14 and, it is not offended if a payment made is legal under local law or is a ‘facilitation payment’.15 The implementation by signatories of their obligations under the OECD Anti-Bribery Convention is scrutinised through peer review.16 Peer reviews are public and often criticise those countries that enforce the relevant laws inadequately. As the OECD Anti-Bribery Convention was being negotiated, so too was the United Nations Convention Against Corruption (UNCAC). Its adoption by the

9 See Bhargava, V., Curing the cancer of corruption. global issues for global citizens: an introduction to key development challenges, Washington, DC, World Bank, 2006. Accessed at: http:// siteresources.worldbank.org/EXTABOUTUS/Resources/Ch18.pdf (accessed 24 September 2018). 10 More information on the OECD Anti-Bribery Convention can be found at: www.oecd.org/ corruption/oecdantibriberyconvention.htm (accessed 24 September 2018). 11 Article 1.1, OECD Anti-Bribery Convention. 12 Article 1.2, OECD Anti-Bribery Convention. 13 Article 2, OECD Anti-Bribery Convention. 14 For more information as to activities pursued under the OECD Anti-Bribery Convention, see: www.oecd.org/daf/anti-bribery/Anti-Bribery-Convention-Enforcement-Data-2016.pdf (accessed 24 September 2018). 15 Paragraphs 8 and 9, Article 1, Commentaries to the OECD Anti-Bribery Convention. Note there is considerable debate as to whether to retain the facilitation payment exception. 16 Article 12, OECD Anti-Bribery Convention.

Bribery, corruption and the law 51 UN General Assembly in 2003 followed that of the OECD Anti-Bribery Convention. It came into force in 2005.17 In contrast to the OECD Anti-Bribery Convention, the UNCAC remit is extremely broad. It addresses the public sector, private sector, preventative measures, enforcement, technical assistance and asset recovery, to name but a few. Its focus is on countries putting in place laws, organisations, initiative and strategies to address corruption in a domestic context. The United Nations Office on Drugs and Crime (UNODC) is responsible for administering and overseeing signatories’ implementation of the UNCAC. The UNODC also scrutinises signatories’ implementation of their obligations under the UNCAC through peer review assessments.18 The UNCAC sets the baseline that all countries are meant to implement to address corruption. However, it does not define corruption. Instead, it lists the forms of conduct that the signatories agree constitute forms of corruption. These include requiring signatories to introduce laws to prohibit the bribing of public officials,19 the bribing of foreign public officials,20 embezzlement or misappropriate of property by public officials,21 trading in influence,22 abuse of functions,23 illicit enrichment,24 bribery in the private sector,25 laundering the proceeds of crime,26 concealment27 and obstruction of justice.28 Although there is peer review of signatories’ implementation of the UNCAC obligations, contraventions of any laws introduced pursuant to the UNCAC remain the responsibility of the relevant country. In addition to the OECD Anti-Bribery Convention and the UNCAC, there are regional anti-bribery and anti-corruption conventions and protocols that have been agreed and implemented. These include the African Union Convention on Preventing and Combating Corruption (adopted 2003, entered into force 2006), the Organization of American States InterAmerican Convention Against Corruption (adopted 1996, entered into force 1997) and the Council of Europe Criminal Law Convention on Corruption (adopted 1999, entered into force 2002).29 There is also the Asian

17 More information on UNCAC can be found at: www.unodc.org/unodc/en/corruption/ uncac.html (accessed 24 September 2018). 18 For details, see: https://uncaccoalition.org/en_US/uncac-review/uncac-review-mechan ism/ (accessed 24 September 2018). 19 Article 15, UNCAC. 20 Article 16, UNCAC. 21 Article 17, UNCAC. 22 Article 18, UNCAC. 23 Article 19, UNCAC. 24 Article 20, UNCAC. 25 Article 21, UNCAC. 26 Article 23, UNCAC. 27 Article 24, UNCAC. 28 Article 25, UNCAC. 29 Details of and links to the regional anti-corruption instruments that have been agreed, including when the instruments were adopted and came into force, can be found at: www.oecd. org/cleangovbiz/internationalconventions.htm (accessed 24 September 2018).

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Development Bank (ADB)/OECD Anti-Corruption Initiative for Asia and the Pacific (which sets out the initiatives the ADB/OECD have implemented to combat corruption in the region, published 2010).30 As with the UNCAC, the focus of the regional multilateral conventions is quite broad and is on reducing corruption in a domestic context. Back in the business context, there are non-legally binding initiatives to which the private sector can sign up. These include the G20/OECD Principles of Corporate Governance,31 Transparency International’s Business Principles,32 the World Economic Forum’s Partnership Against Corruption Initiative33 and the United Nations Global Compact, which has 10 principles to which organisations commit to adhere to, the last of which is that ‘[b]usinesses should work against corruption in all its forms, including extortion and bribery’.34 Of interest, as with UNCAC, none of these conventions or initiatives define corruption. Although the term ‘corruption’ is frequently used in the media and in public discourse, that term is seldom found in legislation. Instead, laws prohibit specific conduct, such as bribery, personal benefit in a public office and/or the misuse of office. Chapter 1 of this volume sets out the forms of conduct that fall into the broad categorisation of ‘corrupt’.35

Increased enforcement against business As can be observed, multilaterally agreed anti-bribery and anti-corruption conventions, protocols, frameworks and other initiatives have flourished since 2000. All these different initiatives required signatories to adopt relevant anti-bribery and anti-corruption laws and initiatives in their countries’. However, there was little enforcement of any such laws against business involved in international transactions by countries’ law enforcement agencies until the mid-2000s. As enforcement of these laws was minimal, particularly against international enterprises, many businesses continued to operate as if the laws were irrelevant and/ or did not apply to them.36 Laws are obeyed when there is the fear they will be prosecuted. Contraventions of competition laws, for example, are vigorously

30 See: www.oecd.org/site/adboecdanti-corruptioninitiative/46485272.pdf (accessed 21 October 2018). 31 See: www.oecd.org/corporate/principles-corporate-governance.htm (accessed 21 October 2018). 32 For details, see: https://issuu.com/transparencyinternational/docs/business_principles_ web_final (accessed 21 October 2018). 33 Launched in 2004. For details, see: www.weforum.org/communities/partnering-against-cor ruption-initiative (accessed 24 September 2018). 34 Launched in 2000. For details, see: www.unglobalcompact.org/ (accessed 24 September 2018). 35 Chapter 1 of this volume: Corruption: The shape of the beast. 36 This author can recall trying to engage with general counsel on the anti-bribery laws and their extra-territorial reach during the 2000s only to face indifference. The general attitude was that the laws were not being enforced, therefore there was little need to pay heed to them.

Bribery, corruption and the law 53 enforced in most, if not all, developed countries, unlike anti-bribery laws until the mid-2000s.37 So, what changed? The events of 11 September 2001 had a profound geopolitical impact globally. Among other changes, intelligence agencies intensified their investigations of questionable financial transactions. The aim of these intensified investigations was to identify transactions carried out by potential terrorists. In doing so, the agencies also uncovered questionable transactions of another nature – the transfer of funds for corrupt purposes. In short, enhanced security measures meant transgressions became easier to identify and this information was passed onto the DoJ and the SEC. In addition, the DoJ and the SEC changed the means by which they brought actions against companies. Traditionally, in the United States as in most countries, companies suspected of wrong doing were prosecuted criminally (subject to there being a law that imposed criminal liability on corporate entities) or civilly. From 2004, however, FCPA enforcements largely comprised of settlements negotiated between prosecuting authorities and corporate entities through the means of deferred prosecution agreements (DPAs) and/or non-prosecution agreements (NPAs).38 DPAs and NPAs have now been or are being introduced in the United Kingdom,39 Canada40 and Singapore,41 among others. Some DPA/NPA regimes have greater court oversight than others. Using DPAs and NPAs makes it easier for prosecuting authorities to enforce anti-bribery and anti-corruption laws. Many organisations generally agree to DPAs or NPAs as a means by which to minimise reputational damage and avoid protracted criminal court proceedings. This has led to significant increased enforcement, particularly by the DoJ and SEC and in the terms of the penalties imposed. For example, some of the companies that have agreed DPAs with the DoJ and SEC for amounts of US $100s of millions include Total, KBR/Halliburton, Eni, Alstom, BAE, Alcoa and JGC Corp.42

37 Personal observation from years as a competition lawyer and involvement with Transparency International. The author recalls one discussion she had with a senior executive of a company with a well known brand who was responsible for managing that business’s risk. In his view, prosecuting authorities were too focused on anti-terrorism to pay much attention to bribery and corruption. Consequently, his assessment of any exposure under the latter law was low. 38 Individuals were the initial targets of DPAs and NPAs. See Dentons, Deferred Prosecution Agreements: The US experience and the UK potential, 14 July 2014. Accessed at: www.lexol ogy.com/library/detail.aspx?g=4f0cc529-bfdb-49c3-ac8d-e989e87fc84a (accessed 24 September 2018). 39 Introduced in 2014, Crime and Courts Act 2013, Schedule 17, UK. 40 The Canadian Parliament table Bill C-74 in March 2018 to amend the Criminal Code of Canada 1985. 41 The Singapore Parliament passed the Criminal Justice Reform Act in March 2018 to incorporate a deferred prosecution agreement framework into its Criminal Procedure Code 2010. 42 Details of each can be obtained from the Department of Justice’s FCPA website: www.just ice.gov/criminal-fraud/foreign-corrupt-practices-act.

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The increase in prosecutions, and the spectacular quantum of some the fines negotiated, has had a profound impact on raising awareness in the international business community of anti-bribery laws and their extra-territorial reach. This is particularly so as the DoJ and the SEC have enforced the FCPA not just against US companies but also against non-US companies.43 Another significant catalyst was the introduction by the UK government of the Bribery Act in 2010 (UK Bribery Act).44 The UK Bribery Act: • • • •

Prohibits bribery in both the public and private sectors;45 Makes no exception for facilitation payments;46 Specifically prohibits the bribery of foreign public officials;47 Most radically, introduced an offence of a passive nature – a company that conducts part of its business in the United Kingdom can contravene the UK Bribery Act if it fails to prevent bribery.48

In relation to the latter point, for example, if a UK company (Company A) does not take all reasonable steps to ensure a company in its supply chain (Company B) complies with the UK Bribery Act, and Company B pays a bribe to secure business for Company A, then Company A has committed an offence in the United Kingdom. The defence Company A has available to it in these circumstances is if it had in place ‘adequate procedures’.49 That is, a compliance programme that meets the requirements of the UK Serious Fraud Office and, ultimately, the court. Coinciding with the introduction of the UK Bribery Act was an initiative agreed by multilateral development banks around the world, called the Cross Debarment Agreement for Mutual Enforcement of Debarment Decisions Among Multilateral Development Banks. Under this agreement each institution undertakes to mutually enforce another’s debarment action against an entity as a sanction for engaging in a prohibited practice, being corruption, fraud, coercion and/or collusion.50 Thus, if one multilateral bank finds a contractor to have secured business through a prohibited practice and debars it as a consequence, all other multilateral banks impose the same sanction against that contractor.

43 See, for example: www.aohub.com/aohub/publications/the-fcpas-broad-reach-and-itsimpact-on-non-us-companies-and-individuals?nav=FRbANEucS95NMLRN47z%2BeeO g E F C t 8 E G Q 7 1 h K X z q W2 E c %3 D & k e y = B c J l h Lt d C v 6 %2 F J T D Z x v L2 3 T Q a 3 J H L2AIGr93BnQjo2SkGJpG9xDX7S2thDpAQsCconWHAwe6cJTmlnVN%2BUp8Mvj2L% 2BEiiz68X (accessed 21 October 2018). 44 The UK Bribery Act came into force in 2011. 45 Section 1, UK Bribery Act. 46 Section 6, UK Bribery Act. 47 Section 7, UK Bribery Act. 48 Section 7, UK Bribery Act. 49 Section 7, UK Bribery Act. 50 More details can be found here: http://lnadbg4.adb.org/oai001p.nsf/ (accessed 21 October 2018).

Bribery, corruption and the law 55 The impact of the UK Bribery Act, in particular, facilitated the expansion of awareness of anti-bribery and anti-corruption laws in the private sector and the need for compliance programmes. Companies that had disparaged or ignored anti-bribery and anti-corruption laws in the past were being required to agree contractual provisions insisted upon by contracting parties subject to UK laws.51 Regulatory authorities have made it clear they expect companies to have in place anti-bribery and anti-corruption compliance programmes as evidence of companies’ commitment to anti-bribery and anti-corruption. Similarly, multilateral banks insist on debarred organisations developing and implementing relevant compliance programmes as part of their rehabilitation. Thus, in the private sector, there is now considerable awareness of anti-bribery and anti-corruption laws and the potential impact on business should they be contravened. Although, as discussed in other chapters of this volume,52 there is still more that can be done in the context of both legal enforcement and compliance implementation.

And anti-corruption reforms elsewhere? The remit of the UNCAC and regional anti-corruption multilateral conventions seek to address corruption where it impacts on the lives of the average person and otherwise those who are most vulnerable. In terms of corruption experienced by the public, particularly in fragile states, in those countries where corruption is systemic or in countries subject to state capture by criminal elements, there remains much to be done.53 Good governance in government and the public sector has become the mantra in the development sector. The UNODC oversees the implementation of signatories’ obligations under the convention. It also has a coalition with civil society to facilitate the implementation of reforms.54 Many international development agencies, such as the UK’s Department for International Development (DfID),55 Germany’s Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ) and Japan’s International Cooperation Agency (JICA) fund projects designed to introduce good governance with the objective of reducing corruption and ameliorating poverty.

51 Personal observation and experience as a legal adviser. 52 See Chapter 5 of this volume: ‘Cui bono? Corruptors and the corrupted – corporate governance and corruption’ and Chapter 6 of this volume: ‘Tackling corruption through corporate social responsibility’. 53 See Chapter 11 of this volume on how a systems-based approach to corruption can go some way to addressing this: ‘Using systems thinking to understand and address corruption in the criminal justice system in fragile states’. 54 More details can be found here: https://uncaccoalition.org/en_US/ (accessed 21 October 2018). 55 See Chapter 12 of this volume on findings of a DfID funded project: ‘Social norms and attitudes towards corruption: Comparative insights from East Africa’.

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For every step forward, however, there are backward moves. There are vested interests in many countries that seek to undermine anti-bribery and anti-corruption reforms even while governments publicly express commitments to implementing them.56 As this volume shows, while the law is essential, and enforcement of it even more so, it is not enough. Further, there is disparity in the prosecution of corruption. The OECD Anti-Bribery Convention and the increase in the prosecution of the laws implemented pursuant to it, provide a much-needed focus on the role of the private sector in corrupt conduct. However closely the UNODC works with governments toward implementing the UNCAC requirements, there is no external agency that can oblige governments to do so or to enforce what they have in place. This is exemplified in the case of SNC Lavalin in relation to allegations of corruption brought against SNC Lavalin in its dealings in Bangladesh on the World Bank-funded Padma Bridge project. Ultimately, the World Bank decided to debar SNC Lavalin and its affiliates from tendering for any World Bank project for 10 years.57 Under the Cross Debarment Agreement, SNC Lavalin and its affiliates are debarred from tendering for any project funded by a multilateral development bank that is a party to the Agreement.58 The Canadian Prosecution Service brought actions again three senior SNC Lavalin executives, although they were ultimately acquitted.59 However, despite the best attempts of the World Bank, no action was ever brought against the relevant public officials in Bangladesh for their role in the scandal.60 Pressure is being placed on the private sector to achieve what cannot be done through multilateral conventions or through the auspices of the United Nations or World Trade Organization. That is, have the private sector insist on governments implementing anti-corruption reforms in countries in which they wish to operate. A laudable objective but query whether this is an abdication of responsibility by those governments promoting the anti-corruption initiative. The law is necessary to addressing corrupt conduct, but it is not sufficient.

56 For example, there continues to be concerns about the legitimacy of monies used to buy high–value houses in London despite the pledge to crack down on this practice at the UK Anti-Corruption Summit in 2016. See: www.transparency.org.uk/one-year-on-2016-anti-cor ruption-summit/#.W8yfHfbTU2w (accessed 21 October 2018). 57 See the World Bank’s press release on this issue: www.worldbank.org/en/news/pressrelease/2013/04/17/world-bank-debars-snc-lavalin-inc-and-its-affiliates-for-ten-years (accessed 21 October 2018). 58 Ibid. 59 See: www.thedailystar.net/world/north-america/canada-court-finds-no-proof-padmabridge-graft-conspiracy-1359397 (accessed 21 October 2018). The Canadian authorities continue to investigate and prosecute SNC Lavalin and various senior executives for other allegations of bribery. 60 See the World Bank’s press release on this issue: www.worldbank.org/en/news/pressrelease/2012/06/29/world-bank-statement-padma-bridge (accessed 21 October 2018).

Bribery, corruption and the law 57

Bibliography Allen & Overy (2017), The FCPA’s broad reach and its impact on non-U.S. companies and individuals. Retrieved from www.aohub.com/aohub/publications/the-fcpas-broad-reach-andits-impact-on-non-us-companies-and-individuals?nav=FRbANEucS95NMLRN47z%2BeeO gEFCt8EGQ71hKXzqW2Ec%3D&key=BcJlhLtdCv6%2FJTDZxvL23TQa3JH L2AIGr93BnQjo2SkGJpG9xDX7S2thDpAQsCconWHAwe6cJTmlnVN%2BUp8Mvj2L% 2BEiiz68X. Bhargava, V. (2006), Curing the cancer of corruption. Global issues for global citizens: An introduction to key development challenges, Washington, DC, World Bank. Retrieved from http://siteresources.worldbank.org/EXTABOUTUS/Resources/Ch18.pdf. Cross debarment (2011), Cross debarment. Retrieved from http://lnadbg4.adb.org/ oai001p.nsf/. Dentons (2014, July 14), Deferred prosecution agreements: The US experience and the UK potential. Retrieved from www.lexology.com/library/detail.aspx?g=4f0cc529-bfdb49c3-ac8d-e989e87fc84a. Department of Justice’s FCPA Foreign Corrupt Practices Act. Retrieved from www.justice. gov/criminal-fraud/foreign-corrupt-practices-act. Koehler, M. (2012), The Story of the Foreign Corrupt Practices Act. Ohio State Law Journal, Vol. 73, No. 5. SSRN. Retrieved from https://ssrn.com/abstract=2185406. OECD (2017), 2016 data on enforcement of the anti-bribery convention. Retrieved from www.oecd.org/daf/anti-bribery/Anti-Bribery-Convention-Enforcement-Data2016.pdf. OECD (2018a), G20/OECD principles of corporate governance. Retrieved from www.oecd. org/corporate/principles-corporate-governance.htm. OECD (2018b), International conventions. Retrieved from www.oecd.org/cleangovbiz/ internationalconventions.htm. OECD (2018c), OECD convention on combating bribery of foreign public officials in international business transactions. Retrieved from www.oecd.org/corruption/oecdantibriber yconvention.htm. OECD (2018d), The criminalisation of bribery in Asia and the Pacific. Retrieved from www.oecd.org/site/adboecdanti-corruptioninitiative/46485272.pdf. Siemens (2008), Siemens press releases. Retrieved from www.siemens.com/press/en/pressre lease/?press=/en/pressrelease/2008/corporate_communication/axx20081219.htm. The Daily Star (2017, February 11), Canada court finds no proof of Padma bridge bribery conspiracy. Retrieved from www.thedailystar.net/world/north-america/canada-courtfinds-no-proof-padma-bridge-graft-conspiracy-1359397. Transparency International (2013, December 12), Business principles for countering bribery. Retrieved from https://issuu.com/transparencyinternational/docs/ business_principles_web_final. Transparency International (2017, May 12), One year on: What’s happened since the 2016 anti-corruption summit? Retrieved from www.transparency.org.uk/one-year-on-2016anti-corruption-summit/#.W8yfHfbTU2w. Transparency International (2018), Transparency international home page. Retrieved from www.transparency.org/. UN Global Compact (2018), UN global compact home page. Retrieved from www.unglobal compact.org/. UNCAC Coalition (2018), UNCAC review mechanism. Retrieved from https://uncaccoali tion.org/en_US/uncac-review/uncac-review-mechanism/.

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UNODC (2018), United Nations convention against corruption. Retrieved from www. unodc.org/unodc/en/corruption/uncac.html. US Department of Justice (2008, December 15), Siemens AG and three subsidiaries plead guilty to Foreign Corrupt Practices Act violations and agree to pay $450 million in combined criminal fines. Retrieved from www.justice.gov/archive/opa/pr/2008/Decem ber/08-crm-1105.html. World Bank (2012, June 29), World Bank statement on Padma bridge. Retrieved from www.worldbank.org/en/news/press-release/2012/06/29/world-bank-statementpadma-bridge. World Bank (2013, April 17), World Bank debars SNC-Lavalin Inc. and its affiliates for 10 years. Retrieved from www.worldbank.org/en/news/press-release/2013/04/17/ world-bank-debars-snc-lavalin-inc-and-its-affiliates-for-ten-years. World Economic Forum (2018), Partnering against corruption initiative. Retrieved from www.weforum.org/communities/partnering-against-corruption-initiative.

4

Reduction of corruption as good governance Habibul Haque Khondker

Introduction Although it is a truism to state that corruption erodes good governance or that corruption is the hallmark of “bad governance” as the Black Book of Corruption in Hungary suggests,1 it is incumbent on scholars, concerned citizens and public officials to understand – empirically and conceptually – how and why corruption undermines good governance. And if corruption can be shown to be a debilitating factor to the delivery of good governance, then, it can be argued that by reducing, and, if possible, eliminating corruption, good governance can be ensured and sustained. To put it starkly, good governance may be defined as a mode of governance where corruption is effectively reduced. Having stated the main premise of this chapter, thus, it would be useful to define the two concepts at hand – corruption and governance.

What is corruption? Corruption, for the purpose of this chapter, is defined as misuse or abuse of public office for private gains. In other words, it is assumed that public officials, elected, ordained, or positioned in the bureaucratic hierarchy, are expected to uphold public interest, that is, the interest of the public good or collective welfare for which they are entrusted. However, when public officials not only use their official position to profit for personal gain but do so at the expense of public good, a derogation occurs, and that derogation is corruption. To keep the discussion focused on corruption, it may be useful to separate it from inefficiency, mismanagement, incompetence, lack of professionalism, and so on, which lead to mal-governance. Then there are the problems of crime, injustice, and other maladies of human existence or human experience in society or in an organisation, which need to be delineated from corruption. The two categories of problems often interact and intermingle adding to the complexity in life. Yet, we need to analytically separate the problems of corruption from the

1 Transparency International Hungary at https://transparency.hu/wp-content/uploads/ 2018/03/Black-Book_EN.pdf, 2018 (accessed June 20, 2018).

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other ills of society and administration. To put it simply, we need to base our discussion on a thin or lean theory of corruption, rather than a thick theory. Corruption harms public good by debilitating the mechanism, namely, governance, through which public good is distributed. Governance is a process of reducing, and, if possible, removing the obstacles to public good. Good governance not only enables performance of the task of serving the public interest in the most efficient manner, it also ensures reduction and, if possible, removal of obstacles to the delivery of public good. One major obstacle or impediment is corruption.

What is wrong with corruption? Corruption remains an intractable phenomenon, more so in some organisations and some countries than in others and remains pervasive around the world in the twenty-first century. Corruption comes in various forms and magnitudes. There is petty corruption as there is mega corruption. Some forms of corruption are mere nuisances that slow the functioning of a government department and delay the provision of services, which is often overcome by paying a small bribe or “baksheesh” (as it is called in India, Pakistan, and Bangladesh). For example, a disrupted electricity supply from a public utility can be restored rather quickly with a small bribe, while non-payment of a bribe might lead to a long wait for the restoration of electricity. Pragmatic consumers often opt for paying an extra rent, albeit irregular, to ensure an uninterrupted supply of electricity on which their business and continued income depends. Some of them keep the functionaries on their payroll to avoid any disruption. Other forms of corruption are of a large-scale that may impose a significant cost on an economy, or even compromise national security and endanger public safety. In recent years there has been a growing concern with intersectionality of corruption that might compromise ecological security with devastating planetary consequences.2 Sociological analyses of corruption have often given due consideration to the cultural contexts that perpetuate or may give rise to corruption. Yet, Syed Hussein Alatas cautioned not to use culture as an excuse for conceding to corruption.3 Corruption is not limited to any particular geographical region. The pervasiveness of corruption is borne out by the fact that everyday media will have at least some reports of corruption in some parts of the world. Let us just take the case, almost at random, The Economist of February 17, 2018.4 In the section “The World This Week”, we find the following stories related to corruption. In the first story, police in Israel investigating Prime Minister Binyamin Netanyahu recommended that he face

2 www.unodc.org/documents/Wildlife/Corruption_Wildlife_Crime.pdf. 3 Syed Hussein, A., The Problem of Corruption. Singapore: Donald Moore Press, Ltd, 1968 and Khondker, H. H., “Sociology of Corruption and ‘Corruption of Sociology’”, Current Sociology, 54 (1), 2006, pp. 25–39. 4 “The World This Week”, The Economist, February 17, 2018, p. 6.

Reduction of corruption as good governance 61 charges of bribery and fraud. In the second story, Ukraine deported Mikheil Saakashvili, a former president of Georgia, to Poland. In 2015 Mr. Saakashvili exiled from Georgia was tasked with fighting corruption in Ukraine by the president of the country, Petro Poroshenko. As there was a falling out between them when he accused Mr. Poroshenko of abetting corruption, the former Georgian president was expelled from Ukraine. In the third case, police in Guatemala arrested former president Alvaro Colom and most of his cabinet ministers in a fraud case involving a new bus system in the capital.5 In the fourth case, a top ranking Chinese politician, a member of the politburo, was charged with taking bribes. He was the most senior serving politician to face allegations in the anti-corruption campaign of President Xi Jin Ping. In the fifth story, a court in South Korea sentenced Choi Soon-sil, a confidant of former president Park Geun-hye, twenty years in prison after he was convicted of various corruption charges. What is common in all the above cases reported in the newspaper is that they all involve politicians, who are public officials elected to their respective positions and entrusted to protect and advance public good. In 2017 the first female president of South Korea, Park Guen-hye, faced charges of corruption as a serving president and was jailed upon conviction. She was awarded a prison sentence of 24 years, which is basically a life-sentence for the 66-year old. Dilma Rousseff, the first female president of Brazil, was impeached in August 2016 on charges of mismanagement and scandals of corruption implicating her government.6 In April 2018, another former president of Brazil Luiz Inacio Lula da Silva was awarded a 12-year sentence on charges of alleged corruption.7 How far those charges of corruption were politically motivated or not is another story, but the pattern of the linkage between corruption and high political office is unmistakeable. One of the interesting points to note is that even after the sentencing of the former Brazilian president Luiz Inacio Lula da Silva, he remains popular; 37% of Brazilians say they will vote for Lula in the October 2018 presidential election.8 In early July 2018 shortly after being voted out of office, former Malaysian prime minister Najib was charged with corruption as hundreds of millions dollars from a development bank were diverted to his personal accounts.9 The above cases squarely link corruption with high public

5 The Guatemalan case also involved accusation of bribery. See: www.nytimes.com/2018/02/ 13/world/americas/guatemala-corruption-colom-oxfam.html, 2018 (accessed June 12, 2018). Fraud is a type of corruption, especially in this case when the highest public official was involved and it involved a breach of trust. 6 “Brazil’s Dilma Rousseff Impeached by Senate in Crushing Defeat”, The Guardian, 2016, available at www.theguardian.com/world/2016/aug/31/dilma-rousseff-impeached-presi dent-brazilian-senate-michel-temer (accessed June 12, 2018). 7 “Lula Goes to Jail”, The Economist, April 8, 2018, available at www.economist.com/news/ americas/21740253-even-behind-bars-former-president-will-remain-force-be-reckoned-lulagoes-jail (accessed June 15, 2018). 8 Ibid. 9 www.reuters.com/article/us-malaysia-politics-najib/former-malaysian-pm-pleads-not-guiltyto-charges-in-1mdb-graft-probe-idUSKBN1JT30V (accessed on October 6, 2018).

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offices. Corruption is linked to high public office simply because corruption is minimally defined as “use of public office for private gains”. The Black Book of Corruption states: Corruption is the most important sign of “bad governance”, which is usually coupled with the violation of the rule of law. In such a case the biased institutions of the state, intended to secure the power of the currently reigning elite, do not prosecute, rather tolerate and sometimes downright encourage corruption, by which members of the ruling elite will acquire even more power, while the society becomes poorer.10 In the US, allegations of corruption have been made against the highest office. For example, Nobel Prize winning economist Paul Krugman cited the tax cuts passed by the Republican-dominated Congress in 2018 that would result in a trillion-dollar deficit as an example of corruption. Although no bribery was involved, practices such as the revolving-door model whereby congressmen leave office and join the big corporations as lobbyists, and tax cuts benefitting the rich real estate businesses, are examples of corruption. As Krugman ends his column, “… Republicans in Congress are taking their cues from a president who openly uses his office to enrich himself. Goodbye, ideology; hello, corruption.”11 Yet allegations do not always lead to prosecutions, which illustrates that in some cases loyalty to power trumps allegations of corruption. This is why, in several cases, leaders out of office are subjected to investigations leading to prosecutions and punishments.

What is governance? Governance, in this chapter, is defined as the functioning of an organisation – government, corporation, community organisation – to deliver and uphold public good. Public good may be described as a basket of goods that includes both abstract ideas of rights and justice and material provisions. Good governance would ensure that more of the goods in the basket were made available to citizens without favour in a fair and equitable manner. The concept of governance has a rather short history. The phrase could hardly be found before 1980s. In fact, it was in 1989 that the World Bank used the term for the first time in a report titled “From Crisis to Sustainable Growth – Sub-Saharan Africa: A Long-Term Perspective Study”, where the president of the Bank suggested that:

10 Transparency International Hungary, op cit n. 1. 11 Krugman, P., “Passing Through to Corruption”, The New York Times, December 18, 2017, available at www.nytimes.com/2017/12/18/opinion/republicans-taxes-corruption.html (accessed on June 10, 2018).

Reduction of corruption as good governance 63 A root cause of weak economic performance in the past has been the failure of public institutions. Private sector initiative and market mechanisms are important, but they must go hand-in-hand with good governance – a public service that is efficient, a judicial system that is reliable, and an administration that is accountable to its public. And a better balance is needed between the government and the governed.12 The report defined governance as “the exercise of political power to manage a nation’s affairs”. In the report, World Bank president used the term “good governance” for the first time.13 It was observed, in sum, that the absence of good governance was holding back Africa’s development. And not just Africa’s development. Governance refers to the different ways that organizations, institutions, businesses, and governments manage their affairs. Governance is the act of governing and thus involves the application of rules and regulations but also of customs and practices, and ethical standards and norms, and it is characterized by the fragmentation of political authority.14 Here, governance is conceived broadly to include both government and nongovernment organisations. The 2017 “World Development Report” of the World Bank was dedicated to the issues of governance and law, highlighting the impact of governance on development, especially equitable development. Governance, according to the report, “is the process through which state and non-state actors interact to design and implement policies within a given set of formal and informal rules that shape and are shaped by power”.15 The definition is interesting because it introduces the idea of an interaction between the state and non-state actors. The relational aspect is important since it may be useful to include the larger environmental and cultural contexts within which governance takes place. It is pertinent to ask the question, in the vein of the World Bank report: governance for what? For the World Bank report, governance seeks to achieve the goals of security by removing threats of violence, and of growth by promising prosperity and equity, meaning shared prosperity.16 Collectively, security, growth, and equity can be conceived as public goods.

12 From Crisis to Sustainable Growth – sub Saharan Africa: A Long-Term Perspective Study, 1989, available at: http://documents.worldbank.org/curated/en/498241468742846138/ From-crisis-to-sustainable-growth-sub-Saharan-Africa-a-long-term-perspective-study, (accessed June 25, 2018). 13 Ibid. 14 Kacowicz, A. M. “Regional Governance and Global Governance: Links and Explanations”, Global Governance, 24, 2018, pp. 61–79. 15 World Bank, “World Bank Development Report”, 2017, p. 41. 16 Ibid, at p. 43.

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The interaction of governance with corruption Good governance is a qualitative judgment. Countries that are able to provide security and equitable growth may be defined as having good governance. It may be argued that corruption erodes security, growth, and equity. As we add more items to the definition of public good, we find more areas of corruption that potentially undermine it. Rather than discussing how corruption hinders economic development and undermines security and other public goods, we argue that the major enabler of public good is good governance, which is undermined by corruption. In other words, of the various factors that might impair good governance, corruption would be the leading one. Corruption is both the cause and manifestation of bad governance. There are several instances where a breakdown of state authority, a failed, failing, or a fragile state becomes a ground for breeding corruption.17 This is why many of the failed states experience high incidence of corruption – either due to internal reasons of state capture or caused by external intervention and capture. Many of the countries with high incidences of corruption, insofar as it is inferred from the corruption perception index18 (CPI), are war-ravaged countries. The close relationship between authoritarian states and a high incidence of corruption is due to state capture by a narrow elite who remain above public scrutiny. Public scrutiny takes place in a society where openness – free press, public opinion, and in general, a condition of freedom – is tolerated. In other words, democracy provides a hedge against corruption. The main argument of this chapter, that good governance entails absence or near-absence of corruption and, alternately, bad governance entails high levels of corruption, is not a tautology since there are several intervening variables that may impact the outcome. The trade-off between the quality of governance and the level of corruption is clearly evident in Table 1. Countries that rank highly on the scale of good governance, not surprisingly, are also known as being the least corrupt. With some notable exceptions, most of these countries also enjoy high levels of political freedom.

17 This is discussed in more detail in Chapter 11 of this volume: “Using systems thinking to understand and address corruption in the criminal justice system in fragile states”. This raises an interesting conundrum – does the fact that there is a breakdown in state authority breed corruption or is it that corruption leads to the breakdown? 18 Launched in 1995, Berlin-based Transparency International publishes the Corruption Perceptions Index based on the opinion and perceptions of experts and business people about the incidence of official corruption in various countries around the world.

Reduction of corruption as good governance 65 Table 1 Corruption, political freedom, and governance in high- and low-corruption countries Country

CPI 2017 (100 is perfect)

Freedom Rating (2017)19

Basel AML Index (2017)20

Legatum Prosperity Index (2017)21

New Zealand

89 (Ranked 1)

1 (98)

142

3

Finland

85

1 (100)

146

1

Denmark

88

1 (97)

140

8

Sweden

84

1 (100)

138

4

India

40

3 (77)

88

41

China

41

6 (14)

51

122

Japan

73

1 (96)

98

18

Singapore

84

4 (52)

117

17

Botswana

61

2.5 (72)

74

33

Costa Rica

59

1 (91)

77

32

Central African Republic

20

7 (9)

6

142

Does governance require democracy? Governance in the Legatum Prosperity Index22 measures a country’s performance in three areas: effective governance, democracy and political participation, and rule of law. China’s score is skewed mainly because of the criteria used. Here, the inclusion of “democracy and political participation” introduces a bias and a preconceived notion that democracy and political participation are good things as a first principle and a required criterion for good governance. One of the problems is the very definition of democracy. For example, in many of the newly democratic countries, there may be a democracy by the people but not necessarily for the people. There may have been an increase in the number of countries with procedural or electoral democracy, yet substantive democracy lags behind. New democracies often fail to adhere to ethical universalism and remain enmeshed in particularism.23 The incorporation of democracy, a political system, as

19 1 is most free and 7 is least free. There is an aggregate score out of 100; the higher the score, the better. 20 The higher the score, the better. 21 Governance. The lower the score, the better. 22 www.prosperity.com/rankings (accessed June 15, 2015, 2018). 23 Mungiu-Pippidi, A., “Controlling Corruption Through Collective Action”, Journal of Democracy, 24 (1), 2013, pp. 101–115.

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a component of governance puts China closer to the Central African Republic, which ignores the fact that China’s economic success is in large part due to its adherence to good governance that entails effective planning and formulation of policies and then the implementation of those policies with high degree of effectiveness and alacrity. China may not have a democracy by the people, but it has a system of governance that is for the people. In Table 1, India is 37 ranks ahead of China in the quality of governance, simply because India is a practising democracy, but that does not ensure India’s success in the fight against corruption. China’s crackdown on corruption, notwithstanding concerns that its purpose is to neuter political rivals,24 is one of the drivers of China’s rapid economic growth and political stability. The Central Commission for Discipline Inspection of China’s Communist Party has punished millions of Communist Party officials in recent years. In March 2018 at the 19th National Party Congress, a new body, the National Supervision Committee, was created via an amendment of the constitution, which raised some concerns among international human rights groups.25 A consequentialist definition of good governance takes into account tangible outcomes in achieving economic and social goals. Rather than introducing a priori normative components such as democracy, it may be useful to begin with an analytical and outcome-oriented definition of governance as an institutional process that incorporates a set of clearly defined policies and procedures, assures stability in society, and enhances the wellbeing of the people.

Corruption as an institutional process The institutional factor that routinises, and hence, normalises corruption is due to state capture by the business elites, or, as they are often referred to as, oligarchs. In some instances, the states have little choice or power to function autonomously as the grip of the oligarchs becomes a stranglehold from which the state is unable to untangle itself. In some cases, such as in the Russian Republic under President Putin, the state uses the oligarchs to its benefit.26,27 And there are cases where states and oligarchs go into a partnership to rob the country.28 In some contexts, the term “Official Moguls” has been used where:

24 The Economist, March 3, 2018, p. 9. Osberg, J., “Making Business Personal: Corruption, Anti-Corruption, and Elite Networks in Post-Mao China”, Current Anthropology, 59, Supplement 18, April 2018, S149–S159. Wedeman, A., Double Paradox: Rapid Growth and Rising Corruption in China. Ithaca, New York: Cornell University Press, 2012. 25 See: www.bbc.com/news/world-asia-china-43453769 (accessed October 8, 2018). 26 May, R., “Putin: From Oligarch to Kleptocrat”, New York Review of Books, 2018. Available at: www.nybooks.com/daily/2018/02/01/putin-from-oligarch-to-kleptocrat/ (accessed October 8, 2018). 27 Brown, D., “The 25 Richest Russian Oligarchs on the ‘Putin List’ That the US Just Released”, 2018. Availabe at www.businessinsider.com/richest-russian-oligarchs-putin-list2018–1 (accessed October 8, 2018). 28 Antonov, S., “The Age of Oligarchs: How A Group Of Political And Economic Magnets Have Taken Control of Bulgaria”, University of Oxford, Reuters Institute for the Study of

Reduction of corruption as good governance 67 officials and politicians enrich themselves through corruption more or less at will, at times moving into the economy by converting the whole state agencies into profit-seeking enterprises, and ambitious businesspeople with official protection and partners take on a quasi-official status as they build their empires.29 In the age of neoliberalism and privatisation, the distinction between the “public” and the “private” often gets blurred.30 There are instances where such partnerships costs the society and its economy dearly, siphoning off resources from development projects to enrich the perpetrators. In some instances, sections of economic and political elites bleed the country, but not callously. For example, in Indonesia under President Suharto (1968–1998), tangible development goals were achieved such as reduction of poverty from 60% in the late 1960s to 13% in 1997, despite the regime being known for nepotism and corruption.31 Thailand also achieved positive economic development in the 1980s under its military rulers, at a time when charges of corruption were rife. Therefore, it can be said that Indonesia under Suharto and Thailand under the military rule led to a new nexus of corruption with development, as opposed to corruption without development as was the case in the Philippines under President Marcos (1965–1986). In 1965 when Marcos became the president, Philippines was regarded as a development model.32 By the time he was forced out in a mass movement in 1986, the economy was in shambles. Mozambique in the early 2000s also illustrates a case of corruption eroding development outcomes.33 In all the cases mentioned above, the relationship between the state and private businesses feature prominently and the rule of law was impaired. The impairment of the rule of law or its derogation undermines trust in the institutions of the law. In accounting for corruption, according to the World Bank, “exclusion, capture, and clientelism are manifestations of power asymmetries”,34 which in turn is the source of corruption. This analysis goes to the very heart of social scientific analysis where power is a potent variable. Yet, one can ask: power for what? We would submit that in most cases, whether it is a community or a state

29 30 31 32 33 34

Journalism, 2013. Available at: https://reutersinstitute.politics.ox.ac.uk/our-research/ageoligarchs-how-group-political-and-economic-magnates-have-taken-control-bulgaria (accessed October 2018). Johnston, M., Syndromes of Corruption, Cambridge: Cambridge University Press, 2005, p. 155. Ibid., p. 11. Greenless, D., “Suharto’s Legacies of Development and Corruption”, The New York Times, January 28, 2008. See Chapter 1 of this volume for a contrasting view: Shaping the beast. Overholt, W. H., “The Rise and Fall of Ferdinand Marcos”, Asian Survey, 20 (4), 1988, pp. 1137–1163 at p. 1137. Stasavage, D., “Causes and Consequences of Corruption: Mozambique in Transition”, Commonwealth & Comparative Politics, 37 (3), 2008, pp. 65–97. World Bank, op cit n. 12.

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organisation, the hierarchical organisational structure presents an asymmetric power relationship. Those who are in positions of power need a combination of recognition and economic or financial rents. The yearning for recognition of one’s role in a position of power as an efficient, other-regarding leader is in itself a strong motivating factor. The institutional complexes create a system of expectations of the role, which might also be considered as the culture of the organisation, encouraging leaders to seek recognition through their diligence and hard-work and commitment to the role. Yet, in other contexts, there are people in positions of power in organisations, from small, micro-level to governments at the macro-level, who seek rents, sometimes at the expense of recognition and reputation. In some extreme cases, rent-seeking behaviour itself becomes a source of recognition in a perverse way. In many organisations in the developing world, the presence of non-transparent rules and procedures creates opportunities for corruption. Take the simple example of obtaining a driving license. In the USA or Singapore, or in most of the developed part of the world, one would follow a set of procedures of studying the rules of driving, passing a test, and obtaining a learner’s permit, then after practice, when one is ready, going for a driving test and if a pass is achieved a driving license will be issued. These licenses have variable classification. In Canada, a beginner is not allowed to drive on a highway until she obtains the specific license. Now, all these steps could be avoided at once in a country, let us call, B, where one could give a bribe to an official to obtain a driving license. Sometimes, “drivers” learn driving as they begin their work as apprentices as “helpers” of a driver. It is a common sight, in country B, to see young boys in their early teens assisting the driver either by encouraging passengers to board the bus, or alerting drivers to the blind-spots in a busy traffic. As these apprentices turn out to be drivers in due course, they learn how to manoeuvre the vehicle but do not know the rules of the traffic. The reason for using this example is that it has direct consequences on the public. The variability of road accidents by country may reflect both the variability in corruption and the state of governance. Of course, there are several other factors involved in accounting for road crashes, such as terrain, poor road infrastructure, lack of education of road users, lack of traffic police, inadequate enforcement of laws, inadequate awareness of traffic related accidents, unfit vehicles on the road, and so on. Most, if not all, of these deficiencies can be attributed to weakness in governance. When a bribe can secure a fitness certificate for an unfit vehicle, and a bribe in another government department can secure a driving license, it is not a surprise that some of the countries with a high score of bribe-paying are also the countries with a high incidence of road traffic deaths. Table 2, shows that countries with a high degree of political stability, a high human development index, and a cleaner corruption index have fewer traffic accident deaths. Countries such as Sweden or Singapore have road traffic accident death rates of 2.8 and 3.6 respectively, and on the corruption perception

Reduction of corruption as good governance 69 Table 2 Road accidents, corruption, governance and development Country

Estimated Road Traffic Death Rate (2013)35

CPI 2017

Fragile State Rank 2018 (178 states)

Human Development Index (2016)

Sweden

2.8

84

174

14

Switzerland

3.3

85

176

2

Netherlands

3.4

82

167

7

Denmark

3.5

88

175

5

Singapore

3.6

84

161

5

Germany

4.3

81

165

6

Finland

4.8

85

178

23

Japan

4.7

73

156

17

Canada

6.0

82

169

10

New Zealand

6.0

89

170

13

Zimbabwe

28.2

22

13

154

Gambia

29.4

30

37

173

Mozambique

31.6

25

40

181

Rwanda

32.1

55

34

159

Central African Republic

32.4

20

3

188

Liberia

33.7

31

27

177

Malawi

35.0

31

44

170

index both Sweden and Singapore score 84. Contrast those with the Central African Republic and Mozambique, with high road accident death rates of 32.4 and 31.6 respectively, and a high corruption perception index of 20 and 25 respectively. On the fragile state index, which is reflective of the state of governance, both the latter countries score poorly.

Forms of corruption Table 3 lists the countries where those surveyed report paying bribes. Taking the case of bribery, Table 3 makes the case for the variability and the ubiquity of the problem of corruption. It also indicates that some of the least

35 Per 100,000 population. World Health Organization, “Global Health Observatory Data Repository Road Traffic Deaths Data by Country”, 2013. Available at http://apps.who.int/ gho/data/node.main.A997.

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Table 3 Variation in corrupt practices: Bribe paying36 Percentage of People

Country

Less than 5%

Australia, Botswana, Germany, Japan, South Korea, Hong Kong, Sweden

5 to 10%

Italy, Namibia, Senegal, Taiwan, Tunisia

10 to 15%

Brazil, Burundi, Greece, Slovak Republic

15 to 20%

Argentina, Bulgaria, Sri Lanka, Turkey, Uzbekistan

20 to 30 %

Armenia, Chile, China, Costa Rica, Lebanon, Malaysia

30 to 40%

Ghana, Indonesia, Peru, Russia, Ukraine, Venezuela

40 to 50%

Cambodia, Egypt, Morocco, Nigeria, Pakistan, Thailand

50 to 75%

India, Liberia, Mexico, Vietnam

corrupt countries can be found not just in Europe – which the aggregate scores suggest – but also in Asia and Africa. The case of Botswana is interesting because it also scores highly in economic development and in the governance score. The table also raises some questions about the links between corruption and the alleged authoritarian political systems. The difference between China and India is illustrative. Democratic India ranks highly in the bribery scale (50 to 75%) compared to “authoritarian” China (20 to 30%). The Transparency International survey suggested that, as regions, the Middle East and North Africa had the highest percentage of citizens (68%) who rated their governments as doing a bad job in fighting corruption. In fact, in all the regions of the world over half the population surveyed rated their governments as doing a bad job in fighting corruption. In 76 of the surveyed countries, the majority of the respondents rated their governments poorly in addressing the problem of corruption, while in only eight countries a majority of the respondents stated that their governments are doing a good job. In Thailand 72% of the respondents thought that the government was doing a good job in fighting corruption; for Indonesia it is 64%, for Honduras 55%, and for Guatemala, Botswana, and Ecuador it is 54%.37 There are several types of corruption,38 of which two types are worth mentioning here: active, which is predatory, versus passive. An example of passive corruption is “speed-money” in India, Pakistan, and Bangladesh, which facilitates the transfer of files from one desk to the other in government offices, characterised by “License Raj”. The owner of a pharmaceutical business in

36 Transparency International, Global Corruption Barometer, 2017. The survey asked respondents about their direct experiences of paying a bribe to a public official in the last 12 months. 37 Ibid. 38 See also Chapter 1 of this volume: “Corruption: Shaping the beast”.

Reduction of corruption as good governance 71 Bangladesh explained why he paid a bribe to customs officials. If he did not, he would suffer a huge loss. A delay in the release of raw material shipments might not only delay production, but could put the raw materials at risk in a less than ideal storage facility at the airport cargo. There is also corruption that is mindless. For example, the corruption involving the fake metal (and bomb) detectors39 that were sold in Afghanistan and Iraq, which, surely, caused a death toll of serious proportion. Fake medicines and drugs are other examples with devastating consequences. The cases of fake medical certificates attesting the fitness of the migrant workers cost the workers not only their jobs, but who upon medical screening in the receiving countries are repatriated at their own expenses. Such corruptions ruin not only the worker’s job prospects but all his family’s savings that were invested in the migration process. Corruption in the banking and financial sectors is abundant. High-profile cases are well-known. Lesser known are the cases of systemic and routinised practices of bribery and influence peddling secure unworthy loans from banks.40 There is a consensus among development experts that poor or bad governance hamstrings poverty reduction and socio-economic development. In the case of Bangladesh, which has a poor governance record, corruption was identified as one of the features of poor governance, alongside poor revenue collection and other institutional weaknesses.41 Good governance is key in promoting development and the well-being of the people. Good governance is viewed as a governing process that ensures distributive justice fairly. Table 4 presents the quality of governance where low rank indicates good governance. In the Arab Spring of 2011, the protesters were fighting for justice and against corruption. The problem with the nexus of development with corruption is that while development helps purchase legitimacy for the government, corruption erodes that legitimacy very quickly. If a country can showcase more development and less corruption and a firm commitment to the institutions of law, that country has a better survival chance than those where corruption eats up the gains of development leading to the undermining of the rule of law. In some democracies, the government under the control of the ruling party rely on the oligarchs or crony capitalists for financial support to run expensive elections. The oligarchs would be willing to provide the resources on a quid pro quo basis. This is often translated into the state looking the other way, while the oligarchs exploit the society and bend the institutions of the law. In a hard state like Singapore, the institutions of law remain sacrosanct, and thus the bulwark in its fight against corruption.

39 Hawley, C., “The Story of the Fake Bomb Detectors”, BBC, 2014. Available at: www.bbc. com/news/uk-29459896 (accessed October 8, 2018). 40 Bandyopadhyay, T., From Lehman to Demonetization, Delhi: Penguin Random House, 2017. 41 World Bank, Bangladesh – Curbing Corruption and Strengthening Governance: A Note on Strengthening Anticorruption Initiatives, 2007.

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Table 4 Quality of governance: The Legatum Prosperity Index 2017 (0–149 rank) Quality of Governance Rating

Countries

0–9

Finland, Norway, New Zealand, Sweden, Netherlands, Denmark, Canada

10–19

U.K. Germany, Australia, Belgium, Austria, Singapore, Japan

20–29

USA, Uruguay, France, Portugal, Hong Kong, Namibia, Chile

30–39

Spain, Czech Republic, Costa Rica, Botswana, South Africa, Poland, S. Korea

40–49

India, Ghana, Indonesia, Malaysia, Italy, Rwanda, Senegal

50–59

Philippines, UAE, Greece, Hungary, Sri Lanka, Tunisia

60–69

Mongolia, Lesotho, Tanzania, Serbia, Romania, Peru

70–79

Turkey, Bulgaria, Qatar, Argentina, Benin, Kenya, Brazil

80–89

Malawi, Mexico, Jordan, Nepal, Bahrain, Liberia, Niger

90–99

Ivory Coast, Sierra Leone, Mozambique, Guatemala, Saudi Arabia, Vietnam

100–109

Uganda, Kuwait, Ecuador, Pakistan, Nicaragua, Bangladesh, Ethiopia

110–119

Mali, Paraguay, Nigeria, Russia, Morocco, Egypt

120–129

Tajikistan, Laos, China, Cambodia, Zimbabwe, Algeria

130–139

Ukraine, Gabon, Iran, Cameron, Iraq, Sudan

140–149

Swaziland, Burundi, Democratic Republic of Congo, Venezuela, Congo

What is to be done? As corruption remains a big challenge for society, so too does the fight against corruption. Governments around the world seek to eradicate corruption. Although some governments pay only-lip service to the idea, they are still nominally equipped with the departments that fight corruption. Organisations such as Berlin-based Transparency International rank countries around the world on corruption. The report, published annually since 1995, reveals a clear geographical pattern in the distribution of corruption. Rarely are countries in Africa, Asia, and Latin America on the list of the top ten countries with the least corruption. Singapore remains a striking exception. Singapore is also ranked very highly as a country with good governance.42

42 www.prosperity.com/globe/singapore.

Reduction of corruption as good governance 73 The three-yearly Eighth Summit of the Americas held in Lima, Peru in April 2018 chose “Democratic Governance Against Corruption” as the theme of the conference.43 One of the key factors identified in the stagnation of the South American economy was corruption. And in dealing with corruption, it is assumed that democracy is a better tool. In South America, Uruguay, ranked 23 of the 175 countries in the world, has the least levels of corruption in South America as indicated by the Defined previously. See p. 64 CPI of 2017, and ranked 157 in the fragile state index. Unsurprisingly, Venezuela is ranked 168 in the CPI of 2018. Venezuela is also ranked high as a fragile state, ranked at 58 of the 180 world states. A fragile or crumbling state is a breeding ground for corruption as the absence of institutions enable high levels of corruption and irregularities to go on unchecked; at the same time, high-level of corruption creates new, informal rules and shadow institutions that keep the fragile state unchanged, There is a sense of defeatism or despondency even at pragmatic institutions such as the World Bank that doubts the eradication of corruption since it is not “a social ‘malady’ or ‘disease’ but rather an integral feature of governance interactions.”44 It also states that without development leading to a fragmentation or decentralisation of power and competitive economic system, the problem of corruption may not be tackled. In other words, since economically advanced countries such as the member states of the Organisation for Economic Cooperation and Development (OECD), which are characterised by both advanced economies and decentralised or competitive political power, are the best bets against corruption, there is little hope for developing countries to be able to fight corruption as long as the underlying structural reasons prevail. This argument has both logical and empirical bases. Yet, a careful analysis of individual countries in various parts of the world such as Singapore in Asia, Botswana in Africa, and Uruguay and Costa Rica in South America points out that even in a developing country, appropriate policies, a strong leader with very low to zero level of tolerance for corruption, backed up rule of law and institutions can play a big part in reducing corruption.45 Singapore is ranked number 6, the United Arab Emirates is ranked 21, Uruguay is ranked 23, Botswana is ranked 34, and Costa Rica is ranked 38 in terms of levels of corruption. Singapore and the United Arab Emirates are both high-income countries according to the World Bank classification, with per capita Gross National Income (GNI) of US $51,880 and US $40,480 respectively. They are both classified as countries with high human development. Uruguay is an upper-middle-income country with a per capita GNI of US $15,230 and Botswana, with a per capita GNI of US $6,750, is a middle-income country.

43 www.summit-americas.org/brief/053118.htm. 44 World Bank, op cit n. 12 at p. 77. 45 See also Chapter 12 of this volume: “Social norms and attitudes towards corruption: Comparative insights from East Africa”.

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Singapore and Japan in Asia receive high ratings for good governance as well as being known for low levels of corruption. Singapore scored 84 and Japan 73 in the CPI and 18 and 17 respectively in the governance ranking of the Legatum prosperity index. Both states are also robust, scoring 161 and 156 points respectively in the fragile states index. According to Freedom House, in terms of political rights and civil liberties – two important indices of freedom – Japan was given the top rating of 1 and Singapore 4, in both civil liberties and political rights indices on a scale of 1–7. In the world freedom index, Japan received a score of 96 out of 100 while Singapore received a score of 52. The case of Japan illustrates that a robust state with democracy can achieve a high rate of good governance and restrict corruption. Singapore’s key to achieving a huge success in fighting corruption lies in its robust legal system. Singapore has one of the best regulatory systems in the world. In the rule of law index, Singapore had the highest rank in Asia and was ranked 13 in the world, just one rank ahead of Japan’s 14th place. The worst performers in the rule of law index were: Venezuela, ranked 113 (of the 113 countries); Cambodia, ranked 112; Afghanistan, ranked 111; and Egypt, ranked 110. The top achievers were Denmark, ranked 1; Norway, 2; Finland, 3; Sweden, 4; and the Netherlands, 5.46 Meanwhile, China provides a model of hard government with a strong commitment to fighting corruption by mobilising the resources of law as well the political party. There are institutions that report corruption, as there are media and social media sites and whistle-blowers who bring incidents of corruption to public attention. In India, an online magazine, Tehelka.com, earned publicity by pointing out corruption in government departments, and later a web portal, Ipaidabribe.com, where stories of corrupt practices were featured, played a role in not only bringing public attention to corruption but also alerting concerned authorities to take appropriate actions. Yet, scholars believe that many aspects of corruption remain hidden, unreported. Corruption, like crime, is a world unto itself exposing only the tip of the iceberg. It may be concluded that the main difference between a well-governed society and a society encumbered by bad governance – with or without democracy – is the toleration of corruption. In countries lacking democracy and a free press, corruption with impunity becomes the norm; in entrenched democracies corruption is rarely met with impunity. In order to fight corruption at the state level, the chair of Transparency International, Delia Ferreira has proposed a formula known as 4 I’s.47 There are two pluses, or + I’s: + Information from government to the citizens (in other words,

46 World Justice Project, Rule of Law Index, 2017–2018, 2018. Available at: https://worldjusti ceproject.org/sites/default/files/documents/WJP_ROLI_2017–18_Online-Edition_0.pdf (accessed June 10, 2018). 47 Transparency International (2018) Instagram: www.instagram.com/p/BhbDJfIgLgo/? taken-by=transparency_international.

Reduction of corruption as good governance 75 more transparency), and + Integrity of the public officials, politicians and business leaders, to which one could add civil society leaders, journalists, academics, and other professionals. And there are two minuses I’s: – Impunity and – Indifference. Impunity for the corrupt officials and business leaders is one of the lingering problems in many countries, especially in countries with a high CPI. The other is Indifference from the public. If people or citizens become indifferent to corruption it will perpetuate corruption. An active citizenry is a deterrence against corruption.

Bibliography Alatas, S. H. (1968), The Problem of Corruption. Singapore: Donald Moore Press, Ltd. Antonov, S. (2013), The Age of Oligarchs: How a Group of Political and Economic Magnets have Taken Control of Bulgaria. University of Oxford, Reuters Institute for the Study of Journalism. Retrieved from https://reutersinstitute.politics.ox.ac.uk/our-research/ageoligarchs-how-group-political-and-economic-magnates-have-taken-control-bulgaria (accessed October 2018). Bandyopadhyay, T. (2017), From Lehman to Demonetization. Delhi: Penguin Random House. Basel Institute on Governance (2017), Basel AML Index 2017. Basel: Basel Institute on Governance. Brown, D. (2018), The 25 Richest Russian Oligarchs on the ‘Putin list’ that the US just released. Retrieved from www.businessinsider.com/richest-russian-oligarchs-putin-list2018–1 (accessed October 8, 2018). Clifford, S. (2018, March 9), Martin Shkreli Sentenced to 7 Years in Prison for Fraud. The New York Times. Economist (2018, February 17), The World This Week. Economist, p. 6. Economist (2018, April 8), Lula Goes to Jail. The Economist. Retrieved from www.econo mist.com/news/americas/21740253-even-behind-bars-former-president-will-remainforce-be-reckoned-lula-goes-jail. Freedom House (2018), Freedom in the World. Retrieved from https://freedomhouse. org/report/freedom-world/freedom-world-2018. From Crisis to Sustainable Growth – sub Saharan Africa: A Long-Term Perspective Study. (1989). Retrieved from http://documents.worldbank.org/curated/en/4982414 68742846138/From-crisis-to-sustainable-growth-sub-Saharan-Africa-a-long-term-perspec tive-study (accessed June 25, 2018). Greenless, D. (2008, January 28), Suharto’s Legacies of Development and Corruption. The New York Times. Retrieved from www.nytimes.com/2008/01/28/world/asia/28ihtsuharto.1.9542684.html. Hawley, C. (2014, October 3), The Story of the Fake Bomb Detectors. BBC. Retrieved from www.bbc.com/news/uk-29459896. Johnston, M. (2005), Syndromes of Corruption. Cambridge: Cambridge University Press. Kacowicz, A. M. (2018), Regional Governance and Global Governance: Links and Explanations. Global Governance, 24, pp. 61–79. Khondker, H. H. (2006), Sociology of Corruption and “Corruption of Sociology”. Current Sociology, 54(1), pp. 25–39. Krugman, P. (2017, December 18), Passing through to Corruption. The New York Times. Retrieved from www.nytimes.com/2017/12/18/opinion/republicans-taxes-corrup tion.html.

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Legatum Institute (2015, November 2), 2015 Legatum Prosperity Index. Legatum Institute. Retrieved from https://lif.blob.core.windows.net/lif/docs/default-source/publica tions/2015-legatum-prosperity-index-pdf.pdf?sfvrsn=2. Malkin, E. (2018, February 13), Guatemala Arrests Ex-President and His Finance Minister in Corruption Case. The New York Times. Retrieved from www.nytimes.com/2018/02/ 13/world/americas/guatemala-corruption-colom-oxfam.html. May, R. (2018), Putin: From Oligarch to Kleptocrat. New York Review of Books. Retrieved from www.nybooks.com/daily/2018/02/01/putin-from-oligarch-to-kleptocrat/ (accessed October 8, 2018). Messner, J. J. (2018), Fragile States Index 2017. The Fund for Peace. Retrieved from http://fundforpeace.org/fsi/2017/05/14/fsi-2017-factionalization-and-group-griev ance-fuel-rise-in-instability/. Mungiu-Pippidi, A. (2013), Controlling Corruption through Collective Action. Journal of Democracy, 24(1), pp. 101–115. Overholt, W. H. (1988), The Rise and Fall of Ferdinand Marcos. Asian Survey, 20(4), pp. 1137–1163. Osberg, J. (2018), Making Business Personal: Corruption, Anti-Corruption, and Elite Networks in Post-Mao China. Current Anthropology, 59(Supplement 18), April, pp. S149–S159. Pollack, A. (2015, September 20), Drug Goes From $13.50 to $750, Overnight. The New York Times. Retrieved from www.nytimes.com/2015/09/21/business/a-huge-over night-increase-in-a-drugs-price-raises-protests.html. Pring, C. (2017), Global Corruption Barometer. People and Corruption: Citizens’ Voices from Around the World. Transparency International. Retrieved from http://files.trans parency.org/content/download/2161/13659/file/GCB%20Citizens%20voices_F INAL.pdf. Stasavage, D. (2008), Causes and consequences of corruption: Mozambique in Transition. Commonwealth & Comparative Politics, 37(3), pp. 65–97, doi: 10.1080/ 14662049908447797. Syed Hussein, A. (1968), The Problem of Corruption. Singapore: Donald Moore Press, Ltd. Transparency International (2017), Corruption Perceptions Index. Transparency International. Retrieved from www.transparency.org/news/feature/corruption_perceptions_index_2017. Transparency International (2018), Instagram. Retrieved from www.instagram.com/p/ BhbDJfIgLgo/?taken-by=transparency_international. Transparency International Hungary (2018), Black Book of Corruption. Retrieved from https://transparency.hu/wp-content/uploads/2018/03/Black-Book_EN.pdf. UNODC (n.d.), Corruption and Wildlife Crime. UNODC. Retrieved from www.unodc. org/documents/Wildlife/Corruption_Wildlife_Crime.pdf. Watts, J. (2016, September 1), Brazil’s Dilma Rousseff Impeached by Senate in Crushing Defeat. The Guardian. Retrieved from www.theguardian.com/world/2016/aug/31/ dilma-rousseff-impeached-president-brazilian-senate-michel-temer. Wedeman, A. (2012), Double Paradox: Rapid Growth and Rising Corruption in China. Ithaca, NY: Cornell University Press. WikiLeaks (n.d.), Retrieved from https://wikileaks.org. World Bank (2007), Bangladesh – Curbing Corruption and Strengthening Governance: A Note on Strengthening Anticorruption Initiatives. Retrieved from https://openknow ledge.worldbank.org/handle/10986/8104. World Bank (2017), World Bank Development Report, p. 41.

Reduction of corruption as good governance 77 World Health Organization (2013), Global Health Observatory Data Repository Road Traffic Deaths Data by Country. World Health Organization. Retrieved from http://apps. who.int/gho/data/node.main.A997. World Justice Project (2018), Rule of Law Index, 2017–2018. World Justice Project. Retrieved from https://worldjusticeproject.org/sites/default/files/documents/ WJP_ROLI_2017–18_Online-Edition_0.pdf.

5

Cui bono? Corruptors and the corrupted – corporate governance and corruption The roles and responsibilities of the private sector Marie dela Rama, Alice Klettner and Michael Lester

Introduction One of the films made in the wake of the 2007–08 global financial crisis was the movie Margin Call (2011), set in an unnamed investment bank broadly modelled after Goldman Sachs. The monologue below suggests the long-term view held by the Chair and CEO, John Tuld, played by Jeremy Irons who cites the recurrent years of financial crises that have occurred in the last half-millennium of capitalism. Indeed, his view is that the upheaval of the 2007–08 global financial crisis will barely make an impact given the long history of behaviours underpinning human greed and hubris, and the cyclical nature of financial markets: What, you think we may have helped put some people out of business today? That it’s all just for naught? – It’s just money, it’s made up, a piece of paper with some pictures on it so we don’t all kill each other trying to get something to eat. But it’s not wrong and it’s certainly not any different today than it’s ever been. Ever. 1637, 1797, 1819, `37, `57, `84, 1901, `07, 1929, `37, `73, and 1987 … 92, 97, 2000, and whatever this is gonna be called. They’re just the same thing over and over. We can’t help ourselves, and you and I can’t control it, stop it, slow it, or even ever so slightly alter it … We just react … and we get paid well for it if we’re right … and get left by the side of the road if we’re wrong. There’s always been and there’s always gonna be the same percentage of winners and losers – fat pigs and starving dogs in this world.1 The cynical attitude displayed in the dialogue reflects the very worst excesses and corporate social irresponsibility of a company while its ‘rubber-stamp’ board exhibits a combination of ‘do-nothing’, ‘proactive’ and ‘pragmatic’ behaviour in the space of 90 minutes (see Table 1, Typology of a board culture). Tuld’s role

1 Margin Call (2011), Retrieved from www.imdb.com/title/tt1615147/ (accessed 27 May 2017).

Cui bono? Corruptors and the corrupted 79 Table 1 Typology of a board High Intensity Issue Low Intensity Issue

Do-nothing Conservative Inactive

Proactive Pragmatic Active Board

shows the ‘superiority’ and ‘master of the universe’ attitude of his ilk towards the financial system and wider society. The movie is a cautionary tale that firms such as his will always maximise selfinterested opportunities – even if unethical or illegal – in a crisis, in the absence of robust public standards, transparency and sanctioned accountability, by seeking ‘to exploit weak regulation and disclosure standards in some pockets of the global economy.’2 This chapter looks at the role played by the private sector in corruption. All too often corruption is portrayed as behaviour symptomatic of the public sector. But there are two faces to corruption – the corruptor and the corrupted. They represent the Janus-like visage of power.3 If the corruptor is in the private sector, and the corrupted is in the public sector – cui bono? Who ultimately and predominantly benefits – or loses – from the interaction? There can be no supply of corruption without a corresponding demand. The structure of this chapter is as follows: it first introduces the incidence of private sector corruption around the world and the consequences that this can have for effective government. Corporations can engage in and foster corruption or they can strive to rise above it. Next, the chapter provides an overview of international efforts to combat corruption through multilateral frameworks. Corporate governance is then discussed as it guides the way companies are directed and controlled and can mitigate the chances of a company engaging in corrupt conduct. Lastly, we discuss the main issues and responsibilities of the private sector when it comes to ‘undue influence’ in the corporate lobbying of politicians and the ‘revolving door’ of personnel moving between the private and public sectors.

Private sector corruption around the world According to the International Monetary Fund (IMF), the annual cost of bribery is around 2% of global GDP or between USD 1.5 to USD 2 trillion.4 While

2 Transparency International, Global Corruption Report: Corruption and The Private Sector, Cambridge University Press. Retrieved from www.transparency.org/whatwedo/publication/ global_corruption_report_2009, 2009, p. xxx. 3 Bacharach, P. & Baratz, M.S., ‘Two faces of power’, American Political Science Review, 56 (4), 1962, pp. 947–952. 4 IMF, Corruption: costs and mitigating strategies, Staff Discussion Note, Fiscal Affairs and Legal Departments, Washington, DC: International Monetary Fund. Retrieved from www.imf.org /external/pubs/ft/sdn/2016/sdn1605.pdf, 2016.

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the economic costs are substantial, the corrosive societal and governance effects are arguably greater. It is impossible to quantify the true monetary value of a dysfunctional state. The private sector has a pivotal role to play in promoting or deterring corrupt practices.5 A series of short-term bribes may pay-off a company’s need to facilitate efficient commercial transactions by cutting through red tape. However, even petty corruption or facilitation payments has or have insidious and widespread ramifications6 and ‘bribery causes more economic harm than it fixes’.7 The long-term effects include the weakening of the state institutions that they have captured and misallocating the use of resources.8 Far from being petty, they can be ‘not a minor nuisance in the functioning of the public administration and companies but a cancer that has harmful consequences’.9 When private sector players ignore or do not support the rules of the countries in which they operate, the results tend to compound the arbitrariness and uncertainty of corruption by undermining public governance and weakening its institutions.10 They also antagonise and undermine trust in civil society by demonstrating that the rules do not apply to well-funded or politically-connected private sector players.11 In its 2009 global corruption report on private sector corruption, Transparency International highlighted the widespread threat that this phenomenon poses for societies. This is especially true when it undermines ‘the legitimacy of governments … thwart[s] democratic decisions, posing a significant threat to accountable and inclusive governance everywhere’.12

5 dela Rama, M. & Rowley, C., The changing face of corruption in the Asia-Pacific: Current perspectives and future challenges, Amsterdam: Elsevier, 2017. 6 Proctor, A., ‘Petty corruption in developing countries: Here for the long term’, Chapter 22, pp. 327–334 in dela Rama, M. & Rowley, C. (eds) The changing face of corruption in the Asia-Pacific: Current perspectives and future challenges, Amsterdam: Elsevier, 2017. 7 Spahn, E.K., ‘Implementing global anti-bribery norms: From the Foreign Corrupt Practices Act to the OECD Anti-Bribery Convention to the UN Convention Against Corruption’, Indiana International and Comparative Law Review, 23 (1), 2013, pp. 1–33 at p. 4. 8 dela Rama, M., ‘Corporate governance and corruption: Ethical dilemmas of Asian business groups’, Journal of Business Ethics, 109 (4), 2012, pp. 501–519. 9 Argandoña, A., ‘Private and public corruption: facilitating payments’, Chapter 5 in dela Rama, M. & Rowley, C., op cit n. 6, pp. 71–80 at p. 77. 10 Huber-Grabenwarter, G. & Boehm, F., ‘Laying the foundations for sound and sustainable development: Strengthening corporate integrity in weak governance zones’, Chapter 3 in Transparency International, op cit n. 2, pp. 46–54 and Oberoi, R., ‘Governance gridlocks and ubiquitous corruption: Charting causes, costs and consequences of corruption in India’, Chapter 12 in dela Rama, M. & Rowley, C. (eds), op cit n. 6, pp. 179–208. 11 Faccio, M., ‘Politically-connected firms’, American Economic Review, 96 (1), 2006, pp. 369–386; dela Rama, M., ‘Corruption, corporate governance and building institutions in the Asia-Pacific’, Chapter 7 in dela Rama, M. & Rowley, C. (eds), op cit n. 6, pp. 93–108; and dela Rama, M. & Rowley, C., op cit n. 5. 12 Transparency International, op cit n. 2, p. xxvii.

Cui bono? Corruptors and the corrupted 81 Certain industrial sectors are also more vulnerable to corrupt practices with over 50% of respondents in the construction, gas, oil, telecommunications and mining industries reporting bribery.13 These are sectors typically characterised by a significant government role in its interaction with the private sector, in forms such as major public contracting, regulation or licensing. On the other hand, leading private sector players in such sectors have developed and put in place internal systems (such as codes of conduct that are implemented under the supervision of a risk or governance board committee and/or involving sector-wide arrangements) to guard against corrupt behaviour. These companies have an ‘ethical organisation’ at their core with a ‘culture of integrity’.14 Internally, such companies make a strong ‘business case’ for anti-corruption practices.15 Externally, these companies are validated by the market through integrity dividends16 or a higher valuation of their share price due to their reputational premium, especially if these well-governed companies are located in not-so-well-governed countries.17 The code of conduct of Australian mining giant, BHP, posits the company’s perspective on how corruption affects the reputation of the company by undermining its legitimacy, its social licence to operate and the wider ramifications on communities.18 Despite the existence of the code, BHP has been party to significant incidents of bribery and corruption. A most notable one is a 2013 investigation by the US Securities and Exchange Commission over alleged breaches of the 1977 US Foreign Corrupt Practices Act and by the Australian Federal Police into violations of Australia’s Criminal Code Act 1995 (which includes anti-bribery laws) in relation to entertainment and hospitality of foreign officials during the 2008 Beijing Olympics.19 The main challenge remains in the implementation, rather than the formulation, of codes of conduct and anti-corruption policies.

13 Ibid at p. 5. 14 Tiffen, N., ‘Is it simple as ABC? A practitioner’s perspective on anti-bribery compliance’, Chapter 21 in dela Rama, M. & Rowley, C. (eds), op cit n. 6, pp. 313–326. 15 Transparency International, op cit n. 2, p. xxvii. 16 Ibid. 17 McKinsey, ‘Investor Opinion Survey on Corporate Governance, June’. Retrieved from www. oecd.org/daf/ca/corporategovernanceprinciples/1922101.pdf, 2000, and Durnev, A. & Kim, E.H., ‘Explaining differences in the quality of governance among companies: Evidence from emerging markets’, Journal of Applied Corporate Finance, 19 (1), 2007, pp. 16–24. 18 BHP Code of Conduct, (2016), Retrieved from www.bhp.com/our-approach/our-company /code-of-business-conduct (accessed 28 May 2018). 19 BHP, ‘Update on continuing regulatory investigation’, Media Release, August 13. Retrieved from www.bhp.com/media-and-insights/news-releases/2013/08/update-on-continuingregulatory-investigations, 2013.

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The role of multilateral frameworks in addressing anti-corruption The following multilateral agreements, principles and working groups are in place to address corruption and promote anti-corruption efforts around the world. Some are international treaties and others have a specific focus on the role of the private sector.20 The UN Convention Against Corruption (UNCAC) is the ‘only legally binding universal anti-corruption instrument’ and has been signed by 140 countries at the time of writing.21 It covers five areas: ‘preventive measures, criminalisation and law enforcement, international cooperation, asset recovery, technical assistance and information exchange.’22 In particular, in addition to bribery and corruption, the Convention’s articles define trading in influence (Article 18), abuse of functions (Article 19) and other acts of private sector corruption such as laundering the proceeds of crime (Article 23).23 The UN Global Compact (UNGC) is a voluntary initiative undertaken by the private sector to support universal sustainability principles and sustainable development goals of the UN.24 In particular, the 10th Principle of the Compact directly addresses corrupt actions by private sector participants stating that: Businesses should work against corruption in all its forms, including extortion and bribery.25 A list of signatories to the Compact is available by country, size of business, sector and joining date.26 The multilateral frameworks mentioned above show the need for mutual cooperation and exchange of information. However, there is still some way to go when it comes to the operation of multilateral cooperation and coordination. Only four countries are considered to be active enforcers on anti-bribery:

20 See also Chapter 3 of this volume: ‘Bribery, corruption and the law’. 21 UN Office on Drugs and Crime, UNCAC Signature and Ratification Status. Retrieved from www.unodc.org/unodc/en/corruption/ratification-status.html (accessed 18 February 2018). The UNCAC entered into force on 14 December 2005. 22 UN Office of Drugs and Crime, About UN Convention Against Corruption. Retrieved from www.unodc.org/unodc/en/corruption/uncac.html, (accessed 18 February 2018). 23 UN Office of Drugs and Crime, UN Convention Against Corruption. Retrieved from www. unodc.org/documents/treaties/UNCAC/Publications/Convention/08-50026_E.pdf, (accessed 18 February 2018). 24 UN Global Compact, About Us. Retrieved from www.unglobalcompact.org/about (accessed 18 February 2018). 25 UN Global Compact 10th Principle. Retrieved from www.unglobalcompact.org/what-is-gc /mission/principles/principle-10 (accessed 18 February 2018). 26 UN Global Compact, Our Participants. Retrieved from www.unglobalcompact.org/what-isgc/participants (accessed 18 February 2018).

Cui bono? Corruptors and the corrupted 83 Germany, Switzerland, UK and USA. These top four also account for one-fifth of the world’s global exports.27 The above multilateral frameworks are complemented by civil society activity and participation, such as Transparency International’s work,28 which provides an ongoing authoritative and informed voice in the fight against corruption. Similarly, on the private sector and corporate governance side is the International Corporate Governance Network’s (ICGN) guidance on anti-corruption practices. Their policy statement sets out the clear link between corruption, governance and the fiduciary responsibility of investors and their investments.29 Representing the institutional investor community of pension funds, not-forprofit funds, sovereign wealth funds, other private sector funds, directors’ associations and investment associations, the ICGN is a formidable influence in helping its members with total assets under management of USD 26 trillion. It recommends that these investors make informed decisions when implementing and applying economic, social and governance (ESG) considerations in their investment decisions.

The role of corporate governance in anti-corruption Corporate governance dictates the way corporations are directed and controlled and hence can have a significant impact on whether a company accepts or rejects opportunities to engage in corruption. In countries where corporate governance rules are enforced by independent regulation, this can significantly reduce the likelihood of corporate leaders taking the route of least resistance. The law and regulation pertaining to corporate governance is very broad in its scope and takes a variety of forms. In most countries it includes hard law, usually mandatory rules found in corporate statues, and also soft law, such as semivoluntary codes of corporate governance.30 Strong corporate governance is important in mitigating corruption, as without it the powers entrusted in boards and directors could be ‘vulnerable to abuse for private gain, to the detriment of other stakeholders and society’.31

27 Tomasic, R., ‘Global corporations, bribery and corrupt practices: Anti-bribery laws and the limits of state action’, Law and Financial Markets Review, 12 (1), 2018, pp. 18–30. 28 Transparency International, Asia-Pacific Corruption, Global Barometer. Retrieved from www. transparency.org/whatwedo/publication/people_and_corruption_asia_pacific_global_corrup tion_barometer (accessed 18 February 2018). 29 ICGN Guidance on Anti-Corruption Practices, Retrieved from www.icgn.org/sites/default/ files/ICGN_Anti-Corruption_2015_0.pdf, 2015 (accessed 18 February 2018). 30 Farrar, J., Corporate governance: Theories, principles and practice, Oxford University Press, 2008. Retrieved from http://econpapers.repec.org/RePEc:oxp:obooks:9780195551457. 31 Transparency International, op cit n. 2 at p. 4.

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Hard law Hard law relevant to corporate governance includes fundamental provisions of corporations’ legislation that set out the rights and responsibilities of those involved in directing and controlling a corporation. In most jurisdictions these include: (1) the managers of the corporation; (2) the shareholders; and, (3) a board of directors. The managers run the day-to-day operations of the company under the leadership of a chief executive officer (CEO). The shareholders provide finance in return for rights to dividends and limited voting rights. One of these voting rights permits them to elect a board of directors whose job is to monitor and advise the managers and report back to the shareholders and other interested parties. In small companies, the managers, shareholders and directors may overlap (a company founder may perform all three roles) but as a company grows the board becomes a vital intermediary between knowledgeable managers and dispersed shareholders.32 In the wake of the Enron collapse, one example of hard law as it relates to corporate governance is the 2002 US Sarbanes-Oxley Act. The implementation problems and compliance approach with this particular legislation33 show the difficulties of hard law and their unintended consequences as a reactive rather than a preventative measure. They are also subject to changing political views and ideologies, as witnessed by President Trump’s rolling back of hard corporate regulations.34 In some countries, other stakeholders, such as employees, have a defined role to play. For example, under the principle of codetermination, German supervisory boards must include employee representatives as well as shareholder representatives who together, as a group of non-executive directors, monitor the decisions of the executive management board.35 Corporate legislation tends to set general rules or provide for delegated regulations which may be interpreted further or legitimised by the courts if their application in a particular scenario is challenged or unclear. For example, in Anglo-American jurisdictions a common legal duty imposed upon company directors is that, when making decisions, they must act ‘in the best interests of the corporation’ as well as for a ‘proper purpose’. They must also discharge their duties with ‘due care and diligence’.36 Thus, if a board member were to act in a corrupt manner (or fail to

32 Berle, A. A., & Means, G. G. C., The modern corporation and private property, New Brunswick, NJ: Transaction Publishers, 1991 and Fama, E. F., & Jensen, M. C., ‘Separation of ownership and control’, The Journal of Law and Economics, 26 (2), 1983, pp. 301–325. 33 See Coates IV, J.C., ‘The goals and promise of the Sarbanes-Oxley Act’, Journal of Economic Perspectives, 21 (1), 2007, pp. 91–116 and Dravis, B.F., The role of independent directors after Sarbanes-Oxley, Chicago: American Bar Association Publishing, 2007. 34 Rapoport, M., ‘Why stop at Dodd-Frank? Some want Trump’s regulatory overhaul to go further’, Wall Street Journal. 14 February 2017. Retrieved from www.wsj.com/articles/trumpgives-impetus-to-push-to-revamp-sarbanes-oxley-auditor-rule-1487070001. 35 Gorton, G. & Schmid, F. A., ‘Capital, labor, and the firm: A study of German codetermination’, Journal of the European Economic Association, 2 (5), 2004, pp. 863–905. 36 Farrar, J., Corporate governance: Theories, principles and practice, Oxford University Press, 2008. Retrieved from http://econpapers.repec.org/RePEc:oxp:obooks:9780195551457.

Cui bono? Corruptors and the corrupted 85 prevent others doing so) it is highly likely that a court would determine this to be a breach of the director’s legal duties and would impose fines or even jail. Unfortunately, such cases are rare as the costs of bringing a claim often outweigh the benefits. In some countries only aggrieved shareholders have the right to bring a private claim against the directors, whereas in other countries the corporate regulator has public power to enforce directors’ duties. Other legal provisions relevant to corporate governance are those that set out corporate reporting requirements. Much corporate governance regulation works on a disclosure basis, requiring information rather than prescribing actions. By requiring companies to make public statements about their activities, these laws improve transparency as a form of accountability, usually without sanctions imposed for breaches of the actual behaviour governed. For example, many countries now require mandatory disclosures around the remuneration paid to key executives and provide for shareholders to approve (or vote against) the company’s remuneration policy at the annual general meeting.37 Thus, corporation laws such as directors’ duties can work together with more specific anti-corruption legislation. As well as the Australian and US laws mentioned above, other jurisdictions have statues in place such as the Canadian Corruption of Foreign Public Officials Act (1999) and the UK Bribery Act (2010).

Soft law In terms of soft law, most countries now have a corporate governance code in place. At last count there were 93 of these around the world.38 Codes of corporate governance provide recommended standards and guidance around best practice structures, processes and behaviours for facilitating good corporate governance. As the unique nature and circumstances of any particular company will determine its optimal corporate governance system, these codes are usually very flexible. Most codes employ a system known as ‘comply-or-explain’, first introduced in the United Kingdom in 1992. This mechanism requires that for every recommendation in the code, a company must either state that the recommendation has been adopted (the comply option) or alternatively they may state that it has not been adopted and justify why this is the case (the explain option).39 Corporate governance codes

37 Conyon, M. & Sadler, G., ‘Shareholder voting and directors’ remuneration report legislation: Say on pay in the UK’, Corporate Governance: An International Review, 18 (4), 2010, pp. 296–312 and Hill, J. G., ‘Regulating executive remuneration: International developments in the post-scandal era’, European Company Law, 3 (2), 2006, pp. 64–74. 38 Klettner, A., Corporate governance regulation: The changing roles and responsibilities of boards of directors. London: Taylor & Francis, 2017. Retrieved from https://books.google.com.au/ books?hl=en&lr=&id=PkUlDwAAQBAJ&oi=fnd&pg=PP1&dq=klettner+and+codes& ots=GE7qWidrPp&sig=nWxgsDng7lTUPRzKyjqTorqfEao. 39 Keay, A., ‘Comply or explain in corporate governance codes: In need of greater regulatory oversight? Comply or explain in corporate governance codes’, Legal Studies, 34 (2), 2014, pp. 279–304. https://doi.org/10.1111/lest.12014.

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tend to make recommendations about matters such as the composition of the board of directors, the roles of the chair and CEO, use of board subcommittees, communications with shareholders, fair remuneration practices and ethical conduct.

Role of the board With regard to board composition, codes of corporate governance have been a strong force in the drive to include more independent directors on boards. Most codes now encourage companies to have a majority of independent directors on their board (and often also on each board committee) as well as an independent chair. The purpose of this is to reduce the risk of corrupt behaviour by ensuring there is independent monitoring of executive management but also by reducing the risk of a concentration of power and influence in the hands of one individual.40 Of course, privately held companies are not subject to similar governance, transparency and accountability processes. There is now a strong norm promulgated by corporate governance codes that the CEO and chair of a company should not be the same person. According to the late Sir Adrian Cadbury, concentration of both of these powerful roles in the one person – also known as CEO duality – is not healthy for a company: The separation of the two roles builds in a check and a balance. Chairmen are responsible for ensuring that their boards take account of the interests of the shareholders and that they carry out their supervisory functions conscientiously. Chairmen, who are also chief executives, have to be scrupulously clear in their own minds when they are acting as the one and when as the other, as they move between the two roles. It can be done and it is done, but it is less demanding on all concerned to divide the roles rather than the individual. When someone who holds both positions is determined on a course of action, which perhaps entails high risks for the company, who is to challenge their judgment?41 In Margin Call, this concentration of power and risk was embedded in the character of John Tuld who held CEO duality and controlled a board that rubberstamped his actions.

Role of the independent director Every corporate governance code will have its own definition of an independent director, however there are some common themes. A director who is also employed as

40 McCabe, M. & Nowak, M., ‘The independent director on the board of company directors’, Managerial Auditing Journal, 23 (6), 2008, pp. 545–566. 41 Cadbury, A., Corporate governance and chairmanship, Oxford: Oxford University Press, 2002, p. 110.

Cui bono? Corruptors and the corrupted 87 an executive, such as the CEO, cannot be independent. However, not all nonexecutive directors are independent. For example, the UK code, published by the Financial Reporting Council (FRC) lists the following as relationships or circumstances that could lead to a loss of independence: If a director: • • • • • • •

has been an employee of the company or group within the last five years; has, or has had within the last three years, a material business relationship with the company either directly, or as a partner, shareholder, director or senior employee of a body that has such a relationship with the company; has received or receives additional remuneration from the company apart from a director’s fee, participates in the company’s share option or a performance related pay scheme, or is a member of the company’s pension scheme; has close family ties with any of the company’s advisers, directors or senior employees; holds cross-directorships or has significant links with other directors through involvement in other companies or bodies; represents a significant shareholder; or has served on the board for more than nine years from the date of their first election.42

Independent directors provide, in theory, an avenue by which investor concerns about corporate corruption may be channelled. However, ‘independent directors may also lack courage in the desire to be accepted’,43 thus their presence is no guarantee that whistleblowing of corrupt activities to these non-executives will be heard sympathetically.

Role of board committees It is also recommended in codes that the chairs of board sub-committees are independent directors (yet not the same person as the chair of the board). This helps to ensure that control over committee agendas is shared by different board members. This is important as in large companies the board committees will be delegated responsibilities in relation to audit (financial control); nomination (selection of new board members) and remuneration (determining executive pay). Of course, board committees can still be subordinated by a powerful chair or CEO in acts of self-preservation. An example of this is AMP Australia’s former

42 FRC, The UK Corporate Governance Code, 2016. Retrieved from www.frc.org.uk/getattach ment/ca7e94c4-b9a9-49e2-a824-ad76a322873c/UK-Corporate-Governance-Code-April -2016.pdf. 43 Gandossy, R. & Sonnenfeld, J., ‘“I see nothing, I hear nothing”: Culture, corruption and apathy’, International Journal of Disclosure and Governance, 2 (3), 2005, pp. 228–243.

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chair, Catherine Brenner, who excised the name of the former AMP CEO, Craig Meller, in an independent report that was critical of company practices.44 Although prevention of corruption tends not to be a direct focus of most national codes it is often seen as one of the benefits of good corporate governance. It may also be included within: the duties of the audit committee45; the fostering of an ethical corporate culture46 or as a topic for which company policies should be disclosed.47 The ICGN model code states: The board should ensure that management has implemented appropriately stringent policies and procedures to mitigate the risk of bribery and corruption or other malfeasance. Such policies and procedures should be communicated to shareholders and other interested parties.48

Boards and crisis management When it comes to crisis management and dealing with issues of corporate scandals, a board culture may be characterised by the following four styles of response: a. The do-nothing board: The board directors do not act and have their heads in the sand, waiting for the storm to pass over and ride it out until the situation returns to normal. b. The conservative board: The board is nominally the most conservative part of an organisation and will wait until an issue arises before addressing it; it is more active than the do-nothing board but reactive. Most boards can be classified in this area. c. The proactive board: This board is progressive and reform-minded; they anticipate issues as, or before, they arise and actively seek to mitigate their impact. d. The pragmatic board: This board acts according to the conditions of the environment, not seeking to proactively address the problems, but responding according to the intensity of the crisis.

44 Maley, K., ‘AMP Chair Catherine Brenner’s day of reckoning’, Australian Financial Review, 18 April 2018. Retrieved from www.afr.com/business/banking-and-finance/financialservices/amp-chair-catherine-brenners-day-of-reckoning-20180418-h0yx9p. 45 Securities and Exchange Commission of Pakistan, Code of Corporate Governance, 2012, p. 17. 46 National Committee on Corporate Governance (NCCG), The National Code of Corporate Governance for Mauritius, 2nded, 2016, p. 45. 47 Azerbaijani Economic Development Ministry, Azerbaijan Corporate Governance Standards, 2011, p. 20. 48 International Corporate Governance Network, ICGN Global Governance Principles, 5th ed, 2017, p. 19.

Cui bono? Corruptors and the corrupted 89 It is important to assess how a board culture responds to crises involving corruption, as a do-nothing or conservative board may indicate ‘. . . fundamental checks and balances of corporate governance are failing or have been actively manipulated’.49 Nevertheless, it is possible that a board may exhibit all four modalities during the course of a corporate crisis.

Stewardship codes Since the global financial crisis another form of soft law, the stewardship code, has become popular as a means to improve shareholder participation in corporate governance.50 Stewardship codes have been published in nearly 20 countries with the UK leading the way in 2010.51 Some of these codes have been issued by corporate governance regulators to supplement and support their corporate governance code whereas others are purely voluntary industry initiatives. Most use the same comply-or-explain mechanism employed by corporate governance codes, which means their focus is on transparency rather than prescriptive rules. However, the ultimate aim of stewardship codes is to encourage large institutional investors, such as pension funds and insurance firms, to become more active owners of investee companies. The ICGN released its Global Stewardship Principles to: provide a framework to implement stewardship practices in fulfilling an investor’s fiduciary obligations to beneficiaries or clients.52 Stewardship codes recommend that investors do this by increasing their monitoring activities, voting responsibly, avoiding conflicts of interest and engaging in dialogue with companies where necessary. The idea is that in doing so they will better protect the value of their investments, thereby fulfilling their duties to the ultimate beneficiaries of the funds that they hold. Overall, if this works, it should provide another layer of monitoring to reduce the likelihood of company managers and directors misbehaving in a corrupt or fraudulent manner.

49 Aldrighi, D.M., ‘Corruption around the enterprise: corporate fraud and conflicts of interest’, in Transparency International, op cit n. 2, Chapter 2. 50 Hill, J. G., ‘Good activist/bad activist: The rise of international stewardship codes’, Seattle University Law Review, 2017. Retrieved from https://papers.ssrn.com/abstract=3036357. 51 Klettner, A., Corporate governance regulation: The changing roles and responsibilities of boards of directors, London: Taylor & Francis, 2017. Retrieved from https://books.google.com.au/ books?hl=en&lr=&id=PkUlDwAAQBAJ&oi=fnd&pg=PP1&dq=klettner+and+codes& ots=GE7qWidrPp&sig=nWxgsDng7lTUPRzKyjqTorqfEao. 52 ICGN, Global Stewardship Principles, 2016. Retrieved from http://icgn.flpbks.com/icgnglobal-stewardship-principles.

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Responsible investment also has been encouraged by international soft law such as the Principles of Responsible Investment (PRI) published by the United Nations in 2006. These principles are described as voluntary and aspirational with the aim of contributing to a more sustainable finance system. They have attracted a global signatory base which represents a majority of the world’s professionally managed investments.53 Since the launch of the principles in 2006 the number of signatories has grown from around 100 to over 1800.54 The PRI sees corruption as one of many value-destroying reputational risks that can be reduced by appropriate corporate governance.

Corporate lobbying This section and the next look at the issue of corporate governance and corruption, namely, the insidiousness and justification of corporate lobbying,55 and, in relation to that, the ‘revolving door’ between the public and private sectors. Lobbying involves the perceptions and risks of corruption and misconduct, particularly through conflicts of interest on the part of public officials due to their receipt of payments, including political donations; secondary employment; and the ‘revolving door’ behaviour of public officials and lobbyists.56 Articles 18 and 19 of UNCAC address this unfair access to, and influence on, ‘insiders’ in public policy. However, these phenomena are often obscured by secrecy, abetting the exercise of political connections and the power of lobbyists with their advantages of wealth. Igan and Mishra found that lobbying paid off for those in the American financial industry with the legislators lobbied changing their positions in favour of deregulation from 1999–2006.57 The long-term consequences of this can be seen in the immediate effects of the global financial crisis as the captured regulators failed to regulate. It is estimated that in America, there are around five lobbyists for every lawmaker.58 In Australia, there is neither any systematic action nor any professional body dedicated to lobbyists to issue and enforce standards of conduct in the lobbying

53 UN PRI, About the Principles of Responsible Investment, 2017. Retrieved from www.unpri. org/about. 54 Ibid. 55 Bouwen, P., ‘Corporate lobbying in the European Union: The logic of access’, Journal of European Public Policy, 9 (3), 2002, pp. 365–390. 56 Tham, J.-C. & Ng, Y.-F., Regulating direct lobbying in New South Wales for integrity and fairness. Report prepared for the NSW Electoral Commission, August 2014. Retrieved from www.elections.nsw.gov.au/__data/assets/pdf_file/0004/188140/Regulating_Direct_Lob bying_in_New_South_Wales_for_Integrity_and_Fairness.pdf. 57 Igan, D. & Mishra, P., ‘Wall Street, Capitol Hill and K Street: Political influence and financial regulation’, Journal of Law and Economics, 57 (4), 2014, pp. 1063–1084. 58 Transparency International, op cit n. 2 at p. xxvii.

Cui bono? Corruptors and the corrupted 91 industry. The UK Association of Professional Political Consultants (APPC) and other professional groups were scrutinised by a House of Commons report59 and, while no monetary amount can be placed on the breadth of this industry in that country, the industry’s political influence is assessed as ‘disproportionate’.60 In America, the lobbying industry is sophisticated, systemic and a USD 3 billion industry61 with conglomerates such as General Electric paying USD 20 million in 2007.62 The Sunlight Foundation estimated a Washington lobbyist with some form of government experience generated USD 300,000 in median revenue in 2012.63 These practices undermine key democratic principles: the protection of the integrity of representative government through transparency in decision making; prevention of corruption and misconduct; promoting fairness in decision making; and respect for the political freedom for all to directly lobby. Lobbyists provide increasingly unprecedented access to political decision makers. In Europe, there are an estimated 2,500 lobbying organisations employing 15,000 lobbyists in Brussels – all of whom vie for influence on EU policy making.64 Lobbying maybe unethical, but it is not illegal. As in most cases where activities fall in the greyness of the latter, corporate boards may have given tacit, if not explicit approval for such participation, paying out large fees and commission payments on ‘success’. One lobbyist had no illusions about the nature of his influence-peddling activity: ‘I’m a mercenary, in effect being paid by a company to do their bidding’.65

Revolving door politics The term ‘revolving door’ when applied to politics denotes the movement of senior people between the public and the private sectors and vice versa. There

59 House of Commons, Lobbying: access and influence in Whitehall, Report by the Public Administration Select Committee, 2009. Retrieved from https://publications.parliament.uk /pa/cm200809/cmselect/cmpubadm/36/36i.pdf. 60 Beetham, D., ‘How widely should we define corruption?’ Criminal Justice Matters, 94 (1), 2013, pp. 4–5. 61 Centre for Responsive Politics, Lobbying Database, 2017. Retrieved from www.opensecrets. org/lobby/. 62 Drutman, L., The business of America is lobbying: how corporations became politicised and politics became more corporate, New York: Oxford University Press, 2015. 63 Drutman, L. & Furnas, A., ‘K Street pays top dollar for revolving door talent’, Sunlight Foundation, 21 January 2014. Retrieved from https://sunlightfoundation.com/ 2014/01/21/revolving-door-lobbyists-government-experience/. 64 Transparency International, op cit n. 2 at p. xxvii. 65 Christodoulou, M. & Begley, P., ‘Canberra Inc. ‘The revolving door’ of lobbyists shaping today’s policies’, Sydney Morning Herald, 13 October 2017. Retrieved from www.smh.com. au/politics/federal/canberra-inc-lobbyists-and-the-influence-industry-20171012-gyzr52 .html.

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are legitimate reasons for such two-way movement of senior personnel: it brings real world, commercial experience, and specialised expertise and knowledge to bear on the processes of improved public policy and decision making in the public interest; and, it informs business about the workings of governments: A robust exchange of expertise and talent can raise the quality of regulation and decision-making. If personal ties are too densely interwoven and financial interests are too closely aligned, however, the chances are slim that all stakeholders’ views or the public interest will be carefully considered.66 However, such movements can provide opportunities for vested private interests to advance their own agendas at the expense of the general public good; at a minimum they can foster perceptions of close and cosy relationships between business and politics against the public interest.67 ‘Revolving door’ politics presents problems for modern democracies that go largely unrecognised, unaccounted for and un-policed, and as a result can profoundly undermine representative democracy and the base of trust upon which it is built.68 The traditional legal and criminal conceptions of corruption are premised around the taking of personal benefits in the form of gifts, payments and bribes in return for exercising public duties in the interests of the private parties making the payments, with the latter gaining commercially from the officer’s decision at the expense of the public good. The difficulty arising with ‘revolving door’ behaviour is that the conflict of interest that arises is typically displaced in time between the exercise of the influence and the payment of the benefit. The ‘decision’ or ‘favour’ done in public office is likely to be rewarded once they leave their position in the public sector and take up lucrative employment in the private sector, typically with an organisation with whom the office holder was dealing in their public office. Receiving direct quid pro quo payment upfront while in office and then conferring political favour can be more readily associated for purposes of prosecution than the ex-post benefit rewarded and accepted after the favour. The conflict of interest only becomes apparent after they leave office. Again, from Zinnbauer: Even when pertinent laws are effective and political decisions are officially not for sale, a close nexus between politics and business may still give

66 Zinnbauer, D., ‘Corrupting the rules of the game: From legitimate lobbying to capturing regulations and policies’, in Transparency International, op cit n. 2 at pp. 32–38. 67 Transparency International, op cit n. 2 at p. 274. 68 Rennie, G., ‘The revolving door: Why politicians become lobbyists, and lobbyists become politicians’, The Conversation, 22 September 2016. Retrieved from https://theconversation. com/the-revolving-door-why-politicians-become-lobbyists-and-lobbyists-become-politicians -64237.

Cui bono? Corruptors and the corrupted 93 corporate interests disproportionate influence. Politicians or their families may have direct financial stakes in the industries they are supposed to regulate, or set their sights on lucrative private sector posts when they leave office. National elites often attend the same selective schools and move easily between public bureaucracies and corporate postings during their professional careers (the ‘revolving door’ phenomenon), cultivating strong interpersonal ties.69 These strong interpersonal ties are valuable with ‘. . . 50% of executives from OECD countries reported that personal and familiar relationships [were used] to win public contracts in non-OECD countries’.70 In the UK, political revolving-door movements are monitored by the Advisory Committee on Business Appointments (ACOBA) – a non-departmental public body under the aegis of the Cabinet Office.71 According to Transparency International, 40% of the country’s market capitalisation are politically connected firms – though less than the estimated 80% in Russia.72 The UK National Audit Office noted there were four risks with the revolving door: abuse of office, undue influence, profiteering and switching sides.73 In France, the revolving door is addressed with Article 432–13 in the penal code preventing the movement for three years, punishable by three years’ imprisonment and a fine of €200,000.74 The caveat, or what makes the French experience different, is that public servants do not need to resign from their positions if they wish to run as an elected official. Indeed, over half of lower house representatives come from the public sector.75 The fourth estate has accounted for instances of many former politicians entering business life or lobby groups after their departures, especially after an election. In Australia, the revolving-door phenomenon has caused concern and disquiet in the community. Of particular note is the sway that coal-based industries and lobby groups have on public policy, with its hiring of former political advisers and ministers. Australia is the world’s largest exporter of coal as well as the country with the highest dependence on coal as fuel for the generation of

69 Zinnbauer, op cit n. 66 at p. 34. 70 Ibid. 71 ACOBA. Retrieved from www.gov.uk/government/organisations/advisory-committee-onbusiness-appointments (accessed 23 September 2018). 72 Transparency International, op cit n. 2 at p. xxvii. 73 UK NAO, Investigation into government’s management of the Business Appointment Rules, 19 July 2017. Retrieved from www.nao.org.uk/wp-content/uploads/2017/07/Investiga tion-into-governments-management-of-the-Business-Appointment-Rules.pdf. 74 Legifrance. Retrieved from www.legifrance.gouv.fr/affichCodeArticle.do;jsessionid=6249 B543BC51299B7439E88407866EDA.tplgfr39s_3?idArticle=LEGIARTI000033912762&cid Texte=LEGITEXT000006070719&categorieLien=id&dateTexte=. 75 Viscusi, G., ‘A reform beyond Macron’s grip: The revolving door of politics’, Bloomberg Businessweek, 8 June 2017. Retrieved from www.bloomberg.com/news/articles/2017-06-08/ a-reform-beyond-macron-s-grip-the-revolving-door-of-politics.

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electricity. The political–business nexus in this regard is suggestively illustrative of why, from an international perspective, Australia’s energy policy has become particularly politicised and lags behind that of other OECD countries in the promotion of renewables and policies for the transition from coal to a fossil-fuel-free future.76 The 2018 Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry77 and the forthcoming Royal Commission into Aged Care78 is another evidence of this community disquiet. The appalling conduct perpetrated by Australia’s largest financial institutions including the Commonwealth Bank, which charged fees to deceased clients,79 and the widespread belief that politicians have been lobbied by the sector’s vested interests to water down the terms of reference,80 if not prevent this Royal Commission from happening in the first place,81 shows that in the absence of transparency and accountability, civil society faces a dilemma: either it can trust all its institutions or none of them. Specific ‘revolving door’ and ‘lobbying’ laws are required because the absence of such laws shows such actions cannot be sanctioned as illegal even if they can be classified as corrupt. Without more transparency and accountability of such career moves through appropriate regulation, legislation and sanctions, public trust will continue to erode. For corporate boards, the question of whether to actively engage, participate and hire from the plentiful pool of such well-connected ‘guns for hire’ is a matter of culture. A strong ethical board culture will resist the temptation to buy a short-cut into the political process. The downward spiral of buying regulators for the benefit of the regulated tend to have unintended consequences and the outcomes are rarely satisfactory in the long term for the integrity of the public institutions.

76 See Climate Council, The global renewable energy boom: How Australia is missing out, 2015. Retrieved from www.climatecouncil.org.au/uploads/ed4518226c655546cc529390c7c d4a8f.pdf. 77 See https://financialservices.royalcommission.gov.au/Pages/default.aspx. 78 See https://agedcare.health.gov.au/announcement-of-royal-commission-into-aged-carequality-and-safety. 79 Chalmers, S., ‘Commonwealth Bank charged fees to customer who had been dead for a decade, royal commission told’, ABC News, 19th April 2018. Retrieved from www.abc.net. au/news/2018-04-19/cba-charged-fees-to-customers-who-had-died-commission-hears /9675922. 80 Australian Council of Trade Unions, Letter shows Morrison and banks worked together, 5th February See https://www.actu.org.au/actu-media/media-releases/2019/letter-shows-mor rison-and-banks-worked-together. 81 Wright, T., ‘Does royal commission turncoat Scott Morrison really think the public is so dim?’ Canberra Times, 20 April 2018. Retrieved from www.canberratimes.com.au/federalpolitics/political-news/does-royal-commission-turncoat-scott-morrison-really-think-thepublic-is-so-dim-20180420-p4zarf.html.

Cui bono? Corruptors and the corrupted 95

Partially closing the door and the responsibility of the private sector The core of the problem for representative democracy is not lobbying activity per se; it is the preferential access to and hence perceived undue influence upon decision makers by wealthy and powerful corporate and business interests. The ‘revolving door’ phenomenon (along with corporate political funding) severely compounds this problem. Its scope and extent have flourished coincident with increasing privatisation, corporatisation and outsourcing of government assets, services and procurement in the USA, UK and Australia. Since the 1980s ‘neo liberal-’, small government-, deregulatory-, free marketdoctrines82 have considerably opened up the opportunities to the private sector to profit directly from billions of dollars of government business. At the same time, it has weakened the capacity of the public sector to act in the public as opposed to the private interest. The ‘revolving door’ phenomenon blights and undermines public trust in government and is a child of this emergent form of ‘crony capitalism’. Private elite networks interlocking with directorates suggest collusion between private sector players in an industry or across industries. Lobbying as a fixed cost and the public–private sector revolving door can be, in their basest form, a collusion of formerly elected public officials and private sector players against the public and civil society. Even at their most benign, they fuel the growing distrust by the public of both business and government elites.

Conclusion This chapter has examined corporate governance and corruption and the responsibilities of the private sector to neither engage in corrupt acts involving the public sector, nor to give rise to public perceptions of vested private interests at work through elites at the expense of the public good. Several multilateral frameworks and international treaties are in place aimed at mitigating the risks of corrupt interaction between the public and private sectors. However, it is in the implementation in each country where these frameworks are shaky and may fold, especially when confronted by significant vested private interests, and are of a politically sensitive nature. According to Transparency International, a three-pronged approach must be taken by the private sector to tackle corruption: a zero-tolerance policy, enforcement of the zero-tolerance policy and transparency.83 A healthy and robust public sector must be reciprocated by the private sector. A mutual regard and respect between the two sectors with a vigilant civil sector will ensure a healthy

82 Dine, J., ‘It takes two people to tango (or more!): The corrupt and debased culture of neoliberalism’, in dela Rama, M. & Rowley, C. (eds), op cit n. 6 at pp. 81–92. 83 Transparency International, Private sector solution, 2018. Retrieved from www.transparency. org/topic/detail/private_sector/P5.

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functional society. The onus of responsibility on the private sector is not to break the trust embedded within them by governments and societies and to maintain their ‘social licence’ to operate. This chapter also showed that while lobbying and revolving-door politics may be legal in most countries, these two often closely related corporate practices may constitute a form of ‘political corruption’ that causes more harm than good. Regulatory capture and rent-seeking behaviours tend not to lead to healthy, trusting and egalitarian societies. They undermine public trust in their institutions. Legislation and closer regulation of both practices is required in the interests of full transparency and public accountability. In the intersection between ethics and economics, what and where is the place, then, for democracy?

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6

Tackling corruption through corporate social responsibility Onyeka K. Osuji

Introduction This chapter examines how corporate social responsibility (CSR) can be used as an effective solution to official corruption, especially in developing countries. In this sense of the word, official corruption can be defined as “the misuse of public office, public resources or public responsibility for private – personal or group – gain.”1 The misuse/abuse of power is “according-to-rule” when the results expected from an act or decision are not prohibited or “against-the-rule” when the results are prohibited by law, rules or regulations.2 According to Hess and Dunfee, “corruption is universally disapproved yet universally present”3 and, where large scale corruptions exists, it comprises the demand (public officials) and supply (largely business) sides. Intermediaries can facilitate arrangements between demand and supply. On the supply side, multinational corporations (MNCs) and other corporations are often implicated in official corruption in developing countries.4 This has led to an exponential growth in legal interventions by national governments and multilateral bodies, which demonstrates a global anti-corruption public

1 Szeftel, M., ‘Clientalism, corruption and catastrophe’, Review of African Political Economy, 85, 2000, pp. 427–441 at p. 407. See also Collins, J., Uhlembruck, K. & Rodriguez, P., ‘Why firms engage in corruption: a top management perspective’, Journal of Business Ethics, 87, 2008, pp. 89–108. 2 Stapenhurst, F. & Langseth, P., ‘The role of the public administration in fighting corruption’, Journal of Public Sector Management, 10(5), 1997, pp. 311–330 at p.313. 3 Hess, D. & Dunfee, T.W., ‘Fighting corruption: a principled approach’, Cornell International Law Journal, 33(3), 2000, pp. 593–626 at p. 595. 4 Hellman, J., Jones, G., Kaufmann, D. & Schankerman, M., Measuring governance, corruption and state capture: how firms and bureaucrats shape the business environment in transition economies. Washington, DC, World Bank, 2000; Errath, B. (ed.), Business against corruption: case stories and examples. New York, UN Global Compact Office 2006; Osuji, O.K., ‘Fluidity of regulation-CSR nexus: the multinational corporate corruption example’, Journal of Business Ethics, 103(1), 2011, pp. 31–57; Cuervo-Cazurra, A., ‘Better the devil you don’t know: type of corruption and FDI in transition economies’, Journal of International Management, 14(1), 2008, pp. 12–27; Luiz, J. and Stewart, C., ‘Corruption, South African multinational enterprises and institutions in Africa’, Journal of Business Ethics, 124(3), 2014, pp. 383–398.

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policy. Relevant anti-corruption treaties include the Organization of American States’ Inter-American Convention against Corruption 1996, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions 1997, the Council of Europe’s 1997 Convention on the Fight against Corruption, African Union Convention on Preventing and Combating Corruption 2003 and the UN Convention against Corruption 2003. National laws with extraterritorial reach include the US Foreign Corrupt Practices Act 1977 and the UK Bribery Act 2010. Despite these wide-ranging legal interventions, official corruption persists as a significant public interest issue for various reasons. One is the enforcement gap in international and national rules.6 While no supranational regulatory authority monitors and demands accountability from corporations,7 anticorruption rule enforcement depends on national governments’ political willingness and capacity. Some home and host governments of MNCs in developing countries are often reluctant to impose effective regulations due to an overriding competitive desire to attract investments and encourage business.8 Another reason is corporate attitude towards anti-corruption rules. An ethical culture is essential for business regulation,9 and an effective anti-corruption regime requires the right corporate attitude. While attitude is especially important when “conflicting and multiplying jurisdictions”10 exist, MNCs and other corporations are often unwilling to provide a true picture of their networks and relationships to regulators.11 Organizational loyalty, transactional secrecy and evidential difficulties due to the way corruption can be disguised also hinder rule enforcement.12 Despite this, or perhaps because of it, official corruption is now a recognized CSR issue in scholarship that focuses on corporations as the supply side of corruption.13 The European Commission defines CSR as “the responsibility of

5 Osuji, op cit n. 4. 6 Ibid. 7 Schrempf-Stirling, J. & Wettstein, F., ‘Beyond guilty verdicts: human rights litigation and its impact on corporations’ human rights policies’, Journal of Business Ethics, 145(3), 2017, pp. 545–562. 8 Hackett, C. & Moffett, L., ‘Mapping the public/private-law divide: a hybrid approach to corporate accountability’, International Journal of Law in Context, 12(3), 2016, pp. 312–336. 9 Hodges, C., Ethical business regulation: understanding the evidence. London, DBIS, 2016, p. 3. 10 Kennedy, D., ‘The mystery of global governance’, in Dunoff, J.L. & Trachtman, J.P. (eds.), Ruling the world: constitutionalism, international law and global governance. Cambridge University Press, 2009, pp. 55–56. 11 Seabrooke, L. & Wigan, D., ‘The governance of global wealth chains’, Review of International Political Economy, 24(1), 2017, pp. 1–29. 12 Osuji, op cit n. 4. 13 Hess, D. & Ford, C.L., ‘Corporate corruption and reform undertakings: a new approach to an old problem’, Cornell International Law Journal, 41(2), 2008, pp. 307–346; Carr, I. & Outhwaite, O., ‘Controlling corruption through corporate social responsibility and corporate governance: theory and practice’, Journal of Corporate Law Studies, 11(2), 2011, pp. 299–341; Osuji, op cit n. 4; Putrevu, S., McGuire, J., Siegel, D.S. & Smith, D.M., ‘Corporate social

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enterprises for their impacts on society”. CSR has gained traction due to its plurality and multiple stakeholder framework, ethical approach and potential resolution of social issues in comparison to the focus of the shareholder primacy corporate governance model on corporate self-interest, shareholders and profit-maximization. Due to the perceived low-level corruption environments of the MNCs’ more developed countries of origin15 and other factors, achieving an anti-corruption credential through CSR is increasingly important to corporations. This is also evident from the equally exponential anti-corruption initiatives of multilateral and nongovernmental organizations, business associations and other stakeholders. In existence are several public and private codes of conduct for MNCs and other corporations by national and international bodies that contain specific anti-corruption references. These include the UN Global Compact 2004, International Chamber of Commerce’s Rules of Conduct on Bribery 1999 and Anti-Extortion And Bribery Rules 2005, Caux Principles of Responsible Business, World Bank’s Voluntary Disclosure Programme, FTSE4Good Index Countering Bribery Criteria 1997, Transparency International’s Business Principles for Countering Bribery 2004, the Business Principles Against Bribery of the Partnering Against Corruption Initiative of the World Economic Forum, and the Wolfsberg Anti-Bribery and Corruption Compliance Programme Guidance 2017. The law’s limited scope and effectiveness has engendered alternative and complementary anti-corruption regulation opportunities within the scope of CSR. For example, there is largely a lack of legal clarity regarding lobbying16 and facilitation payments17 despite the abundance of national and international anti-

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responsibility, irresponsibility, and corruption: introduction to the special section’, Journal of Business Research, 65, 2012, pp. 1618–1621; Khojastehpour, M., ‘How does corporate social responsibility avoid the incidence of corruption in international expansion?’ European Business Review, 27(3), 2015, pp. 334–342; Lopatta, K., Jaesche, R., Tchikov, M. & Lodhia, S., ‘Corruption, corporate social responsibility and financial constraints: international firm-level evidence’, European Management Review, 14, 2017, pp. 47–65. Commission of the European Communities (CEC), A renewed EU strategy for corporate social responsibility, EU Doc. COM 2011, 681 final, p. 6. Hess and Dunfee, op cit n. 3 at p. 608; Petrou, A. & Thanos, I., ‘The “grabbing hand” or the “helping hand” view of corruption: evidence from bank foreign market entries’, Journal of World Business, 49, 2014, pp. 444–454; Godinez, J. & Liu, L., ‘Corruption and its effects on FDI: analysing the interaction between the corruption levels of the home and host countries and its effect at the decision-making level’, Journal of Business Ethics, 147, 2018, pp. 705–719. Hamilton, D. & Hoche, D., ‘Ethical standards for business lobbying: some practical suggestions’, Business Ethics Quarterly, 7(3), 1997, pp. 117–129; Keffer, J. & Hill, R., ‘An ethical approach to lobbying activities of businesses in the United States’, Journal of Business Ethics, 16 (12/13), 1997, pp. 1371–1379; Ostas, D., ‘The law and ethics of K street lobbying, the first amendment and the duty to create just laws’, Business Ethics Quarterly, 17(1), 2007, pp. 33–63; Bertrand, M., Bombardini, M. & Trebbi, F., ‘Is it whom you know or what you know? An empirical assessment of the lobbying process’, American Economic Review, 104(12), 2014, pp. 3885–3920; Rival, M. & Major, R., ‘What lobbying ethics and what for? The case of French lobbying consulting firms’, Journal of Business Ethics, 150, 2018, pp. 99–116. Osuji, op cit n. 4.

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corruption rules. Nonetheless, when legal rules are non-existent, weak or inadequately enforced, CSR demands that corporations should observe and apply certain standards and international best practices in their operations and relationships. This may involve the expectation of an anti-corruption stance from corporations even when there are non-existent rules, rules with limited scope and application or inadequate and incompetent rule enforcement. Similarly, a corporate anti-corruption posture is expected when law enforcement authorities are not in a position to detect corrupt practices due to the nature of the relevant industry, practice or transaction, or due to the character of the parties or their relationship. Since it provides both a restraint on conduct and a justification for positive actions, CSR also requires corporations to proactively promote anti-corruption wherever and whenever they are in a position to do so. Ideally, CSR can help to identify gaps in substantive law and enforcement process and how to plug them. Due to corporate influence and power over international and national authorities, CSR can play a role in pressuring governments to implement international anti-corruption instruments and enforce national rules effectively. An anti-corruption CSR approach can also have a positive impact on other areas of CSR and corporate activity such as labour standards, human rights and environment protection by promoting ethical values-driven transparency. However, while a central question for CSR generally is whether it can “in fact make a difference?”18 the anti-corruption impact of CSR seems modest to date. One reason is the prevalence of the legal compliance form of CSR which, according to Wolfsberg Anti-Bribery and Corruption Compliance Programme Guidance, for instance, may only be designed to comply with anti-corruption “legal and regulatory requirements”.19 While they describe CSR practices in the United States and European countries as either voluntary (“explicit CSR”) or mandatory (“implicit CSR”) as required by the applicable legal environment, Matten and Moon explain that that “isomorphic pressures [arising from globalization] may also make for a rise in explicit CSR among MNCs operating in the so-called developing world, where there are weak institutions and poor governance mechanisms.”20 The motivation for anti-corruption CSR is therefore critical. CSR can be motivated by coercive, mimetic and normative institutional pressures21 and by

18 Salazar, J., Husted, B. & M. Biehl, M., ‘Thoughts on the evaluation of corporate social performance through projects’, Journal of Business Ethics, 105, 2012, pp. 175–186 at p. 175. 19 Wolfsberg Anti-Bribery and Corruption Compliance Programme Guidance, 2017, p. 1. 20 Matten, D. & Moon, J., ‘Implicit and explicit CSR: a conceptual framework for a comparative understanding of corporate social responsibility’, Academy of Management Review, 33(2), 2008, pp. 404–424 at p. 418. 21 Jamali, D. & Neville, B., ‘Convergence versus divergence of CSR in developing countries: an embedded multi-layered institutional lens’, Journal of Business Ethics, 102, 2011, pp. 599–621 at pp. 615–616; Miska, C., Witt, M.A. & Stahl, G.K., ‘Drivers of global CSR integration and local CSR responsiveness: evidence from Chinese MNEs’, Business Ethics Quarterly, 26(3), 2016, pp. 317–345; Husted, B., Montiel, I. & Christmann, P., ‘Effects of local legitimacy on

Corporate social responsibility 105 managerial perceptions of stakeholder responsibilities.22 CSR assumes a different form and purpose when corporations are motivated merely by legal compliance and not by ethical values. When corporations act in deference to institutional pressures (e.g. the laws and governments of home and host states, directives of parent companies and globalization forces), a self-interest approach can be undertaken in an ethical vacuum. Anti-corruption CSR practices driven by legal rules are largely of a limited impact as they are designed to demonstrate legal compliance within the finite scope of the applicable law. Consequently, these practices are likely to be divorced from the ethical imperatives and extended responsibilities of a pure CSR approach to anti-corruption. However, CSR requires more than “symbolic structures”23 and substantively advances anti-corruption when it is reflected in the conduct of corporations, their subsidiaries, agents and partners in developing countries. To be embedded and guarantee effectiveness, CSR requires an organizational culture that is responsive to social and stakeholder expectations.24 Being that informality in organizations has normative and substantive significance for governance,25 relational and solidarity signals enable people to generate judgements that can hinder the establishment of an appropriate organizational culture. CSR may be ineffective when corporations are practically insulated from formal anticorruption rule compliance by informal signals. While it is possible to “promote a culture of ethical business practices” side-by-side with legal compliance,26 the latter should not trump the former if an anti-corruption CSR is truly desired. Consequently, CSR can be strengthened to complement anti-corruption regulation. It can “provide evidence of business commitment to ethical behaviour”27 which, essentially, means accountable anti-corruption standards that corporations and stakeholders can effectively enforce. Corporations need to adopt an anti-corruption CSR paradigm by demonstrating a “shared ethical approach”28 and appropriate “responsible leadership” at the micro (individual), meso (organizational), macro (national), sectoral and global levels.

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certification decisions to global and national standards by multinational subsidiaries and domestic firms’, Journal of International Business Studies, 47, 2016, pp. 382–397 at p. 383. Jain, T., Aguilera, V. & Jamali, D., ‘Corporate stakeholder orientation in an emerging country context: a longitudinal cross industry analysis’, Journal of Business Ethics, 143, 2017, pp. 701–719 at p. 702. Edelman, L., Petterson, S., Chambliss, E. & Erlanger, H., ‘Legal ambiguity and the politics of compliance: affirmative action officers’ dilemma’, Law & Policy, 13(1), 1991, pp. 73–93 at p. 75. Freeman, I. & Hasnaoui, A., ‘The meaning of corporate social responsibility: the vision of four nations’, Journal of Business Ethics, 100(3), 2011, pp. 419–443 at p. 425. Christiansen, T. & Neuhold, C. (eds.), International handbook on informal governance, Cheltenham, Edward Elgar, 2012. This is suggested by the Wolfsberg Anti-Bribery and Corruption Compliance Programme Guidance, 2017, p. 1. Hodges, op cit n. 9. Ibid.

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The rest of this chapter proceeds to establish the theoretical linkages between CSR and anti-corruption principally through the political CSR, governance CSR and institutional theoretic models. It identifies effective self-regulation, accountability and responsible global leadership as the core principles of an anti-corruption CSR paradigm before outlining its components. It demonstrates how corporate conscience, whistleblowing and individual and collective responsibility can overcome informal signals and ends with a restatement of the challenges and opportunities in using CSR for anti-corruption promotion. Before concluding, the chapter outlines certain steps corporations can undertake to demonstrate anti-corruption CSR.

CSR, law and anti-corruption: Concepts, scope and relationship CSR reflects the central idea that corporations have some “social obligations” aside from the commercial/profit-making objectives. Corporations are integrated with society and corporate activities are supposed to be undertaken in consideration of societal expectations.29 Traditionally, CSR emphasizes the need for corporations to refrain from actions that have adverse social consequences and to address the results of those actions. This focus is apparent when CSR is defined as “a firm’s voluntary actions to mitigate and remedy social and environmental consequences of its operation”.30 When extrapolated to anti-corruption, a corporation is socially responsible when it does not engage in corrupt acts and the activities of other persons, like employees, agents and business partners, are not attributable to it. This conception of CSR is linked to the liberal philosophy. By distinguishing the public and private spheres,31 liberalism requires a more restricted version of CSR that excludes public governance matters. However, a growing realization of a shared responsibility of corporations and other segments of society in tackling societal challenges32 has shifted the CSR discourse to “business responsibility for some of the wider societal good.”33 This has provided room for the emergence of the political CSR theoretical model.

29 Li, H.H., ‘Finding sustainable profitability: the U.S. financial services industry’s pursuit of corporate social responsibility’, Corporate Governance Law Review, 2(3), 2006, pp. 343–373 at p. 346. 30 Fransen, L., ‘The embeddedness of responsible business practice: exploring the interaction between national-institutional environments and corporate social responsibility’, Journal of Business Ethics, 115, 2013, pp. 213–227 at p. 213. 31 Hutchinson, T., ‘Doctrinal research: researching the jury’, in Watkins, D. & Burton, M. (eds.), Research methods in law 2nd ed. Abingdon, Routledge, 2017, pp. 8–39. 32 Deakin, S. & Hobbs, R., ‘False dawn for CSR? Shifts in regulatory policy and the response of the corporate and financial sectors in Britain’, Corporate Governance, 15(1), 2007, pp. 68–76 at pp. 69–71; Lozano, J.M., Albareda, L. & Ysa, T., Governments and corporate social responsibility: public policies beyond regulation and voluntary compliance. Basingstoke, Palgrave Macmillan, 2008, pp. 35–36. 33 Matten, D. & Moon, J., ‘‘Implicit’ and ‘explicit’ CSR: a conceptual framework for a comparative understanding of corporate social responsibility’, Academy of Management Review, 33(2), 2008, pp. 404–424 at p. 405.

Corporate social responsibility 107 As Frynas and Stephens describe it, political CSR refers to “activities where CSR has an intended or unintended political impact, or where intended or unintended political impacts on CSR exist (i.e., impacts related to the functioning of the state as a sphere of activity that is distinctive from business activity)”.34 In particular, political CSR legitimizes corporate performance of traditional government functions and involves the expectation on corporations to respond to “institutional voids” which are triggered by public governance failures. The presence of institutional voids requires corporations to provide “public goods” such as education and health and to refrain from “public bads” such as corruption.35 While on the one hand, political CSR addresses “regulatory vacuum or governance gap in the global economy”,36 on the other hand, it restrains corporations from exploiting inadequate legal infrastructure and law enforcement. One version of political CSR argues that corporations occupy a distinct “corporate” regulatory space that disregards the public–private divide.37 It therefore supports corporate roles in advancing anti-corruption and other public governance issues. For example, corporate citizenship is a political theoretical approach that “locates the corporation within a network of mutual responsibilities and obligations in their social environment … and in a political context within the wider debate on the role of business in society”.38 Another category of political CSR focuses on corporate capacity to influence political processes and determine public policy outcomes in their favour39 in developed and developing countries.40 A third variety is based on the corporations’

34 Frynas, J.G. & Stephens, S., ‘Political corporate social responsibility: reviewing theories and setting new agendas’, International Journal of Management Reviews, 17, 2015, pp. 483–509 at p. 485. 35 Berliner, D. & Prakash, A., ‘The United Nations global compact: an institutionalist perspective’, Journal of Business Ethics, 122, 2014, pp. 217–223 at p. 219; Scherer, A.G., Rasche, A., Palazzo, G. & Spicer, A., ‘Managing for political corporate social responsibility: new challenges and directions for PCSR 2.20’, Journal of Management Studies, 53(3), 2016, pp. 273–298 at p. 276. 36 Gjølberg, M., ‘Varieties of corporate social responsibility (CSR): CSR meets the Nordic model’, Regulation and Governance, 4, 2010, pp. 203–229 at p. 203. 37 Ciepley, D., ‘Beyond public and private: toward a political theory of the corporation’, American Political Science Review, 107(1), 2013, pp. 139–158. 38 Matten, D. & Moon, J. (eds.), Corporate citizenship. Cheltenham, Edward Elgar, 2013. 39 Scherer, A.G. & Palazzo, G., ‘Toward a political conception of corporate responsibility: business and society seen from a Habermasian perspective’, Academy of Management Review, 32(4), 2007, pp. 1096–1120; Scherer, A.G. & Palazzo, G., ‘The new political role of business in a globalised world: a review of a new perspective on CSR and its implications for the firm’, Journal of Management Studies, 48(4), 2011, pp. 899–931; Gond, J.P., Kang, N. & Moon, J., ‘The government of self-regulation: on the comparative dynamics of corporate social responsibility’, Economy and Society, 40(4), 2011, pp. 640–671; Fooks, G.J., Gilmore, A., Holden, J. & Lee, K., ‘The limits of corporate social responsibility: techniques of neutralisation, stakeholder management and political CSR’, Journal of Business Ethics, 112(2), 2013, pp. 283–299. 40 Shirodkar, V., Beddewela, E. & Richter, U.H., ‘Firm-level determinants of political CSR in emerging economies: evidence from India’, Journal of Business Ethics, 148, 2018, pp. 673–688.

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power and influence.41 It expresses support for a leverage-based responsibility arising “from an organization’s ability to influence the actions of other actors through its relationships, regardless of whether the impacts of those other actors’ actions can be traced to the organization.”42 The different versions of political CSR have facilitated the emergence of “governance CSR”, which in turn acknowledges that CSR has institutional implications for the behaviour of corporations, individuals and other entities. The new institutional economics shows that “economic behaviour, whether by individuals or by firms, is affected by the institutional setting in which actors find themselves.”43 In this regard, institutions are “rules, norms, and beliefs that describe reality for the organization, explaining what is and is not, what can be acted upon and what cannot.”44 While “organizations” exist formally and provide organized governance, membership and rules, institutions are not necessarily organized and as such include formal and informal rules, customs and practices.45 Governance CSR therefore proceeds on the basis that CSR constitutes a triple institutional framework. First, corporations are potential institutions for private and public governance.46 Second, CSR, like the market and the law, is itself an institution that provides rules of conduct.47 Third, corporations can use CSR as an institutional tool in their horizontal and vertical relationships48 to address

41 Wilks, S., The political power of the business corporation. Cheltenham, Edward Elgar, 2013, p. 197; Geppert, M. & Dörrenbächer, C., ‘Politics and power within multinational corporations: mainstream studies, emerging critical approaches and suggestions for future research’, International Journal of Management Reviews, 16(2), 2014, pp. 226–244. 42 Wood, S., ‘The case for leverage-based corporate human rights responsibility’, Business Ethics Quarterly, 22(1), 2012, pp. 63–98 at p. 64. 43 Ohnesorge, J.K., ‘Developing development theory: law and development orthodoxies and the Northeast Asian experience’, University of Pennsylvania Journal of International Economic Law, 28, 2007, pp. 219–308 at p. 268. 44 Hoffman, A.J., ‘Institutional evolution and change: environmentalism and the U.S. chemical industry’, The Academy of Management Journal, 42(4), 1999, pp. 351–371 at p. 351. 45 Weiss, T.G., Global governance: why? What? Whither? Cambridge, Polity Press, 2013, pp. 29–31. 46 Danielson, D., ‘How corporations govern: taking corporate power seriously in transnational regulation and governance’, Harvard International Law Journal, 46(2), 2005, pp. 411–425 at p. 424; Büthe, T. & Mattli, W., The new global rulers: the privatization of regulation in the world economy. Princeton, NJ, Princeton University Press, 2011; Locke, R.M., The promise and limits of private power: promoting labour standards in a global economy. Cambridge, Cambridge University Press, 2013; Aßländer, M.S. & Curbach, J., ‘The corporation as citoyen? Towards a new understanding of corporate citizenship’, Journal of Business Ethics, 120, 2014, pp. 541–554; Macdonald, K., The politics of global supply chains. Cambridge, Polity Press, 2014, p. 169. 47 Brammer, S., Jackson, G. & Matten, D., ‘Corporate social responsibility and institutional theory: new perspectives on private governance’, Socio-Economic Review, 10, 2012, pp. 3–28 at p. 7. 48 Saurwein, F., ‘Regulatory choice for alternative modes of regulation: how context matters’, Law and Policy, 33(3), 2011, pp. 334–366 at pp. 335–336.

Corporate social responsibility 109 social challenges and contribute to governance, especially in developing countries.49 This obligation is not limited by narrow legal responsibilities, for example, in corporate groups and supply and purchasing chains.50 In governance CSR, it is both private regulation (in the form of selfregulation or co-regulation) and a regulatory tool for private governance. While the role of governments and public sector bodies in setting out priorities, agendas and goals is conceded,51 governance CSR facilitates understanding of the corporation’s role in translating and transplanting norms and public policies in its areas of influence.52 Corporations may engage in private governance in supply chains53 and other networks, but governance CSR goes further to acknowledge its vital role as a complementary regulation to law. This is especially required where public regulation through substantive rules and enforcement is inadequate.54 Being that governance CSR provides ethical justifications for corporate involvement in tackling extra-territorial corruption and other public governance challenges,55 an anti-corruption profile cannot be projected without undertaking governance CSR. Corporate power in this regard is coupled with “responsibility”.56 The more powerful corporations are the more capable, and they can execute governance CSR. The next part of this chapter explains the principles that can rationalize anti-corruption CSR.

49 Visser, W., ‘Corporate social responsibility in developing countries’, in Crane, A., McWilliams, A., Matten, D., Moon, J. & Siegel, D. (eds.), The Oxford handbook of corporate social responsibility. Oxford, Oxford University Press, 2008. 50 Osuji, O.K., ‘Corporate social responsibility- fairness and promise as the fundaments for juridification of social disclosures’, Contemporary Issues in Law, 12(1), 2012, pp. 46–76; LundThomsen, P. & Lindgreen, A., ‘Corporate social responsibility in global value chains: where we are now where we are going?’ Journal of Business Ethics, 123(1), 2014, pp. 11–22. 51 Ministry of Foreign Affairs, The Netherlands (IOB), Corporate social responsibility: the role of public policy. A systematic literature review of the effects of government supported interventions on the corporate social responsibility (CSR) behaviour of enterprises in developing countries. Amsterdam, IOB Study, 2013, pp. 58, 68. 52 Osuji, O.K., ‘Corporate social responsibility, juridification and globalization: ‘inventive interventionism’ for a ‘paradox’’, International Journal of Law in Context, 11, 2015, pp. 265–298. 53 Gereffi, G. & Lee, J., ‘Why the world suddenly cares about global supply chains’, Journal of Supply Chain Management, 48(3), 2012, pp. 24–32; Ponte, S. & Sturgeon, T., ‘Explaining governance in global value chains: a modular theory-building effort’, Review of International Political Economy, 21(1), 2014, pp. 195–223; Sinkovics, N., Hoque, S.F. & Sinkovics, R.R., ‘Rana Plaza collapse aftermath: are CSR compliance and auditing pressures effective?’ Accounting, Auditing & Accountability Journal, 29(4), 2016, pp. 617–649. 54 Johnston, A., ‘Facing up to social cost: the real meaning of corporate social responsibility’, Griffith Law Review, 20(1), 2011, pp. 221–244. 55 Osuji, op cit n. 4 56 Chen, S., ‘Multinational corporate power, influence and responsibility in global supply chains’, Journal of Business Ethics, 148, 2018, pp. 365–374.

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The anti-corruption CSR paradigm While the need for the capability to stimulate organizational change is imperative,57 the nature and complexity of corporations can impede CSR. Apart from distinguishing it from human beings, a corporation’s institutional features have unique behavioural impacts that framers of regulation should consider.58 Consequently, an anticorruption CSR regime needs to provide a “habitus”59 for learning and mediating appropriate values in practice. “Values” in this sense refers to “general standards by which we formulate attitudes and beliefs and according to which we behave.”60 It will now be shown that CSR can transmit anti-corruption values within and outside corporations when it reflects effective self-regulation, accountability and leadership.

Self-regulatory CSR CSR has the potential for self-regulation61 or “civil regulation”62 in tackling corruption. As self-regulation, CSR can exceed the minimum standards of anticorruption laws. Hence, it can be described as “actions that appear to further some social good, beyond the interests of the firm and that which is required by law.”63 However, self-regulation and effective self-regulation are quite distinguishable. Selfregulatory schemes that lack monitoring and enforcement are unlikely to be effective.64 Self-regulatory effectiveness is improved when there are “costs of noncompliance”65 provided by monitoring and sanctions. Monitoring and enforcement need to be complemented by investigation, verification and sanctions provisions for non-compliance with self-regulatory rules and standards. Otherwise, self-regulation is likely to be constituted by ineffectual commitments and free-riding. The UN Global Compact has been criticized for these reasons.66

57 Deakin and Hobbs, op cit n. 32, pp. 69–71. 58 Stone, C.D., Where the law ends. New York, Harper & Row, 1975, p. 7. 59 Bourdieu, P., Distinction: a social critique of the judgement of taste. Cambridge, MA, Harvard University Press, 1984. 60 Posner, B., Randolph, W. & Schmide, W., ‘Managerial values across functions: a source of organizational problems’, Group and Organization Studies, 12(4), 1987, pp. 373–385 at p. 376. 61 Better Regulation Task Force, The challenge of culture change: raising the stakes. London, Better Regulation Task Force, 2004, p. 27; Saurwein, op cit n. 49, p. 351. 62 Vogel, D., ‘The private regulation of global corporate conduct: achievements and limitations’, Business and Society, 49(1), 2010, pp. 68–87. 63 McWilliams, A. & Siegel, D., ‘Corporate social responsibility: a theory of the firm perspective’, Academy of Management Review, 26, 2001, pp. 17–127 at p. 117; Baden, D., ‘A reconstruction of Carroll’s pyramid of corporate social responsibility for the 21st century’, International Journal of Corporate Social Responsibility, 1(8), 2016, pp. 1–15 at p. 8. 64 Vogel, D., The market for virtue. The potential and limits of corporate social responsibility. Washington, DC, Brookings Institution, 2005, p. 164. 65 Berliner, D. & Prakash, A., op cit n. 35 at p. 219. 66 Sethi, S.P. & Schepers, D.H., ‘United Nations global compact: the promise-performance gap’, Journal of Business Ethics, 122, 2014, pp. 193–208; Junaid, N., Leung, O. & Buono, A.F.,

Corporate social responsibility 111 Accountability It is useful to examine in the anti-corruption context the meaning of “responsibility” in CSR. Responsibility can refer to obligations in “primary rules” and “secondary rules” that stipulate the consequences for breaching primary rules.67 It can be defined as “a capacity to engage in reasoned decision making” or “liability for the consequences of one’s action”.68 Clearly, to hold one responsible69 for something requires that person to be answerable for relevant questions.70 By providing the answerability element, accountability is therefore essential to responsibility. Accountability is the “perceived need to justify or defend a decision or action to some audience(s) which has potential rewards and sanctions power, and where such rewards are perceived as contingent on accountability conditions.”71 In addition to indicating the integral role of sanctions, this definition highlights the need for capable accountability holders. Similarly, Mashaw noted that accountability involves: “who, to whom, about what, through what processes, by what standards and with what effect”.72 In terms of accountability holders, there are self, external and surrogate dimensions that are applicable to anti-corruption. By providing “the need to justify one’s actions and decisions to oneself in order to confirm or enhance a selfidentity or image shaped by strongly held beliefs and values”73 self-accountability requires the existence of internal processes to evaluate corporate conduct and its impact on other persons. It would require corporations to demonstrate anticorruption responsibility in their operations and throughout their business chains and networks. MNCs also need to ensure a consistent anti-corruption approach in their corporate groups. After all, member corporations of MNCs are often more constrained by parent company rules than national regulations.74

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‘Institutionalization or decoupling? An exploratory analysis of the UN global compact LEAD initiative’, Business and Society Review, 120(4), 2015, pp. 491–518. Nollkaemper, A., ‘Responsibility of transnational corporations in international environmental law: three perspectives’, in Winter, G. (ed.), Multilevel governance of global environmental change. Perspectives from science, sociology and the law. Cambridge, Cambridge University Press, 2006, pp. 179–199, 181. Dubbink, W. & Smith, J., ‘A political account of corporate moral responsibility’, Ethical Theory and Moral Practice, 14(2), 2011, pp. 223–246 at p. 239. Bottomley, S., The constitutional corporation. rethinking corporate governance. Farnham, Ashgate, 2007, p. 70. Jacobs, F.G., Criminal responsibility. London, Weidenfeld and Nicolson, 1971, p. 10. Frink, D.D. & Klimoski, R.J., ‘Towards a theory of accountability’, in Ferris, G.R. (ed.), Research in personnel and human resources management Vol. 15. JAI Press, 1998, pp. 1–51 at p. 9. Mashaw, J.L., ‘Structuring a ‘dense complexity’: accountability and the project of administrative law’, Issues in Legal Scholarship, 5(1), 2005, pp. 1–38. Dhiman, A., Sen, A. & Bhardwaj, P., ‘Effect of self-accountability on self-regulatory behaviour: a quasi-experiment’, Journal of Business Ethics, 148, 2018, pp. 79–97 at p. 80. Gessner, V., ‘Enabling global business transactions: relational and legal mechanisms’, in Morgan, G. & Whitley, R. (eds.), Capitalisms & capitalism in the twenty-first century. Oxford, Oxford University Press, 2012, pp. 146–165, 151.

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In demonstrating their self-accountability, corporations have to demand accountability on behalf of stakeholders unable to do so, especially in developing countries without strong formal institutional mechanisms. This is surrogate accountability.75 An anti-corruption credential also requires corporations to support external accountability holders like government agencies and nongovernmental bodies. For example, MNCs of US origin played a significant role in the globalization of formal anti-corruption rules.76 This form of accountability could, for instance, discourage corporations from avoiding jurisdictions with strong anti-corruption standards and enforcement. When corporations move their operations to jurisdictions with less stringent regulations and more relaxed enforcement (forum shopping),77 this provides incentives to states to engage in a competitive regulatory race-to-the-bottom.

Responsible global leadership Ideally, transnational public policy issues like official corruption are tackled by national laws and international law. However, states’ political incapacity and/or unwillingness to regulate and/or enforce anti-corruption laws hinders an effective anti-corruption regime. This is one of the reasons for the emergence of global governance as an alternative to the traditional governance by national laws and international law. While international law refers to inter-state relationships, global governance involves both state and non-actors, including corporations.78 Specifically, global governance refers to collective efforts to identify, understand or address worldwide problems that go beyond the capacities of individual states to solve [and] it is the combination of informal and formal values, rules and norms, procedures, practices and policies, and organizations of various types.79 Corporations are important players in global governance due to their power and influence. As Ciepley states, “within its jurisdiction, the business corporation exercises powers analogous to those of government, if more limited, including the right to command, regulate, adjudicate, set rules of cooperation, allocate collective resources, educate, discipline and punish.”80 In global governance, corporations have two-fold roles of affecting/shaping (input) and being affected

75 Rubenstein, J., ‘Accountability in an unequal world’, The Journal of Politics, 69(3), 2007, pp. 616–632. 76 Osuji, op cit n. 4. 77 Hackett and Moffett, op cit n. 8. 78 Weiss, op cit n. 45, p. 28. 79 Ibid at p. 32. 80 Ciepley, op cit n. 37, p. 142.

Corporate social responsibility 113 81

by (output) global rules and decisions. In contrast to self-interest attempts to influence their political environments,82 corporations can influence national and international public policy initiation and implementation. This suggests that corporate leadership has an appropriate anti-corruption role. Responsible leadership, which is intricately linked to CSR,83 refers to a “social-relational and ethical phenomenon, which occurs in social processes of interaction”84 This has some implications. First, responsible leadership has to be exercised within the corporate interaction domains which include corruption’s transnational dimensions. In fact, global governance leadership is not constrained by geopolitical and cultural boundaries.85 Second, relevant responsible leadership has to promote global moralism. The anti-corruption movement could be traced to a widespread acceptance of global moral standards.86 These standards, which abhor corruption irrespective of its location and parties, trumped the competing moral relativism under which corruption could be permissible in certain locations and cultures.

Anti-corruption CSR implementation framework What measures can corporations utilize to evince the anti-corruption principles of effective self-regulation, accountability and responsible leadership? As outlined in Figure 6.1, corporations can individually and collectively advance anticorruption in a variety of ways.

Corporate governance One of the steps for using CSR as an effective self-regulatory and accountable mechanism is by adopting the anti-corruption paradigm in corporate governance structures. The assertion that corporate governance “provides the structure through which the objectives of the company are set, and the means of attaining

81 Brühl, T. & Hofferberth, M., ‘Global companies as social actors: constructing private business in global governance’, in Mikler, J. (ed), The handbook of global companies. Oxford, WileyBlackwell, 2013, pp. 351–370, 354. 82 Picciotto, S., Regulating global corporate capitalism. Cambridge, Cambridge University Press, 2011; Dixon, A.D., The new geography of capitalism: firms, finance and society. Oxford, Oxford University Press, 2014, pp. 62–63. 83 Miska, C. & Mendenhall, M.E., ‘Responsible leadership: a mapping of extant research and future directions’, Journal of Business Ethics, 148, 2018, pp. 117–134. 84 Maak, T. & Pless, N.M., ‘Responsible leadership in a stakeholder society- a relational perspective’, Journal of Business Ethics, 66(1), 2006, pp. 99–115 at p. 99. 85 Mendenhall, M.E., ‘Leadership and the birth of global leadership’, in Mendenhall, M.E., Osland, J.S., Bird, A., Oddou, G.R., Maznevski, M.L., Stevens, M.J. & Stahl, G.K. (eds.), Global leadership: research, practice, and development 2nd ed. Abingdon, Routledge, 2013, pp. 1–20. 86 Osuji, op cit n. 4

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those objectives and monitoring performance are determined”87 suggests that anti-corruption has to be included as a clear corporate objective to form part of corporate governance. This objective requires the setting up of offices, procedures and other structures for monitoring the actions of corporate organs and agents as well as subsidiaries, affiliates and third party business partners. Adrian Cadbury also observed that corporate governance aims “to align as nearly as possible the interests of individuals, corporations and societies”.88 When corporations are socially irresponsible, this can be indicative of poor corporate governance. CSR, including its anti-corruption component, should therefore be inextricably linked to corporate governance and part of its institutional framework of “self-regulatory arrangements, voluntary commitments and business practices”.89

Words-actions alignment An anti-corruption CSR approach requires that commitments expressed in codes of conduct and communicated by corporations must be matched by actions. However, “bluewash”90 is a problem for schemes like the UN Global Compact, which is notable for its inadequate disclosures91 and for projecting a “promiseperformance gap”.92 Member corporations have been accused of exploiting the Global Compact to mask their social irresponsibility. Nonetheless, anti-corruption disclosures should be “primarily driven by a desire for accountability”93 and be clear and accurate and not false or misleading. Accurate and fair reporting reflects responsibility and accountability, including the need for improvements when required, while false and misleading disclosures are indicative of irresponsibility.

Positive CSR Traditional CSR could be limited to refraining from “bad” actions. However, CSR does not simply equate to refraining from doing bad since its moral background also requires corporations to take positive actions. The emergent

87 Organisation for Economic Cooperation and Development (OECD), G20/OECD principles of corporate governance, Paris, OECD, 2015, pp. 9, 13. 88 World Bank, Global corporate governance forum, Washington, DC, World Bank, 2003. 89 OECD, OECD Guidelines for multinational enterprises. Recommendations for responsible business in a global context, Paris, OECD, 2011, p. 142. 90 Berliner, D. & Prakash, A., ‘From norms to programs: the United Nations global compact and global governance’, Regulation and Governance, 6, 2012, pp. 149–166 at p. 151. 91 Ibid; Berliner & Prakash, op cit n. 35; Junaid et al, op cit n. 66. 92 Sethi and Schepers, op cit n. 66. 93 Bouten, L., Everaert, P., Van Liedekerke, L., De Moor, L. & Christiaens, J., ‘Corporate social responsibility reporting: a comprehensive picture’, Accounting Forum, 35, 2011, pp. 187–204 at p. 189.

Corporate social responsibility 115 governance approach shows that corporations may be required to undertake positive actions in furtherance of social objectives like anti-corruption. This “positive” language is reflected by Principle 10 of the UN Global Compact which requires corporations “to work against corruption in all its forms”. Similarly, the UK Modern Slavery Act 2015 ensures that “[o]rganisations have a legal duty to drive out poor practices in their business and a moral duty to influence and incentivise continuous improvements in supply chains”.94 It then means that simply refraining from corruption is an inadequate anti-corruption strategy. Standing by or not speaking out can be indicative of irresponsibility and is no longer a defence.

Private law tool Private law is a potential tool for accountability, especially the self and surrogate dimensions. Corporations can use private law methods like contracts and arbitration provisions to advance their own interests and to promote ideals they share.95 Since corporate groups, supply and purchasing chains and other networks are often organized through contracts,96 using private law mechanisms to promote CSR in corporate external relationships97 and to promote accountability is therefore possible. For example, employment policies and contracts can provide a strong anti-corruption message backed by appropriate sanctions. Anti-corruption policies98 can be implemented through contract and arbitrations provisions relating to their terms, targets, reviews, support, information access and information sharing. These provisions are enforceable by national courts99 and transnational tribunals. Under the rules of the International Centre for the Settlement of Investment Dispute, for example, corruptly procured contracts are contrary to international public policy and therefore unenforceable.100

94 Syder, C., ‘The Modern Slavery Act 2015: what businesses need to know’, The Commercial Litigation Journal, 65, 2016, pp. 22–24 at p. 22. 95 Gessner, op cit n. 74 at pp. 158–159. 96 Picciotto, op cit n. 82; Dekker, H.C, Sakaguchi, J. & Kawai, T., ‘Beyond the contract: managing risk in supply chain relations’, Management Accounting Research, 24(March), 2013, pp. 122–139. 97 Rühmkorf, A., Corporate social responsibility, private law and global supply chains. Cheltenham, Edward Elgar, 2015. 98 Selsky, J.W. & Parker, B., ‘Cross-sector partnerships to address social issues: challenges to theory and practice’, Journal of Management, 31(6), 2005, pp. 849–873; Porter, M.E. & Kramer, M.R., ‘Creating shared value’, Harvard Business Review, 89(1/2), 2011, pp. 62–77; Luiz & Stewart, op cit n. 4. 99 For example, Adler v Federal Republic of Nigeria, 219 F.3d 869 C.A.9 (Cal.2000). 100 World Duty Free v Kenya ICSID Case No. ARB/00/7, (2007) 46 ILM 339.

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Stakeholder enforcement As discussed above, responsible global leadership is an anti-corruption essential. Responsible leadership should normally be undertaken in “the context of contemporary stakeholder theory”101 but a lack of public (stakeholder) participation, engagement and scrutiny is one of the criticisms of corporate decisionmaking.102 While CSR is predicated in the stakeholder model, shareholderprimacy is the dominant Anglo-American corporate governance model. Nonetheless, a stakeholder approach in some form is possible even under the shareholder-primacy model. For example, two UK parliamentary committees describe corporate governance as “the rules and practices by which a company is run and balances the interests of its many different stakeholders, including management, employees, customers, creditors, pensioners and the community.”103 A stakeholder model of corporate governance104 can improve the effectiveness of CSR as a self-regulatory anti-corruption system, especially in rule enforcement. The G20/OECD Principles of Corporate Governance even concede that stakeholders can tackle illegal and unethical practices.105 A stakeholder-enforcement approach can be reflected through clear, transparent and effective procedures, including anonymised channels and reward schemes, to enable and encourage “stakeholders” like employees, agents, professional advisers, business partners and independent persons and organizations to raise concerns and make complaints. Stakeholder involvement can improve self-accountability. For instance, following the Kasky litigation for false and misleading statements,106 Nike engaged external stakeholders who helped to address its supply chains’ poor labour practices.107

Anti-corruption clubs Corporations can display responsible leadership, accountability and stakeholder engagement for governance CSR through the establishment and membership of voluntary clubs. Some existing voluntary clubs which tackle national and

101 Bass, B.M. & Steidlmeier, P., ‘Ethics, character, and authentic transformational leadership behaviour’, The Leadership Quarterly, 10(2), 1999, pp. 181–217 at p. 200. 102 Danielson, op cit n. 46 at p. 424. 103 House of Commons, Work and Pensions and Business, Innovation and Skills Committees, BHS. First report of the Work and Pensions Committee and fourth report of the Business, Innovation and Skills Committee of session 2016–17. London, House of Commons, 39 2016, para. 114. 104 Bridoux, F. & Stoelhorst, J.W., ‘Microfoundations for stakeholder theory: managing stakeholders with heterogeneous motives’, Strategic Management Journal, 35(1), 2014, pp. 107–125; Shahzad, A.M., Rutherford, M.A & Sharfman, M.P., ‘Stakeholder-centric governance and corporate social performance: a cross-national study’, Corporate Social Responsibility and Environmental Management, 23(2), 2016, pp. 100–112. 105 OECD, op cit n. 87, pp. 35, 46–47. 106 Nike v Kasky 123 S. Ct. 2554 (2003). 107 Nike’s 2004 corporate social responsibility report. Available from: www.nike.com/nikebiz/ nikebiz.jhtml?page=29 (accessed 21 June 2018).

Corporate social responsibility 117 transnational social challenges have exclusive corporate membership while some also admit public and private stakeholders as members. There are several examples. Cross-sector social partnerships (CSSPs) are multi-stakeholder clubs of corporations, governmental and non-governmental bodies for addressing social issues and communicating shared values.108 The two governance mechanisms of Accord on Fire and Building Safety and the Business Social Compliance Initiative entered into by some MNCs following Bangladesh’s Rana Plaza collapse109 could be regarded as clubs. Other examples are the Caux Round Table’s Principles of Responsible Business and the UN Global Compact. Voluntary clubs as collective actions are possible anti-corruption strategies.110 However, as noted previously, the Global Compact has not been particularly effective in ensuring that corporations adhere to their commitments. This is probably due to its “mere gesture” status. Depending on the regulatory approach, voluntary clubs are classified as “mere gestures”, “lenient” or “stringent”.111 “Mere gestures” make no real attempts to comply with regulations and lack non-compliance costs while “lenient” clubs normally focus on compliance with minimum government regulations. Stringent clubs, however, impose sanctions as non-compliance costs for the higher standards and social objectives their members commit to. The potential and actual use of expulsions and other sanctions is a significant factor for the effectiveness of the voluntary clubs’ governance structures.112 To be effective and accountable self-regulatory mechanisms, anti-corruption voluntary clubs may be “stringent” and provide enforceable rules, standards referencing international best practices and sanctions for non-compliance. The recent Bell Pottinger case with the Public Relations and Communications Association (PRCA), a UK public relations industry body, is illustrative. South Africa’s main opposition party complained to PRCA about the social media campaign Bell Pottinger, a multinational member, ran for its clients. PRCA sanctioned Bell Pottinger for a “hateful and divisive campaign to divide South Africa along the lines of race” contrary to its code of conduct.113 An apologetic

108 Koschmann, M.A, Kuhn, T.R. & Pfarrer, M.D., ‘A communicative framework of value in cross-sector partnerships’, Academy of Management Review, 37(3), 2012, pp. 332–354; Stadtler, L., ‘Tightrope walking: navigating competition in multi-company cross-sector social partnerships’, Journal of Business Ethics, 148, 2018, pp. 329–345. 109 Reinecke, J. & Donaghey, J., ‘After Rana Plaza: building coalitional power for labour rights between unions and (consumption-based) social movement organisations’, Organization, 22(5), 2015, pp. 720–740; Sinkovics et al, op cit n. 53. 110 Petkoski, D., Warren, D.E. & Laufer, W.S., ‘Collective strategies in fighting corruption: some intuitions and counter intuitions’, Journal of Business Ethics 88, 2009, pp. 815–822. 111 Prakash, A. & Potoski, M., ‘Collective action through voluntary environmental programs: a club theory perspective’, The Policy Studies Journal, 35(4), 2007, pp. 773–792. 112 Baudry, B. & Chassagnon, V., ‘The vertical network as a specific governance structure’, Journal of Management and Governance, 16(2), 2012, pp. 285–303. 113 BBC, ‘PR firm failed in ‘race hate’ campaign’, 2017. Available from: www.bbc.co.uk/news/ business-4114588 (accessed 4 September 2017); ‘Bell Pottinger found in breach of code for

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Bell Pottinger lost customers’ accounts in several countries and terminated the offending client’s contract. Its chief executive officer resigned, four employees were dismissed or suspended and an external review of its management and governance procedures was undertaken. Bell Pottinger’s survival became “highly questionable” when PRCA expelled it for five years.114 It is feasible to design and enforce anti-corruption self-regulatory systems similar to PRCA’s anti-hate rules. This can facilitate stakeholders’ involvement and allow voluntary clubs to act as a potential whistleblowing channel for internal and external stakeholders. It will enable efficient and cost-effective mechanisms for information sharing by voluntary clubs and stakeholders and enhance their ability to dispense rewards and sanctions. The clubs can facilitate anti-corruption standardization, which is useful for performance evaluation by both internal and external stakeholders. This is important because a lack of standardization breeds unhelpful inconsistencies which, for example, appeared in recent transparency reports and reporting practices of the top-four global audit firms.115 Voluntary clubs can also provide private law avenues for promoting anticorruption. The clubs’ codes of conduct are potential sources of contractual rights and obligations for members. Using the codes of conduct, the appropriate club organs can reach decisions enforceable by the formal courts. For example, the UK courts recognized the contractual nature of the City Code on Takeovers and Mergers of the self-regulatory Takeover Panel.116

Confronting informal signals Regulatory ineffectiveness is sometimes due to regulatees’ informal solidarity and relational signals that disconnect appearance from reality. These signals reference personal and collective attributes in interpreting social interactions and perceptions of formal rules. They can be embedded in rationalization, socialization and institutionalization forming the social cocoons for overt or covert corruption “normalization”.117 Consequently, informal signals are “institutions”

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South African campaign’. Available from: www.bbc.co.uk/news/business-41036967 (accessed 24 August 2017); Bell Pottinger row: PR boss sorry for S Africa campaign’. Available from: www.bbc.co.uk/news/business-41142478 (accessed 4 September 2017). Johnston, C., ‘Bell Pottinger expelled from trade body for South African campaign’, 2017. Available from: www.bbc.co.uk/news/business-41151361 (accessed 5 September 2017). Girdhar, S. & Jeppesen, K.K., ‘Practice variation in big-4 transparency reports’, Accounting, Auditing & Accountability Journal, 31(1), 2018, pp. 261–285. R v Takeover Panel ex parte Datafin Plc [1987] 2 WLR 699. Ashforth, B.E. & Anand, V., ‘The normalization of corruption in organizations’, Research in Organizational Behaviour, 25, 2003, pp. 1–52; Campbell, J. & Göritz, A.S., ‘Culture corrupts! A qualitative study of organisational culture in corrupt organizations’, Journal of Business Ethics, 120, 2014, pp. 291–311; Pinto, J., Leana, C. & Pil, F.K., ‘Corrupt organizations or organizations of corrupt individuals? Two types of organization-level corruption’, Academy of Management Review, 33(3), 2008, pp. 685–709; Spicer, A., ‘The normalization

Corporate social responsibility 119 which are “formal and informal procedures, routines, norms and conventions embedded in the organizational structure of the polity or political economy”.118 In corporations and other organizations, informal signals can present moral dilemmas that impede disclosures of corrupt, unethical and unlawful practices.119 The institutional influence of informal signals on rule compliance is largely due to regulatory perceptions from the attitudes and motivations they trigger.120 Being that it is “a relatively enduring organization of beliefs, feelings, and behavioural tendencies towards socially significant objects, groups, events or symbols,”121 an attitude influences an individual’s interaction with others and how rules are perceived or interpreted. On the other hand, motivational postures are sets of beliefs and attitudes that sum up how individuals feel about and wish to position themselves in relation to another social entity … Postures are subjective – they bind together the cognitive, emotional and behavioural components of attitude. They provide the narrative within which the authority’s message is given meaning. They have coherence for the self and are socially acceptable to significant others.122 Formal rule implementation is therefore affected when motivations arising from horizontal solidarity relationships based on shared norms, trust, identity and objectives123 precipitate commitment, resistance, disengagement or gameplaying postures. Nonetheless, there are three possible methods of overcoming obstructive informal signals in governance CSR. First, an appropriate “corporate conscience” can

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of corrupt business practices: implications for integrative social contracts theory (ISCT)’, Journal of Business Ethics, 88(4), 2009, pp. 833–840. Hall. P.A. & Taylor, R.C.R., ‘Political science and the three new institutionalisms’, Political Studies, 44, 1996, pp. 936–957 at p. 940. Andrade, J.A., ‘Reconceptualising whistleblowing in a complex world’, Journal of Business Ethics, 128, 2015, pp. 321–335; Hoffman, W.M. & Schwartz, M.S., ‘The morality of whistleblowing: a commentary on Richard T. De George’, Journal of Business Ethics, 127, 2015, pp. 771–781; Knoll, M. & van Dick, R., ‘Do I hear the whistle…? A first attempt to measure four forms of employee silence and their correlates’, Journal of Business Ethics, 113, 2013, pp. 349–362; Lindblom, L., ‘Dissolving the moral dilemma of whistleblowing’, Journal of Business Ethics, 76, 2007, pp. 413–426; Paeth, S.R., ‘The responsibility to lie and the obligation to report: Bonhoeffer’s ‘what does it mean to tell the truth?’ and the ethics of whistleblowing’, Journal of Business Ethics, 112, 2013, pp. 559–566. Dijksterhuis, A. & Aarts, H., ‘Goals, attention, and (un)consciousness’, Annual Review of Psychology, 61, 2010, pp. 467–490. Hogg, M. &Vaughan, G., Social psychology 4th Ed. Upper Saddle River, NJ, Prentice-Hall, 2005, p. 150. Braithwaite, V., Defiance in taxation and governance: resisting and dismissing authority in a democracy. Cheltenham, Edward Elgar, 2009, p. 20. Etienne, J., ‘Ambiguity in relational signals in regulator-regulatee relationships’, Regulation & Governance, 7(1), 2013, pp. 30–47.

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determine the “organizational culture” for achieving corporate objectives.124 Language is important in shaping organizational culture because “the way a topic can be meaningfully talked about and reasoned about … also influences how ideas are put into practice and used to regulate the conduct of others”.125 Similarly, [a] change in discourse does not just change the way in which people talk about the social world, it changes the way in which people understand and experience it; it changes who can act upon it; and it changes how they act upon it.126 Therefore, the anti-corruption CSR discourse needs to de-emphasize selfinterest and confront conflicting informal signals by focusing on the ethical dimensions. In fact, an ethical focus facilitated the evolution of formal global moralist anti-corruption rules.127 Second, whistleblowing can confront informal signals. Whistleblowing actually involves a moral debate that “centres on the conflict between the duty of loyalty to the firm or organization in which one works and the liberty to speak out against wrongdoing”.128 While some doubt the effectiveness of internal whistleblowing procedures,129 potential whistle-blowers may be more willing to reporting to internal structures than external entities.130 Nonetheless, to be effective against conflicting informal signals in organizational relationships, whistleblowing needs to be directed by the corporate conscience. There should be clear procedures to encourage anti-corruption whistleblowing and structures for information provision on a need-to-know basis. The class of potential whistleblowers can be broadened to include internal and external stakeholders like employees, managers, external consultants and auditors.131 Although there are

124 Selznick, P., The communitarian persuasion. Washington, DC, Woodrow Wilson Centre Press, 2002, p. 101. 125 Phillips, N. & Hardy, C., Discourse analysis: investigating processes of social construction. Thousand Oaks, CA, Sage, 2002, p. 3. 126 Harley, B. & Hardy, C., ‘Firing blanks? An analysis of discursive struggle in HRM’, Journal of Management Studies, 41(3), 2004, pp. 377–400. 127 Osuji, op cit n. 4. 128 Lindblom, op cit n. 119 at p. 415. 129 Pittroff, E., ‘Whistle-blowing systems and legitimacy theory: a study of the motivation to implement whistle-blowing systems in German organizations’, Journal of Business Ethics, 124, 2014, pp. 399–412. 130 Zhang, J., Pany, K. & Reckers, P.M.J., ‘Under which conditions are whistleblowing “best practices” best?’ Auditing: A Journal of Practice & Theory, 32(3), 2013, pp. 171–181; Brink, A.G., Lowe, D.J. & Victoravich, L.M., ‘The public company whistleblowing environment: perceptions of a wrongful act and monetary attitude’, Accounting and the Public Interest, 17(1), 2015, pp. 1–30. 131 Lewis, D., ‘Whistleblowing in a changing legal climate: is it time to revisit our approach to trust and loyalty at the workplace?’ Business Ethics, 20(1), 2011, pp. 71–87; Culiberg, B. & Mihelič, K.K., ‘The evolution of whistleblowing studies: a critical review and research agenda’, Journal of Business Ethics, 146, 2017, pp. 787–803 at pp. 788–790.

Corporate social responsibility 121 moral issues involved, financial reward schemes can also promote whistleblowing.133 An example is the rewards scheme of the US Office for Whistleblowers of the Securities and Exchange Commission. Third, individual and collective responsibility can prevail over resistant informal signals. When primary rules include such responsibilities, this may prompt individuals and groups to establish their secondary rules on peer interactions, regulatory attitudes and rule compliance. As Bouville states: 132

What is the difference between someone who knew of wrongdoing and said nothing and someone who did not know of the wrongdoing but who would not have said anything either had he known? The difference is circumstances: one had to make a decision and the other did not have to.134 Responsibility demands action upon becoming aware of corruption. Knowing that standing-by and not speaking up is not a defence when corrupt activities are undertaken by other persons will make responsible individuals and groups engage in anti-corruption co-regulation through monitoring, prevention, detection and reporting.

Practical steps for anti-corruption in CSR This chapter has identified the applicable principles and implementation framework for anti-corruption CSR, but there is the additional question of “how” corporations can apply the principles and reflect the framework in practice.

Governance structures and procedures Within their corporate governance structures, corporations may need to establish anti-corruption roles and offices at appropriate seniority and management levels. The Wolfsberg Anti-Bribery and Corruption Compliance Programme Guidance, for example, suggests that the “senior management” should oversee corporate anti-corruption programmes “administered by an individual with sufficient authority, expertise and resources and endorsed by the board of directors”.135 In addition, the corporate governance structure can include an anti-corruption committee with membership across different levels of the corporation. The corporate anti-corruption officers should have explicit responsibilities and powers, including anti-corruption information and best practices dissemination,

132 Berger, L., Perreault, S. & Wainberg, J., ‘Hijacking the moral imperative: how financial incentives can discourage whistleblower reporting’, Auditing: A Journal of Theory & Practice, 36(3), 2017, pp. 1–14. 133 Brink et al, op cit n. 130. 134 Bouville, M., ‘Whistle-blowing and morality’, Journal of Business Ethics, 81(3), 2008, pp. 579–585 at p. 583. 135 Wolfsberg Anti-Bribery and Corruption Compliance Programme Guidance, 2017, p. 3.

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Effective Self-Regulation √Monitoring/Verification √Enforcement √Non-compliance costs/Sanctions

Accountability √Self √External √Surrogate

Governance CSR Global Moralism Values Habitus Organisational Culture

Responsible Global Leadership

√Power/Influence √Global Governance √No legal responsibility limitation Informal Solidarity and Relational Signals -Attitudes -Motivational postures

*Corporate Governance *Effective Disclosure *Positive Actions/Leadership *Private Law *Stakeholder Enforcement *Voluntary Clubs

√Corporate objective √Ethical language √Disclosure-performance linkage √Contract/arbitration √Stakeholder engagement √Enforceable non-complaince costs √No forum shopping √Standardisation √Globalisation of best standards √Corporate groups √Supply/purchasing chains √Business relationships √Political power/influence √Corporate conscience √Individual and collective responsibilisation √Effective whistleblowing

Figure 6.1 Anti-corruption CSR paradigm

guidelines and code of conduct formulation and implementation, investigation, verification and sanctions imposition. There should be a clear and safe internal anti-corruption reporting and anonymised whistleblowing structure that persons within and outside the corporation will be confident to use. It should be ensured that whistleblowers and stakeholders trust the governance structure and anti-corruption officeholders. It has to be clear that the “tone at the top” is consistently and unequivocally against corruption and all its ramifications. Overall, the corporate governance should be demonstrative of corporate anticorruption leadership and commitment.

Code of conduct Corporations may establish clear anti-corruption codes of conduct for their operations and those of their supply/purchasing chains, intermediaries and business partners. A code of conduct can provide detailed and explicit rules on issues such as the definition of corruption, examples of corrupt practices, definition of public officials and roles of corporate agents, advisers and partners, in addition to overarching general principles that enable judgements to be made and decisions and conducts to be carried out in a variety of contexts. There should be clear rules on the reporting, investigation and handling of potential corruption cases and cooperation with public law enforcement authorities and

Corporate social responsibility 123 nongovernmental anti-corruption organizations. Employees, contractors, subcontractors, professional advisers and business partners need to sign up to the conduct as part of the pre-qualification criteria for their engagement with the corporation.

Ethical due diligence A requirement for an anti-corruption CSR activity is ethical due diligence in respect of employees, agents, intermediaries, partners and transactions. This should not simply be designed to promote legal compliance but should be both backward- and forward-looking and sufficiently extensive to help in detecting and tackling potential risk to corporate ethical values. The responsible corporate officers that conduct due diligence on behalf of corporations need to be properly trained to be able to detect, monitor and respond to potential anticorruption risks.

Disclosure Disclosure is a vital component of anti-corruption promotion, including selfregulatory schemes. For instance, the OECD Guidelines confirm that corruption-related disclosures are part of CSR136 and the Global Reporting Initiative’s G3 Guidelines 2006 include reporting requirements for anti-corruption policies, training programmes, risk analysis and incident management. However, effective disclosure systems are imperative. While self-regulatory schemes like CSR often include disclosure,137 the effectiveness of even extensive disclosure requirements necessitates sanctions risks for regulatees.138 An accurate and effective disclosure of anti-corruption policies, issues and performance is therefore critical to an anti-corruption credential. Anti-corruption should be prominent in CSR and other relevant corporate reports. The reports may disclose relevant governance, strategy and performance indicators and be presented in an objectively verifiable manner. Public disclosures and reports to public authorities need to be clear, full and meaningful even when the disclosures and reports are not legally required. Being that CSR is not restricted to legal obligations, the requirement of effective disclosure also applies when there are no legal consequences for inaccurate or misleading anti-corruption statements.

136 OECD, op cit n. 89. 137 Choudhury, B., ‘Social disclosure’, Berkeley Business Law Journal, 13(1), 2016, pp. 183–216. 138 Khalil, S. Saffar, W. & Trabelsi, S., ‘Disclosure standards, auditing infrastructure, and bribery mitigation’, Journal of Business Ethics, 132, 2015, pp. 379–399.

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Private–private cooperation An anti-corruption CSR requires zero tolerance of corrupt practices, and cooperation with nongovernment and civil society organizations in preventing, detecting, reporting and dealing with such practices. Corporations can encourage an anti-corruption civil advocacy by providing funding, training, collaboration and other forms of support to appropriate organizations to ensure their greater effectiveness. Corporate cooperation with other private sector organizations should include independent investigation and monitoring of potential and reported corruption cases. Real cooperation should be extended to organizations like Transparency International and OECD Watch as well as to international initiatives like the International Chamber of Commerce’s Anti-Corruption Commission, the Extractive Industry Transparency Initiative, the Basel Institute on Governance and the UN Global Compact.

Public–private partnership An anti-corruption credential requires taking steps to ensure an effective and efficient collaboration with public law enforcement agents, including selfreporting of unethical practices, transactions, persons and organizations. Corporations can, for example, follow the “Specific Instances Procedure” of the OECD Guidelines to report possible infringements to the “National Contact Points”139 and also encourage stakeholders, nongovernmental organizations, trade unions and other bodies to do the same. Corporations can support the anti-corruption efforts of public authorities by, for instance, providing and supporting robust training programmes for law enforcement and judicial officers.

Conclusions This chapter provides a refined normative and practicable framework for using CSR to address the persistent problem of official corruption, especially in developing countries. In those countries, MNCS and other corporations are implicated in corruption despite the formal global consensus against it. The chapter draws on the political CSR and institutional theoretical models to explicate the anti-corruption role of CSR, and goes further to propose the components of a true CSR approach to tackling official corruption and the underlying business collusion that sustains it. The core principles for anti-corruption CSR include effective self-regulation, accountability and responsible leadership based on global moralism. It is argued that corporations need to acknowledge the governance CSR, which is a justification for corporate promotion of anti-corruption in their

139 See http://mneguidelines.oecd.org/specificinstances.htm (accessed 21 June 2018).

Corporate social responsibility 125 power and influence domains. This “political” brand of CSR requires positive anti-corruption leadership from corporations and not just a negative obligation to refrain from corrupt acts. Effective disclosure is required but words must match actions. Anti-corruption CSR must ensure that corporate compliance is real and not merely symbolic. The anti-corruption CSR paradigm can be integrated into corporate governance structures and requires a global multi-stakeholder engagement and stakeholder enforcement approach. Corporations need to manifest an anti-corruption leadership that clarifies the corporate conscience which influences the organizational culture and guides individuals, business partners and other entities within the corporate power and influence domains. Corporations can promote anticorruption through private legal instruments like contracts and arbitration and by collective action in voluntary clubs. A reframed CSR can overcome informal solidarity and relational signals that impede the effectiveness of anti-corruption rules through appropriate corporate conscience, effective whistleblowing and individual and collective responsibilities. The practical anti-corruption steps corporations can undertake include the setting up of effective corporate governance structures and procedures, establishment and implementation of clear codes of conduct, pursuit of ethical due diligence of individuals, organizations and transactions, accurate and effective disclosure, and cooperation with private and public sector organizations in corruption prevention, detection and control. In conclusion, CSR can play a significant role in defining and enforcing anticorruption rules and standards at the micro, meso, macro, sectoral and global levels, and can have meaningful impact on the conduct of corporations and their affiliates, agents and business partners.

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7

A political science perspective From debate to détente Sam Power

Introduction The following chapter will be presented as three debates in political science. First, how we define corruption: do we consider public opinion, the nature of public interest or the nature of public office? Second, there are debates surrounding the quantification of corruption. If we struggle to agree on a definition, how on earth do we measure it? There are those (quantifiers) that think that measures, whilst imperfect, offer a useful heuristic in understanding the causes of corruption. However, there are others (typologists) who think that these indices oversimplify complex, context-specific phenomena and/or are (most worryingly) little more than public policy tools indicative of a wider political agenda. Finally, there are debates regarding what causes corruption – explanations that privilege interests and those that privilege institutions. Ultimately, and in the spirit of this edited volume, this chapter will outline a tentative détente in these three areas. First, there will always be debates about what corruption is; therefore, it is better for a definitional line in the sand to be drawn. The researcher should define corruption in the terms of the research project being undertaken, then be prepared to defend this position. Second, corruption quantifiers and corruption typologists can (and do) work together. Corruption measures can be used in concert with deeper, qualitative research that attempts to further conceptualise, often at the micro level, specific types of corruption. Finally, institutionalists can learn much from interest-based approaches. A consolidated approach which considers the importance of rationality, but also institutional norms, cultures, ideas and discourse, allows us to better understand the historical development of corrupt processes. The chapter concludes by arguing that corruption is often locked-in early on in the development of an institution. Therefore, those hoping for a quick corruption fix may well be waiting a while. However, by taking this long view we can better advocate for institutional learning across cases and disciplines.

Traversing the definitional minefield Corruption is a classic contested concept. Indeed, when discussing corruption in a seminar or on a conference panel the chances are that the discussion, at some

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point, will end up unpicking exactly how, and why, a speaker is conceptualising corruption the way that they are. Therefore, it is largely unsurprising that much of the initial (and ongoing) work tackles this issue.1 Definitions tend to balance three competing perspectives: the nature of public opinion (what the public perceives to be corrupt), the nature of public office (corruption as the violation of formal rules) and the nature of public interest (corruption as subverting an, often intangible, normative public good). Attempts to link these three core themes can be traced to the formulation of the terms white, black and grey corruption.2 The consideration of acts as either ‘white’ (broadly accepted – what we might consider petty corruption), ‘black’ (broadly condemned – what we might consider grand corruption) and ‘grey’ (somewhere in the middle), categorises definitions of corruption in terms of public opinion. However, Heidenheimer has much to say about the nature of public office and public interest – black corruption essentially encompasses agreement of the corruptness of an affair that spans elite and mass opinion.3 Peters and Welch built on this foundation and created a survey (sent to 24 state senators) outlining actions that might be considered corrupt.4 It is argued that the nature of the favour offered, the public official and the payoff provided were all useful in understanding perceptions of whether an act can be considered corrupt. The concept of mitigation forms the basis of further academic analysis which suggests that seemingly corrupt acts can be mitigated by circumstances – such as an official embezzling money to pay for hospital bills.5 This signifies a clear failing with understanding corruption purely as a violation of formal rules of office – what we might understand as a strictly legal perspective. Not all illegal acts are necessarily corrupt and, furthermore, all corrupt acts are not necessarily illegal. Indeed, some scholars have introduced the concept of ‘legal corruption’, to conceptualise

1 See, for instance, Peters, J.G. and Welch, S., ‘Political Corruption in America: A Search for Definitions and a Theory, or If Political Corruption is in the Mainstream of American Politics, Why Is It not in the Mainstream of American Politics Research’, The American Political Science Review, 72(3), 1978, pp. 974–984; Johnston, M., ‘Right & Wrong in American Politics: Popular Conceptions of Corruption’, Polity, 18(3), 1986, pp. 367–391; Philp, M., ‘Defining Political Corruption’, Political Studies, 45(3), 1997, pp. 436–462; Kurer, O., ‘Corruption: An Alternative Approach to Its Definition and Measurement’, Political Studies, 53(1), 2005, pp. 222–239; Lessig, L., ‘Foreword: “Institutional Corruption” Defined’, Journal of Law, Medicine and Ethics, 41(3), 2013, pp. 553–555; and, Navot, D., ‘Real Politics and the Concept of Political Corruption’, Political Studies Review, 14(4), 2016, pp. 544–554. 2 Heidenheimer, A.J., ‘Perspectives on the Perception of Corruption’, in Heidenheimer, A.J. and Johnston, M. (eds.), Political Corruption: Concepts and Contexts, New Brunswick: Transaction, 2002. 3 Ibid. 4 Examples range from a mayor getting the driveway of his home paved by the city crew (95.9% of respondents viewed this act as corrupt) to a public official using influence to get a friend or relative into law school which 23.7% of respondents viewed as corrupt (Peters and Welch, op cit n 1 at pp. 161–165). 5 Johnston, op cit n. 1.

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phenomena, such as lobbying and financing political parties, which would not encompass corruption under a pure public office understanding of the term.6 The parliamentary expenses scandal in the United Kingdom (UK) is a good example of this.7 In 2009 The Daily Telegraph began publishing the expense claims of parliamentarians and cast the political class into a near incomparable period of tumult.8 The claims ranged from the seriously dubious to the downright bizarre: from the ‘flipping’ of properties designated as second homes to claims for moat cleaning, repairs to helipads, the purchase of chandeliers, trouser-presses and court summons. Yet the vast majority of these claims were not only legal, but perfectly within the rules set out by parliament. Only six members of parliament (MPs) ended up being arrested, and this tended to be on more general charges of fraud and false accounting.9 For example, if we take into account one of the more famous stories in the scandal, Conservative MP Peter Viggers and his claim for the cleaning of his duck house, it is important to note that this was in fact disallowed by the Commons fees office before the scandal hit. Yet it became indicative of a venal political class, a broken expenses system which seemed to confirm the public’s worst stereotypes about the politicians.10 The fact that the claim was made, was refused, but still caused outrage suggests there is more to corruption, or perceived corruption, than simple issues of legality. But what of public interest? There are those that argue that corruption, especially in what we might call advanced industrial democracies, is damaging not because it threatens the viability of pre-existing democratic institutions11 but because it can have a pervasive effect on the more abstract institutions of democracy itself, as well as on wider democratic values.12 The notion of mediated corruption, for example, outlines that an exchange between political actors is corrupt precisely because it subverts widely accepted democratic norms and

6 Kaufman, D. and Vicente, C., ‘Legal Corruption’, Economics and Politics, 23(2), 2011, pp. 195–219. 7 It should be said that there is some debate amongst the political finance community about the overuse of the term ‘scandal’ when the term ‘episode’ seems more appropriate (for example Fisher, J.T., ‘Hayden Phillips and Jack Straw: The Continuation of British Exceptionalism in Party Finance’, Parliamentary Affairs, 62(2), 2009, pp. 298–317 and Ghaleigh, N.S., ‘The Regulator: The First Decade of the Electoral Commission’, in Ewing, K.D., Rowbottom, J. and Tham, J.-C. (eds.), The Funding of Political Parties: Where Now? London: Routledge, 2012). In discussing expenses, however, it has been said ‘the expenses scandal was just that – a bona fide scandal where both the rules and the spirit of the rules were well and truly broken by some (but by no means a majority) within parliament’ (Fisher, op cit and vanHeerde-Hudson, J. (ed.), The Political Costs of the 2009 British MPs’ Expenses Scandal, Basingstoke: Palgrave MacMillan, 2014, p. 197). 8 See VanHeerde-Hudson, op cit. 9 Hough, D., Analysing Corruption, Newcastle: Agenda, 2017, p. 45. 10 See Kelso, A., ‘Parliament on Its Knees: MPs’ Expenses and the Crisis of Transparency at Westminster’, Political Quarterly, 80(3), 2009, pp. 329–338. 11 Johnston, M., Syndromes of Corruption: Wealth, Power and Democracy, Cambridge: Cambridge University Press, 2005. 12 Thompson, D.F., Ethics in Congress, Washington, DC: Brookings Institution Press, 1995.

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political processes.13 This can be understood as the general circumvention of principles such as choice, debate and representation – fundamental pillars of democracy itself.14 The most recent scholarship in the area of public interest has argued that considerations of ‘real politics’ are important in identifying, defining and determining the form of political corruption.15 However, in this case we must be wary of introducing normative judgments into decisions about what does, and does not, constitute a corrupt act. Corruption means different things, to different people, in different places. Navot’s conception of corruption flies dangerously close to a conception which merely posits corruption as ‘that thing with which I disagree’ and as such – much like terms such as neo-liberalism – is of little conceptual use beyond that of empty tautology. These debates continue to rage, and much progress has been made. However, they do rather lead one to the conclusion that the corruption analyst is better off drawing a definitional line in the sand and defining corruption in relation to the specific research project that is being undertaken. A good starting point is the widely cited definition outlining corruption as ‘behaviour which deviates from the formal duties of a public role because of private-regarding (personal, close family, private clique) pecuniary or status gains; or violates the rules against the exercise of certain types of private regarding influence’.16 From there it is the job of the researcher to conceptualise, and defend, their position against any (and often all) criticisms.

The quantification of corruption: Traversing the methodological minefield No less contested are issues to do with quantification. This is unsurprising. If we struggle to agree on how to define a concept, then how exactly do you go about measuring it? Researchers tend to fall down on two different sides of this debate: there are those who attempt to create these measures (or indicators) of corruption and there are those who think the creation of these indices is, at best, counter-productive or, at worst, a part of a wider political (often, whisper it, neo-liberal) agenda.17 The latter position is encapsulated neatly by Claudio Weber Abramo

13 Thompson, D.F., ‘Mediated Corruption: The Case of the Keating Five’, The American Political Science Review, 87(2), 1993, pp. 369–381. 14 See Philp op cit n. 1 and Offe, C., ‘Political Corruption: Conceptual and Practical Issues’, in Kornai, J. and Rose-Ackerman, S. (eds.), Building a Trustworthy State in Post-Socialist Transition, Basingstoke: Palgrave MacMillan, 2004. 15 Navot, D., ‘Real Politics and the Concept of Political Corruption’, Political Studies Review, 14(4), 2016, pp. 544–554. 16 Nye, J.S., ‘Corruption and Political Development: A Cost Benefit Analysis’, in Heidenheimer and Johnston, op cit n. 2. 17 Marquette, H., Corruption, Politics and Development: The Role of the World Bank, Basingstoke: Palgrave MacMillan, 2003; Marquette, H., ‘The Creeping Politicisation of the World Bank: The Case of Corruption’, Political Studies, 52(3), 2004, pp. 413–30; Bukovansky, M., ‘The Hollowness of Anti-Corruption Discourse’, Review of International Political Economy,

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who, perhaps unfairly, argues that corruption indicators represent little more than ‘policy tools’ the role of which is ‘to guide effective policy formation and review’.18 These debates notwithstanding, social scientists who have chosen to direct their focus towards uncovering underlying causes of corruption are best described as falling into two camps: those who favour qualitative depth and those who favour quantitative breadth. These debates can be understood as an extension of basic ontological and epistemological differences – as such, members in each camp could be described as worshipping alternate Gods.19 The two (historically) key proponents of the quantification of corruption were (and to an extent still are) Transparency International (TI) and the World Bank; both have created separate indices and both are subject to no small amount of methodological scrutiny.20 The TI Corruption Perceptions Index (CPI) gives an aggregate score, a poll of polls, which uses information from individual expert surveys and other ratings to measure the perceptions of corruption in a given country. Started in 1995, the CPI originally gave a mark out of 10 (0 being the most corrupt, 10 being the least), but in 2012 the index changed and began rating countries out of 100.21 The World Bank on the other hand use the Worldwide Governance Indicators (WGI), which represent ‘the most well-known, the most ambitious and arguably the most impressive’ attempt to analyse and quantify the quality of governance.22 The WGI project measures and reports aggregate and individual government indicators for 215 economies across six dimensions of governance (voice and accountability, political stability and absence of terrorism, government effectiveness, regulatory quality, rule of law and control of corruption) and provides interactive (longitudinal) data which produces a percentile rank score in each of the six dimensions. The fact that the CPI and the WGI only measure perceived corruption represents a clear point of methodological tension. Some academics defend the use of perceptions-based indicators, arguing that ‘perceptions – even if not matched by reality – can have powerful effects’, thus, ‘perceptions clearly matter’.23 This

18 19 20

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13(2), 2006, pp. 181–209; and Gebel, A.C., ‘Human Nature and Morality in the AntiCorruption Discourse of Transparency International’, Public Administration and Development, 32(1), 2012, pp. 109–128. Weber Abramo, C., ‘How Much Do Perceptions of Corruption Really Tell Us?’ Economics: The Open Access, Open Assessment E-Journal, 2, 2008, pp. 1–56. Beck, N., ‘Is Causal-Process Observation an Oxymoron?’, Political Analysis, 14(3), 2006, pp. 347–352. In recent years the rise of proxy indicators – such as public expenditure tracking surveys (PETS) – has challenged this dominance and are now, it is argued, taken more seriously by policy makers than aggregate level indicators. See, Hough op cit n. 9 at pp. 66–69. In the 2017 edition the (always impressive) New Zealand leapfrogged the (always impressive) Denmark at the top of the pile with 89/100 to the Danes’ 88/100, with Somalia (once again) bringing up the rear with 8/100. Hough, D., Corruption and Governance, Basingstoke: Palgrave MacMillan, 2013, p. 37. Triesman, D., ‘What Have We Learned About the Cause of Corruption from Ten Years of Cross-National Empirical Research?’, Annual Review of Political Science, 10, 2007, pp. 211– 244 at p. 220.

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defence has been criticised as leading to ‘an “echo chamber” problem in which officials and investors repeat what they hear from each other, in effect, and in which anecdotes and perceptions acquire false authority through repetition’.24 Furthermore, it is warned ‘that in politics the power of perceptions ought not to be allowed to serve as a proxy for reality’.25 Perceptions, however, are important in the study of corruption. For example, Michael Koß has demonstrated that when it comes to political party financing the adoption of state funding becomes more probable, ‘the more the discourse on political corruption identifies state funding as a remedy against corrupt practice’.26 However, empirical evidence that increased state funding does reduce levels of corruption, or even perceptions of corruption, is unclear.27 To dismiss the causal power of perceptions out of hand is foolish. A second critique of both indicators is that it remains unclear what type of corruption (bribery, graft, petty, grand, political) is being reported, aggregated and measured.28 Furthermore, it is argued, as the CPI scores are aggregated, each type of corruption is given equal weighting which is akin to averaging ‘apples and oranges’: Suppose that in city A there were 5 murders and 95 incidents of shoplifting, whereas in city B, there were 95 murders and 5 incidents of shoplifting. The size of the population is the same in both cities. Then, the total crime rate is the same in the two cities. But no one would say that they are equally safe cities to live in.29 This lack of definitional clarity has steered some critics to the damning conclusion that these indicators represent nothing more than ‘elaborate and unsupported hypotheses’.30 Daniel Kaufmann, and his WGI co-creators, reject this

24 Johnston, M., ‘The New Corruption Rankings: Implications for Analysis and Reform’, in Heidenheimer and Johnston, op cit n. 2 at p. 877. 25 Andersson, S. and Heywood, P.M., ‘The Politics of Perception: Use and Abuse of Transparency International’s Approach to Measuring Corruption’, Political Studies, 57(4), 2009, pp. 746–767 at p. 762. 26 Koß, M., The Politics of Party Funding: State Funding to Political Parties and Party Competition in Western Europe, Oxford: Oxford University Press, 2011, p. 4. 27 Casas-Zamora, K., Paying for Democracy: Political Finance and State Funding for Parties, Colchester: ECPR Press, 2005 and Casal Bértoa, F., Molenaar, F., Piccio, D.R. and Rashkova, E.R., ‘The World Upside Down: Delegitimising Political Finance Regulation’, International Political Science Review, 35(3), 2014, pp. 355–375. 28 Thompson, T. and Shah, A., ‘Transparency International’s Corruption Perceptions Index: Whose Perceptions Are They Anyway?’, Discussion Draft, Washington, DC: World Bank, 2005 and Knack, S., ‘Measuring Corruption in Eastern Europe and Central Asia: A Critique of the Cross-Country Indicators’, Working Paper 3968, Washington, DC: World Bank, 2006. 29 Thompson and Shah, Ibid at p. 9. 30 Thomas, M.A., ‘What Do The Worldwide Governance Indicators Measure?’ European Journal of Development Research, 22(1), 2010, pp. 31–54 at p. 47.

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line of criticism as ‘definitional nit-picking’ before suggesting that ‘waiting for the articulation of a complete, coherent and consistent theory of governance before proceeding to measurement and action’, might be ‘intellectually satisfying to a few, [but] would be impractical to the point of irresponsibility’.31 The CPI and the WGI are by no means the only indicators out there. TI itself answered the critique that the CPI was too elite-focused by creating the Global Corruption Barometer (GCB) and the Bribe Payers Index (BPI), which take into account the experience of ordinary citizens. These indicators are, of course, not without their own detractors. For example, scholars have found that results of the GCB often correlate with other issues such that measuring opinions regarding human rights and violence would give an equally accurate measure of corruption.32 Furthermore, Paul Heywood notes that the Eurobarometer survey (which asks similar questions to the GCB) outlined major discrepancies between those Europeans who thought bribery was a major problem (74%) and those who had experienced bribery themselves (8%).33 The results of the GCB also attest to this. For example, the 2013 GCB found that 90% of respondents thought that the UK government was somewhat, to a large extent or entirely run by a few big entities acting in their own best interests – and 66% thought political parties were corrupt or extremely corrupt. These results would place the UK between Afghanistan (performs better) and Zimbabwe (performs worse) on these indicators, which – whilst alphabetically pleasing – does not hold up to serious scrutiny. The UK performs considerably better when asked about actual experiences of corruption.34 This is all to say that there are plenty of indicators a researcher can employ from the above aggregate level indicators, to the Business Environment and Enterprise Survey (BEEPS), the World Governance Assessment (WGA), the International Crime Victimization Survey (ICVS) and the Global Competitiveness Index (GCI). There are also those that combine indicators, such as the Corruption Risk Index (CRI), and examine contracting patterns in relation to changes of government to identify suspicious winners in the award of government contracts.35 However, disagreements regarding the utility of these quantitative measures remain. As Leslie Holmes put it, ‘we can measure corruption, but only imperfectly’.36

31 Kaufmann, D., Kraay, A. and Mastruzzi, M., The Worldwide Governance Indicators Project: Answering the Critics, Washington, DC: World Bank, 2007, pp. 23–26. 32 Weber Abramo, op cit n. 18 at pp. 1–56. 33 Heywood, P.M., ‘Measuring Corruption’, in Heywood, P.M. (ed.), Routledge Handbook of Political Corruption, London: Routledge, 2015. 34 Power, S., ‘What Do You Do When the Voters Are Wrong? Party Funding Reform’, in Cowley, P. and Ford, R. (eds.), More Sex, Lies and the Ballot Box: Another 50 Things You Need to Know About Elections London: Biteback, 2016. 35 Dávid-Barrett, E. and Fazekas, M., ‘Corrupt Contracting: Partisan Favouritism in Public Procurement: Hungary and the United Kingdom Compared’, Working Paper 49, Budapest: ERCAS, 2016. 36 Holmes, L., Corruption: A Very Short Introduction, Oxford: Oxford University Press, 2015, p. 52.

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The importance of typology: Moving towards a broader debate These methodological critiques largely fit into a wider philosophical discussion regarding the study of corruption. It is one that has been implicitly addressed above – in attempting to quantify an intricate concept, do we miss out on the inherent complexity involved in the causal relationships? The ontological position of a (typical) corruption quantifier sees it as a zero-sum game – as something which can, ultimately, be ranked. Is there a problem when reducing complex phenomena, such as corruption, to a simple dichotomous variable? The findings will inevitably show a scattershot, in which one would struggle to gain any value, or discover anything about which way the causal arrow might point. Furthermore, those employing these indicators are seeking ‘actionable answers’ to ‘the problem of corruption’ which, intentionally or not, ignores ‘what can be seen as arcane debates about nuance, complexity and specificity’.37 This is, at heart, a debate between those who believe levels of corruption take precedence, and those who believe types of corruption do. The argument of corruption typologists is that when researchers end up relying ‘extensively on corruption indices ranking entire societies along one dimension … we implicitly view corruption as essentially the same wherever it occurs, varying in extent but not in nature’.38 If corruption is context specific, then we need to understand in more detail how and why corruption has taken specific forms in these specific contexts. Furthermore, to do this ‘we need to understand better the relationship between historical development paths, institutional configurations, socio-economic organisation and particular corruption issues’.39 Andersson and Heywood understand the problem with an overtly quantitative approach as representative of an underlying issue with the rational choice perspective; it lacks ‘the capacity to distinguish between different types of corruption, as opposed to the overall amount’.40 The implication in these models is that corruption is driven by the same kinds of structures and that these basically reflect self-interest. In other words, that by viewing one state (or context) as necessarily more or less corrupt than another we risk missing the point. It might instead be the case that different types of corruption are prevalent in different contexts, states and regimes. We should, however, be careful of drawing these lines too sharply. Above, a crude dichotomy of ideologically entrenched, warring religious factions has been presented. This is a deliberately melodramatic understanding of the ontological and epistemological divides between those who conduct large-N studies and

37 Heywood, P.M. and Rose, J., ‘“Close But No Cigar”: The Measurement of Corruption’, Journal of Public Policy, 34(3), 2014, pp. 507–529 at p. 524. 38 Johnston, M., Corruption, Contention and Reform: The Power of Deep Democratization, Cambridge: Cambridge University Press, 2013, p. 11. 39 Heywood, P.M., ‘Rethinking Corruption: Hocus-Pocus, Locus and Focus’, Slavonic and East European Review, 95(1), 2017, pp. 21–48 at p. 40. 40 Andersson and Heywood, op cit n. 25 at p. 751.

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those who conduct small-N comparative studies. In reality, neither approach should be (or is) that entrenched. The point is not absolute. It is rather a call for a rebalancing of focus. One does not have to completely renounce the notion of corruption as being a complex, country-specific phenomena to accept that one could describe Kenya as more corrupt than, say, Sweden. Equally, one does not have to entirely renounce large-N inspired inquiry to accept that the utility of ranking Kenya as more corrupt than Sweden has its limits, and more should be done to highlight the different corruption challenges that each country faces. These methodological (and definitional) debates are important and foundational to the study of corruption. Good quality research will utilise quantitative measures, but will complement this research with deep qualitative work so as to understand the complex (country-specific) explanations for the prevalence (or lack thereof) of certain types of corruption in certain institutional settings.

Analysing the causes of corruption Once these minefields have been traversed, if not entirely satisfactorily, political science is primarily interested in what causes corruption, so as to better understand a) why some countries seem to have better records of tackling corruption than others and b) to better understand how to tackle corruption in places (and institutions) where it seems to be prevalent. The approaches can be separated into two positions: causal explanations that privilege interests and causal explanations that privilege institutions.41 This is, essentially, a microcosm of fundamental debates between structure and agency that have raged, and will continue to rage, until time immemorial. Therefore, at the basic level, it boils down to whether you take a structuralist approach (and subsequently downplay the role of agents in shaping political behaviour) or an intentionalist approach (and privilege the capacity of individuals to act independently and make their own free choices).42 These debates may seem to be, to borrow a phrase, merely ‘intellectually satisfying to a few’ but they have implications for the creation of public policy. Do we advocate for a remodelling of the incentive structures in a given society, or attempt to reform the institutional mechanisms that structure political life in that society? The interest-based approach was born out of the school of rational choice economics which, in the 1970s, attempted to model how (and why) individuals acted in the way that they did. The simplified understanding of this approach is

41 We might also consider sociological explanations that privilege the role of ideas and morality in their explanations of what causes (and inhibits) corrupt activity. See, for example, Chapter 8 of this volume: ‘Discourse of corruption and anti-corruption’, and Chapter 12 of this volume: ‘Social norms and attitudes towards corruption: Comparative insights from East Africa’. 42 Marsh, D., ‘Meta-Theoretical Issues’, in Lowndes, V., March, D. and Stoker, G. (eds.), Theory and Methods in Political Science: Fourth Edition, London: Palgrave, 2017.

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that political actors are self-interested utility maximisers and will act as such. We are all capable of acting in a corrupt manner if the opportunity presents itself. This approach relies on the model of a ‘benevolent-principal’ who deals with ‘opportunistic agents’.43 The opportunistic agent in this situation could be anything from a policeman taking bribes at a routine traffic stop, a civil-servant partaking in low (or high) level graft to the prime minister of a country accepting bribes to ensure a greater chance of re-election. The issue, however, is that it is often unclear – particularly in those states with endemic corruption issues – just what that ‘benevolent-principal’ might look like, or where they might come from. As a child of the 1970s rational choice movement, it might be unsurprising that the approach has been criticised for taking a fundamentally negative and cynical view of human nature. Furthermore, that many of its solutions are based not only on a highly sceptical attitude towards the state but also a deeply held belief that firms and private enterprises more generally only indulge in corrupt transactions as and when they need to in order to meet the demands of corrupt bureaucrats, or they are forced to do so on account of overwhelming state regulation.44 The solution presented, is to (re)design institutions so as to reduce the opportunities for (rational utility-maximising) actors to indulge in (inevitable) corruption. Therefore, researchers have focussed increasingly on the kind of democracy in which anti-corruption measures will flourish. Gerring and Thacker show that unitary and parliamentary forms of government are positively associated with reduced levels of corruption, whilst Kunicova and Rose-Ackerman suggest presidential democracies tend to be more corrupt than parliamentary democracies, and majoritarian two-party systems are found to be less corrupt than multi-party (proportional) systems.45 As compelling as these models are, they do rather overlook that many of the perceived ‘least corrupt’ countries in the world represent fairly significant outliers. The Nordic states, and New Zealand, regularly appear at the top of anti-corruption league tables however you measure it. These can all be categorised as consensual, multi-party democracies with (varying levels of) proportional representation. One would struggle also to plausibly describe these countries as purveyors of classic rational choice economics –

43 See Rothstein, B. and Teorell, J., ‘Causes of Corruption’, in Heywood, P. (ed.), The Routledge Handbook of Political Corruption, London: Routledge, 2015. 44 Hough, op cit n. 9 at p. 77. 45 Gerring, J. and Thacker, S.C., ‘Political Institutions and Corruption: The Role of Unitarism and Parliamentarism’, British Journal of Political Science, 34(2), 2004, pp. 295–330 and Kunicova, J. and Rose-Ackerman, S.-A., ‘Electoral Rules and Constitutional Structures as Constraints on Corruption’, British Journal of Political Science, 35(4), 2005, pp. 573–606.

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which expounds low-levels of government spending and, at best, is agnostic towards the notion of high levels of state involvement. The principal agent/rational choice approach has much to offer both intuitively and as ‘an organising perspective’ which provides ‘useful insights into the situations in which political actors find themselves and must make choices but which can be refined and supplemented in order to provide more rounded and thorough explanations of particular events [emphasis added]’.46 However, there remain serious theoretical and empirical shortcomings. First in its embrace of a one-size-fits-all approach to tackling corruption, which see the causes of (and therefore solutions to) corruption as representing the same challenge.47 Second, the approach has little to say about cases of endemic corruption. How can you tackle corruption by means of institutional (re)design when corruption infects every level of every institution? Recent corruption academia has attempted to engage with these critiques utilising a new institutional approach.48 Rational choice, it is argued, has something to offer to those states with robust regulatory institutions, accountable institutional frameworks and where the rule of law is strong – but little to say of those states which do not. Context matters. This approach is based on the notion that institutions are not merely tangible objects of analysis such as legislation, electoral systems or constitutions but can take the more abstract form of norms, values and morals. The new institutionalists, therefore, try to highlight situations in which corruption itself becomes informally institutionalised. Here, corruption is less a rational choice and much more the ‘basic norm’ of an ‘invisible legal system [which] sanctions the unavoidability of bribes’.49 Utilising this approach and Johnston’s fourfold typology of corruption50 (influence market, elite cartel, oligarchs and clans and official mogul), Hellmann argues that in East Asia ‘different corruption types were institutionalised during critical junctures around the middle of the twentieth century … that differences in the institutionalisation of corruption between developing countries have historical origins’ and ‘once institutionalised [are] subject to path-dependent

46 Hindmoor, A. and Taylor, B., ‘Rational Choice’, in Lowndes, V., March, D. and Stoker, G. (eds.), Theory and Methods in Political Science: Fourth Edition, London: Palgrave, 2017, p. 52. 47 For critiques of this approach see Marquette, op cit n. 17; Bukovansky, op cit n. 17; Shah, A., ‘Tailoring the Fight Against Corruption to Country Circumstances’, in Shah, A. (ed.), Performance, Accountability and Combating Corruption, Washington, DC: World Bank, 2007; and Mungiu-Pippidi, A., The Quest for Good Governance: How Societies Develop Control of Corruption, Cambridge: Cambridge University Press, 2015. 48 See Persson, A., Rothstein, B. and Teorell, J., ‘Why Anticorruption Reforms Fail – Systemic Corruption as a Collective Action Problem’, Governance, 26(3), 2013, pp. 449–471 and Hellmann, O., ‘The Historical Origins of Corruption in the Developing World: A Comparative Analysis of East Asia’, Crime, Law and Social Change, 68(1), 2017, pp. 145–165. 49 Della-Porta, D. and Vannucci, A., The Hidden Order of Corruption: An Institutional Approach, Ashgate: Farnham, 2012, p. 230. 50 Johnston, op cit n. 11.

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effects’.51 Hellmann shows that in a variety of states corruption networks became locked-in and/or embedded at critical moments (junctures) in the historical development of the states in question. Once these networks were embedded (institutionalised) they effectively captured the key institutions of democracy, ‘thereby severely undermining these institutions’ monitoring and punishment capacities’.52 Scholars have also taken a new institutional approach to understanding why some states have relatively low levels of corruption. In Denmark, it has been shown that many principles and laws – often encompassing general anti-corruption legislation – were established early in the development of the political system.53 For example, the first ban on bribery and acceptance of gifts was introduced in 1676 and a system of supplikerne (the closest translation is petitioning) was established in the late-eighteenth century. Supplikerne gave the crown a way of receiving information regarding maladministration and malfeasance by its representatives and as such represented a concerted effort, on the part of the Danish elite, to cultivate a collective responsibility amongst citizens regarding the needs of society. This work shows that (much like in East Asia) both legislative, ideational and cultural norms were locked-in early in the development of the Danish state and once institutionalised became subject to path dependent effects.

Conclusion The above analysis has outlined three debates that rage when we attempt to analyse the thorny issue of corruption. First, we must traverse the definitional minefield and satisfactorily balance three competing perspectives: the nature of public opinion (what the public perceives to be corrupt), the nature of public office (corruption as the violation of formal rules) and the nature of public interest (corruption as subverting an, often intangible, normative public good). The corruption researcher is often better off drawing a line in the sand and defining corruption for the specific research project being undertaken. Second, the researcher must traverse the methodological minefield. The debates fall between those who favour quantitative breadth and qualitative depth. For quantifiers, corruption is something that we can measure either at the macro or micro level, but only imperfectly. For typologists, attempts to

51 Hellman, op cit n. 48 at pp. 160–161. 52 Ibid, p. 162. 53 Mungiu-Pippidi, A., ‘Becoming Denmark: Historical Designs of Corruption Control’, Social Research, 80(4), 2013, pp. 1259–1286; Jensen, M.F., ‘The Question of How Denmark Got to be Denmark: Establishing the Rule of Law and Fighting Corruption in the State of Denmark 1660–1900’, Working Paper Series 2014: 06, Gothenburg: Quality of Government Institute, 2014; and, Teige, O., ‘Bureaucratic Corruption and Regime Change: The Case of Denmark and Norway after 1814’, in Dard, O., Engels, J.I., Fahrmeir, A. and Monier, F. (eds.), Scandales at Corruption à l’époque contemporaine, Paris: Armand Colin, 2014.

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measure corruption in this way are either misguided or indicative of a wider political agenda. However, good quality research (and good quality researchers) should understand the utility of both approaches. It is possible to use these imperfect measures as the starting point and to undertake work that focusses on types of corruption in country specific (or institutional) settings. Finally, attempts to analyse the causes of corruption can be separated into two positions: those that privilege interests, and those that privilege institutions. The interest-based approach understands actors in society (agents) as self-interested utility-maximisers. Given an opportunity to act in a corrupt manner these agents, on the whole, will. New institutionalists argue that this approach has little to say in situations where corruption is endemic and unavoidable. However, in the spirit of détente, this chapter concludes by suggesting each approach has much to offer the other. Rational choice, for example, can be understood as an ‘organising perspective’ – the tools of which should not be dismissed for methodological (or political) reasons. As succinctly put by Hindmoor and Taylor, critics need to recognise both that rational choice has moved simple insights about how collective action problems can nobody has an incentive to act in ways which are in everyone’s can illuminate our understanding of complex political events the starting point for more detailed research work.54

on and that arise when best interest and provide

In other words, if people are not acting rationally, then why? Or if simply (re) designing incentive structures is not preventing actors from indulging in corrupt activities, why might this be? This is where the institutional scholar can be of use. The advantage of utilising a new institutional approach means that we can consider the rational without relegating causal explanations that privilege norms, ideas, cultures or discourse. Furthermore, given that political actors and institutional designers are themselves subject to mixed motivations, we have to be aware of the artificial nature of ‘pure’ ontological constructs … as actors encounter institutions (as rule-takers or rulemakers), they are likely to be motivated by (some combination of) their selfish interests, their ‘need to belong’, and their underlying ideas and values.55 The new institutional approach, complemented by rational choice understandings, allows us to understand the historical development of these processes. So, what does the picture look like for the future? Well, if we look at the complex evolution of what we might consider to be our most developed states,

54 Hindmoor and Taylor, op cit n. 46, p. 53. 55 Lowndes, V., ‘Institutionalism’, in Lowndes, V., March, D. and Stoker, G. (eds.), Theory and Methods in Political Science: Fourth Edition, London: Palgrave, 2017, p. 71.

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we see that it took centuries for them to tackle their most entrenched corruption issues.56 Political scientists, and those in the wider anti-corruption community, should understand that those looking for a quick corruption fix might be waiting a while. We should be wary of any approach, or reformer, that promises a ‘big bang’ cure-all for corrupt practices. Instead, by understanding in a deeper sense the institutional evolution of certain corrupt practices, in certain contextual and institutional settings, we can better understand how to tackle corruption in these specific instances. This might then lead to institutional learning across cases and, importantly, disciplines.

Bibliography Andersson, S. & Heywood, P.M. (2009), ‘The Politics of Perception: Use and Abuse of Transparency International’s Approach to Measuring Corruption’, Political Studies, 57(4), pp. 746–767. Beck, N. (2006), ‘Is Causal-Process Observation an Oxymoron?’, Political Analysis, 14(3), pp. 347–352. Bukovansky, M. (2006), ‘The Hollowness of Anti-Corruption Discourse’, Review of International Political Economy, 13(2), pp. 181–209. Casal Bértoa, F., Molenaar, F., Piccio, D.R. & Rashkova, E.R. (2014), ‘The World Upside Down: Delegitimising Political Finance Regulation’, International Political Science Review, 35(3), pp. 355–375. Casas-Zamora, K. (2005), Paying for Democracy: Political Finance and State Funding for Parties. Colchester: ECPR Press. Dávid-Barrett, E. & Fazekas, M. (2016), ‘Corrupt Contracting: Partisan Favouritism in Public Procurement: Hungary and the United Kingdom Compared’ Working Paper 49. Budapest: ERCAS. Della-Porta, D. & Vannucci, A. (2012), The Hidden Order of Corruption: An Institutional Approach. Farnham: Ashgate. Fisher, J.T. (2009), ‘Hayden Phillips and Jack Straw: The Continuation of British Exceptionalism in Party Finance’, Parliamentary Affairs, 62(2), pp. 298–317. Fisher, J.T. & vanHeerde-Hudson, J. (2014), ‘Conclusions: A Very British Episode?’ in vanHeerde-Hudson, J. (ed). The Political Costs of the 2009 British MPs’ Expenses Scandal. Basingstoke: Palgrave MacMillan, pp. 196–203. Gebel, A.C. (2012), ‘Human Nature and Morality in the Anti-Corruption Discourse of Transparency International’, Public Administration and Development, 32(1), pp. 109–128. Gerring, J. & Thacker, S.C. (2004), ‘Political Institutions and Corruption: The Role of Unitarism and Parliamentarism’, British Journal of Political Science, 34(2), pp. 295–330. Ghaleigh, N.S. (2012), ‘The Regulator: The First Decade of the Electoral Commission’ in Ewing, K.D., Rowbottom, J. and Tham, J.-C. (eds). The Funding of Political Parties: Where Now? London: Routledge, pp. 153–171.

56 Johnston, M., Corruption, Contention and Reform: The Power of Deep Democratization, Cambridge: Cambridge University Press, 2013 and Mungiu-Pippidi, op cit n. 46.

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Heidenheimer, A.J. (2002), ‘Perspectives on the Perception of Corruption’ in Heidenheimer, A.J. & Johnston, M. (eds). Political Corruption: Concepts and Contexts. New Brunswick: Transaction, pp. 141–154. Hellmann, O. (2017), ‘The Historical Origins of Corruption in the Developing World: A Comparative Analysis of East Asia’, Crime, Law and Social Change, 68(1), pp. 145–165. Heywood, P.M. (2015), ‘Measuring Corruption: Perspectives, critiques and limits’ in Heywood, P.M. (ed). Routledge Handbook of Political Corruption. London: Routledge, pp. 137–153. Heywood, P.M. (2017), ‘Rethinking Corruption: Hocus-Pocus, Locus and Focus’, Slavonic and East European Review, 95(1), pp. 21–48. Heywood, P.M. & Rose, J. (2014), ‘“Close but No Cigar”: The Measurement of Corruption’, Journal of Public Policy, 34(3), pp. 507–529. Hindmoor, A. & Taylor, B. (2017), ‘Rational Choice’ in Lowndes, V., March, D. & Stoker, G. (eds). Theory and Methods in Political Science: Fourth Edition. London: Palgrave, pp. 39–53. Holmes, L. (2015), Corruption: A Very Short Introduction. Oxford: Oxford University Press. Hough, D. (2013), Corruption and Governance. Basingstoke: Palgrave MacMillan. Hough, D. (2017), Analysing Corruption. Newcastle: Agenda. Jensen, M.F. (2014), ‘The Question of How Denmark Got to be Denmark: Establishing the Rule of Law and Fighting Corruption in the State of Denmark 1660–1900’ Working Paper Series 2014: 06, Gothenburg: Quality of Government Institute. Johnston, M. (1986), ‘Right & Wrong in American Politics: Popular Conceptions of Corruption’, Polity, 18(3), pp. 367–391. Johnston, M. (2002), ‘The New Corruption Rankings: Implications for Analysis and Reform’ in Heidenheimer, A.J. & Johnston, M. (eds). Political Corruption: Concepts and Contexts. New Brunswick: Transaction, pp. 865–884. Johnston, M. (2005), Syndromes of Corruption: Wealth, Power and Democracy. Cambridge: Cambridge University Press. Johnston, M. (2013), Corruption, Contention and Reform: The Power of Deep Democratization. Cambridge: Cambridge University Press. Kaufman, D. & Vicente, C. (2011), ‘Legal Corruption’, Economics and Politics, 23(2), pp. 195–219. Kaufmann, D., Kraay, A. & Mastruzzi, M. (2007), The Worldwide Governance Indicators Project: Answering the Critics. Washington, DC: World Bank. Kelso, A. (2009), ‘Parliament on Its Knees: MPs’ Expenses and the Crisis of Transparency at Westminster’, Political Quarterly, 80(3), pp. 329–338. Knack, S. (2006), ‘Measuring Corruption in Eastern Europe and Central Asia: A Critique of the Cross-Country Indicators’ Working Paper 3968. Washington, DC: World Bank. Koß, M. (2011), The Politics of Party Funding: State Funding to Political Parties and Party Competition in Western Europe. Oxford: Oxford University Press. Kunicova, J. & Ackerman, S.-A. (2005), ‘Electoral Rules and Constitutional Structures as Constraints on Corruption’, British Journal of Political Science, 35(4), pp. 573–606. Kurer, O. (2005), ‘Corruption: An Alternative Approach to Its Definition and Measurement’, Political Studies, 53(1), pp. 222–239. Lessig, L. (2013), ‘Foreword: “Institutional Corruption” Defined’, Journal of Law, Medicine and Ethics, 41(3), pp. 553–555. Lowndes, V. (2017), ‘Institutionalism’ in Lowndes, V., March, D. & Stoker, G. (eds). Theory and Methods in Political Science: Fourth Edition. London: Palgrave, pp. 54–74. Marquette, H. (2003), Corruption, Politics and Development: The Role of the World Bank. Basingstoke: Palgrave MacMillan.

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Marquette, H. (2004), ‘The Creeping Politicisation of the World Bank: The Case of Corruption’, Political Studies, 52(3), pp. 413–430. Marsh, D. (2017), ‘Meta-Theoretical Issues’ in Lowndes, V., March, D. & Stoker, G. (eds). Theory and Methods in Political Science: Fourth Edition. London: Palgrave, pp. 199–218. Mungiu-Pippidi, A. (2013), ‘Becoming Denmark: Historical Designs of Corruption Control’, Social Research, 80(4), pp. 1259–1286. Mungiu-Pippidi, A. (2015), The Quest for Good Governance: How Societies Develop Control of Corruption. Cambridge: Cambridge University Press. Navot, D. (2016), ‘Real Politics and the Concept of Political Corruption’, Political Studies Review, 14(4), pp. 544–554. Nye, J. S. (2002), ‘Corruption and Political Development: A Cost Benefit Analysis’ in Heidenheimer, A.J. & Johnston, M. (eds). Political Corruption: Concepts and Contexts. New Brunswick: Transaction, pp. 281–300. Offe, C. (2004), ‘Political Corruption: Conceptual and Practical Issues’ in Kornai, J. and Rose-Ackerman, S. (eds). Building a Trustworthy State in Post-Socialist Transition. Basingstoke: Palgrave MacMillan, pp. 77–99. Persson, A., Rothstein, B. & Teorell, J. (2013), ‘Why Anticorruption Reforms Fail – Systemic Corruption as a Collective Action Problem’, Governance, 26(3), pp. 449–471. Peters, J.G. & Welch, S. (1978), ‘Political Corruption in America: A Search for Definitions and a Theory, or If Political Corruption Is in the Mainstream of American Politics, Why Is It Not in the Mainstream of American Politics Research’, The American Political Science Review, 72(3), pp. 974–984. Philp, M. (1997), ‘Defining Political Corruption’, Political Studies, 45(3), pp. 436–462. Power, S. (2016), ‘What Do You Do When the Voters Are Wrong? Party Funding Reform’ in Cowley, P. & Ford, R. (eds). More Sex, Lies and the Ballot Box: Another 50 Things you Need to Know About Elections. London: Biteback, pp. 163–167. Rothstein, B. & Teorell, J. (2015), ‘Causes of Corruption’ in Heywood, P. (ed). The Routledge Handbook of Political Corruption. London: Routledge, pp. 79–94. Shah, A. (2007), ‘Tailoring the Fight against Corruption to Country Circumstances’ in Shah, A. (ed). Performance, Accountability and Combating Corruption. Washington, DC: World Bank, pp. 233–254. Teige, O. (2014), ‘Bureaucratic Corruption and Regime Change: The Case of Denmark and Norway after 1814’ in Dard, O., Engels, J.I., Fahrmeir, A. and Monier, F. (eds). Scandales at Corruption à l’époque contemporaine. Paris: Armand Colin, pp. 145–161. Thomas, M.A. (2010), ‘What Do the Worldwide Governance Indicators Measure?’, European Journal of Development Research, 22(1), pp. 31–54. Thompson, D.F. (1993), ‘Mediated Corruption: The Case of the Keating Five’, The American Political Science Review, 87(2), pp. 369–381. Thompson, D.F. (1995), Ethics in Congress. Washington, DC: Brookings Institution Press. Thompson, T. & Shah, A. (2005), ‘Transparency International’s Corruption Perceptions Index: Whose Perceptions Are They Anyway?’ Discussion Draft. Washington, DC: World Bank. Triesman, D. (2007), ‘What Have We Learned About the Cause of Corruption from Ten Years of Cross-National Empirical Research?’ Annual Review of Political Science, 10, pp. 211–244. Van Heerde-Hudson, J. (ed) (2014), The Political Costs of the 2009 British MPs’ Expenses Scandal. Basingstoke: Palgrave MacMillan. Weber Abramo, C. (2008), ‘How Much Do Perceptions of Corruption Really Tell Us?’ Economics: The Open Access, Open Assessment E-Journal, 2(2008–3), pp. 1–56.

8

Discourse of corruption and anti-corruption Chris McVittie and Rahul Sambaraju

Introduction Much has been written in recent decades about the need to address corruption in countries across the globe, whether to facilitate development,1 to allow international aid to be granted and used effectively,2 or to promote morality and integrity.3 This focus on addressing corruption has been accompanied by a growth in anti-corruption agencies and initiatives, to the extent that cumulative attempts to counter corruption have been described as an ‘anti-corruption industry’4 or an ‘anti-corruption package’.5 Yet, notwithstanding the growth in efforts to address corruption, there is a consensus among many writers that such efforts have failed and that corruption across the globe continues unabated.6 As Gebel notes, what anti-corruption initiatives undertaken by different bodies and in different contexts share is ‘their lack of significant success in reducing corruption’.7 Thus, interventions that seek to reduce or eradicate corruption often have little or no impact upon social practices that have continued regardless: in many instances corruption appears to co-exist without difficulty alongside the very attempts made to address it.8

1 Gray, C.W., & Kaufmann, D., ‘Corruption and development’, Finance and Development, 35 (1), 1998, p. 7. 2 Brown, E. & Cloke, J., ‘Critical perspectives on corruption: An overview’, Critical Perspectives on International Business, 7, 2011, pp. 116–124. 3 Sampson, S., ‘Integrity warriors: Global morality and the anti-corruption movement in the Balkans’, in D. Haller & P. Shore (eds.), Corruption: Anthropological perspectives. London: Pluto. 2005, pp. 103–130. 4 Sampson, S., ‘The anti-corruption industry: From movement to institution’, Global Crime, 11, 2010, pp. 261–278. 5 Sampson, S., ‘The anti-corruption package’, Ephemera: Theory & Politics in Organization, 15, 2015, pp. 435–443. 6 See, for example, Brown, E. & Cloke, J., ‘Neoliberal reform, governance and corruption in the south: Assessing the international anti-corruption crusade’, Antipode, 36, 2004, pp. 272–294 and de Sousa L., ‘Anti-corruption agencies: Between empowerment and irrelevance’, Crime, Law and Social Change, 53, 2010, pp. 5–22. 7 Gebel, A.C., ‘Human nature and morality in the anti-corruption discourse of transparency international’, Public Administration and Development, 32, 2012, p. 109. 8 Sampson, op cit n. 4.

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For many critics, the consistent failure of anti-corruption initiatives results inevitably from how corruption is understood. A major target for criticism has been the World Bank’s definition of corruption as ‘the abuse of public office for private gain’.9 This definition has been highly influential in underpinning many anti-corruption efforts undertaken by the international community. It has nonetheless been widely critiqued for its limited scope and utility in proceeding on the basis of a distinction between the public realm and private realm of a state’s activities. To define corruption in this way is to rule out immediately the possibility of examining instances of corporate activity that might be viewed as tantamount to corrupt practices.10 Corruption as so defined could not include, for example, the financial irregularities that led to the 2002 collapse of Enron11 or the alleged fraud that resulted in the bankruptcy of Lehman Brothers in 2008.12 Critics have also argued that the distinction between the public and the private sphere rests upon neoliberal assumptions that reflect Westernised values and ideals about social structures, but which have little relevance for developing states.13 On this argument, where international agencies require developing states to address corruption as a condition of their receiving international aid, such actions involve the imposition of external values on local settings and amount to little more than neo-colonialism.14 Thus, it is argued that anti-corruption efforts amount to a merely technical exercise that is concerned with regulating particular forms of social arrangement rather than effecting ethically desirable forms of behaviour.15 In this chapter, we argue that what is to count as corruption, and the apparent lack of success of anti-corruption initiatives, can usefully be understood through detailed examination of how the issues are worked out in specific contexts. While previous writers have pointed to the difficulties encountered when broad notions of corruption encounter local circumstances, little or no work has considered the detail of how corruption and anti-corruption are negotiated in

9 World Bank, Helping countries combat corruption: The role of the World Bank. Retrieved from http://www1.worldbank.org/publicsector/anticorrupt/corruptn/corrptn.pdf 1997, p. 8, (accessed 21 February 2018). 10 Brown & Cloke, op cit n. 6 and Harrison, E., Corruption. Development in Practice, 17, 2007, pp. 672–678. 11 Craig, R.J. & Amernic, J.H., ‘Enron discourse: The rhetoric of a resilient capitalism’, Critical Perspectives on Accounting, 15, 2004, pp. 813–851. 12 Mollenkamp, C., Craig, S., McCracken, J., & Hilsenrath, J., ‘The two faces of Lehman’s fall: Private talks of raising capital belied firm’s public optimism’, The Wall Street Journal, 2008, A1. 13 Hindess, B., ‘Investigating international anti-corruption’, Third World Quarterly, 26, 2005, pp. 1389–1398. 14 de Maria, B., ‘Neo-colonialism through measurement: A critique of the corruption perception index’, Critical Perspectives on International Business, 4, 2008, pp. 184–202. 15 Bukovansky, M., ‘The hollowness of anti-corruption discourse’, Review of International Political Economy, 13, 2006, pp. 181–209. See also Chapter 12 of this volume: ‘Social norms and attitudes towards corruption: Comparative insights from East Africa’.

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local contexts. Our interest lies in studying how individuals and agencies discursively construct what counts as corruption and how they categorise the actions of others as corrupt. Rather, then, than viewing descriptions of corruption as (merely) depicting identifiable behaviours, or as a means of maintaining and perpetuating certain forms of social arrangements, here we approach attributions of corruption as actions that are designed to achieve particular local social outcomes. And, this understanding of the fine-grained detail of discourse of corruption can not only provide useful insights into how constructions of corruption function but also identify the potential difficulties of seeking to counter corruption in practice.

Discourse of corruption The term corruption is often treated as being self-explanatory: the World Bank describes its definition as one that is ‘straightforward’.16 And, corruption is often referred to in the literature as if it has a taken-for-granted quality that stands in no further need of explanation. Thus, for the most part, corruption is taken to denote unproblematically behaviours that are ethically, if not legally, wanting. The corollary is that efforts that are described as anti-corruption are viewed as being intrinsically beneficial, regardless of how they present what they are seeking to address and the measures that are proposed. Critics, however, have argued that understanding corruption is by no means as straightforward as such a definition suggests. For example, as Harrison notes, the term ‘corruption’ is treated as being interchangeable with other terms that are not necessarily synonymous with it, leading to it being used ‘sloppily’ and with insufficient regard being paid to how it is used in individual instances.17 Similarly, Adaja argues that ‘the various manifestations of corruption have made the concept so vague and nebulous that it has become difficult to capture all the features in a single definition’.18 What is to be understood as comprising corruption is, then, no straightforward matter.

Discourses and corruption Many writers have argued that references to corruption, and broad definitions such as that offered by the World Bank, incorporate elements that are not immediately obvious or transparent but that nonetheless have very real impacts in practice.19 For these critics, the language of corruption reflects or enacts

16 Op cit n. 9. 17 Op cit n. 10, at p. 672. 18 Adaja, T.A., ‘Nigerian media and the anti-corruption campaign: A discourse of contemporary issues and challenges delimiting media potency’, Covenant Journal of Communication, 2, 2014, p. 28. 19 Op cit n. 9.

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forms of social structures and social processes that are intrinsically unequal and oriented to particular social outcomes. For example, as Harrison notes, the distinction between the public and private spheres implies a clear dichotomy between the two.20 This notion is based upon a Weberian view of rational social organisation that might be considered ideal in principle but which ‘cannot be found empirically anywhere in reality’.21 Reliance on this distinction then seeks to promote a form of social organisation that cannot be realised in practice. Notwithstanding such impossibility, however, this distinction in a modified form continues to inform subsequent definitions of corruption, such as ‘corruption is the abuse of entrusted power for private gain’.22 For Harrison, defining corruption in these terms is as unachievable as in the earlier World Bank definition and such attempts are bound to end in failure.23 On a related note, Di Puppo argues that a discourse of corruption largely serves the interests of those who propose anti-corruption interventions in developing countries.24 On this view, corruption is not so much identified as it is constructed within a broader discourse of development that legitimises the promotion of neoliberal forms of social organisation under the guise of rational problem solving. Thus, it is suggested, discourse of corruption is ideological in reflecting the operation of social structures and processes that are inherently unequal. The outcome is that not only does discourse of corruption function to maintain social inequality but it also shapes the ways in which people make sense of the issues and practices: the need to address corruption becomes readily accepted as a step necessary for development and for effective provision of aid. Thus, ‘the very success of anti-corruption rhetoric may result in more and more people believing that corruption is a problem. The more there is talk about the problem of corruption, the more widely it is perceived to be a national blight’.25 When, however, this ideological discourse comes into contact in local settings with very different understandings and practices, the outcomes are ones that fail to reflect the idealised social arrangements envisaged by the World Bank and others. In attributing such properties to discourse, scholars, such as Parker endorse a particular view of discourse.26 On this view, discourse is considered as an

20 Op cit n. 10. 21 Weber, M., ‘“Objectivity” in social science and social policy’, in E.A. Shils & H.A. Finch (Eds.), The methodology of the social sciences. New York, NY: New York Free Press, 1904/ 1949, p. 90. 22 Transparency International, What is corruption? 2018, Retrieved from www.transparency. org/what-is-corruption (accessed 21 February 2018). 23 Op cit n. 10. 24 Di Puppo, L., ‘Anti-corruption interventions in Georgia’, Global Crime, 11, 2010, pp. 220– 236. 25 Harrison, op cit n. 10, at p. 674. See also Chapter 7 of this volume: A political science perspective 26 Parker, I., Discourse dynamics (psychology revivals): Critical analysis for social and individual psychology. London: Routledge, 2014.

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‘interrelated set of texts, and the practices of their production, dissemination, and reception’.27 Here discourses are treated as normative, in defining ‘who and what’ is normal, standard, and acceptable. Examining these discourses then involves taking a critical perspective in ways to explicate how such discourses embed and re-produce certain social practices and relations. For instance, scholars argue that anti-corruption discourses routinely occupy public space and thereby establish norms of appropriate social practices and solutions to practices that are deviant.28 However, the solutions offered are often in the interests of those participating in these discourses. A particular issue for anti-corruption discourses is that these are nested in settings of international development and governance.29 Relatedly, analysts argue that anti-corruption discourses miss nuances and complexities in local matters.30 In addition, these discourses advocate solutions based in rational approaches, thus excluding space for morality and ethics.31 Other scholars argue that such discourses are problematically apolitical, in that, the standardisation of rational or technical practices for addressing corruption issues has little scope for political solutions.32 Broadly, they critique anti-corruption discourses for advocating a neoliberal agenda,33 which includes reforms and practices of increasing privatisation and free-market economic arrangements.

Corruption and everyday talk The studies considered above draw our attention to the need to examine the language of corruption rather than treating it as self-explanatory or accepting anti-corruption talk as necessarily well-intentioned or beneficial to those on the receiving end. Focusing, however, on broad forms of discourse does omit from consideration two elements that are particularly relevant to understanding how talk of corruption and anti-corruption functions in social life. Firstly, although adopting a very different approach from that of attempting to define corruption, studies that prioritise the study of discourse share with that approach one key element: they reify what is being studied. Instead of considering corruption as a clearly delineated topic of study, they treat discourse of corruption as a topic that is equally delineated. Thus, on this view, it makes sense to talk of discourse of corruption, or discourse of development, as if it were a singular identifiable

Ibid. Bukovansky, op cit n. 15. Brown & Cloke, op cit n. 2. Bukovansky, op cit n. 15. Everett, J., Neu, D., & Rahaman, A.S., ‘The global fight against corruption: A foucaultian, virtues-ethics framing’, Journal of Business Ethics, 65, 2006, pp. 1–12; Gebel, op cit n. 7; and, Harrison, op cit n. 10. 32 Brown & Cloke, op cit n. 6. 33 Slager, R. ‘The discursive construction of corruption risk’, Journal of Management Inquiry, 26, 2017, pp. 366–382.

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entity. Secondly, and relatedly, such a focus omits from consideration how matters of corruption or anti-corruption are worked out in local contexts. There is no room for consideration of what happens, more precisely, when those living in developing countries and elsewhere seek to make sense of their actions and those of others. For example, do they take up, challenge, rework, or otherwise deal with the neoliberal or idealised arguments being put to them or are these rejected or reworked in conjunction with previous or alternative understandings? A focus on discourse as a broad and historically located monolithic entity allows no room for the fluidity of social life as lived there and elsewhere. For such reasons, we adopt here a different approach to the study of discourse, one that prioritises the study of how discourse (talk/text) is actually employed in particular social settings. Discursive psychologists argue that discourse has particular properties or features.34 Firstly, discourse is constructive, in that discourse constructs particular versions of events, actions, and agents. Secondly, discourse is occasioned, which refers to the feature that talk or text is always used on particular occasions. Thirdly, discourse is action-oriented, in that, constructions of actions, events, and agents are used on particular occasions to accomplish particular social actions. Discursive psychologists, then, argue that analysis of discourse should proceed in ways to identify and examine firstly, how the relevant issues are constructed and, secondly, the social actions that are thereby accomplished. This approach has particular implications for examination of broader topics, such as corruption. While there exist several definitions, researcher conceptions, and common-sense ideas of corruption and anti-corruption, a ready use of these in the analysis of talk poses problems. One problem is thrown up by research findings discussed above: any one notion of corruption or anti-corruption misses several appropriate aspects that are relevant in specific instances. Another problem is the potential importing of analytical constructs that may not be demonstrably relevant for the phenomena of study. Schegloff argues that rather than employing certain pre-conceived notions of phenomena under study, analysis should primarily focus on the perspectives of those who live, construct, and engage with the phenomena of interest.35 In other words, the analytical thrust is to bring to the foreground the constructs and categories of agents who produce and participate in the phenomena. This supplants the use of analytical constructs and categories derived from researchers or analysts, no matter how wellintentioned. What this means for the study of corruption and anti-corruption is that discursive psychologists examine how particular agents, on specific occasions, construct and manage issues of corruption and anti-corruption in discourse.

34 Potter, J., Representing reality: Discourse, rhetoric and social construction. London: Sage, 1996. 35 Schegloff, E.A., ‘Whose text? Whose context?’, Discourse & Society, 8, 1997, pp. 165–187.

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On this approach analysis of corruption, and anti-corruption, begins with examining how actions are categorised as corrupt, rather than asking whether particular actions constitute corrupt practices. Discursive psychologists treat discourse as a topic of study in its own right,36 studying how individuals construct and categorise events, actions, and agents in selective ways, on particular occasions, and the social actions accomplished in doing so. In the present case, this requires examination of how descriptions of corruption and anti-corruption are constructed and deployed in specific instances, instead of treating them as reflecting external phenomena. In so doing, the analysis prioritises the perspectives and actions of those who produce, participate, and engage with corruption and anti-corruption. As we will see below, such analysis offers useful insights into what it means for people to engage with corruption and anti-corruption in their own terms.

Constructing corruption Defining corruption We begin by returning to the matter of how corruption is constructed in the talk of international agencies. A useful starting point is the much-quoted definition provided by the World Bank, still commonly found in discussions of corruption. Extract 1 We settled on a straightforward definition – the abuse of public office for private gain.37 We do not propose here to revisit the distinction between what is ‘public’ on the one hand, and ‘private’ discussed above. Instead, for present purposes, let us consider other aspects of the definition. A first point to note is the basis offered for selection of this definition, in that it is described as ‘straightforward’. No further detail is given as to the process by which the World Bank ‘settled’ on this definition involved, nor is there mention of any other criteria that might be applied, for example, whether it constitutes an inclusive option or a widely recognised one. This definition thus is presented not as prescriptive but instead as merely one of a set of possible definitions. Secondly, we note that the definition makes no reference to human actors. Instead, it refers to corruption as an abstract entity, without suggesting how it might be applied to any particular actions. The outcome of these features is that this definition is set out here as only one of a set of possibilities and that it leaves entirely open the issue of if and/or

36 McKinlay, A. & McVittie, C., Social psychology and discourse. Oxford: Wiley-Blackwell, 2008. 37 World Bank, op cit n. 9.

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how it might be applied in any specific case. We see similar elements in the definition below from the Organisation for Economic Co-operation and Development (OECD). Extract 2 One frequently used definition that covers a broad range of corrupt activities is the abuse of public or private office for personal gain.38 This OECD definition on first sight appears to be potentially more inclusive than Extract 1, in conjoining ‘public or private office’ rather than distinguishing between them. In other respects, however, it proceeds similarly to the World Bank definition. As before, we see the provisional status given to the definition. Here its application to matters of corruption is doubly qualified. First, similarly to the World Bank’s definition, the OECD describes this as ‘one frequently used definition’ indicating that an unspecified range of other definitions might be available. Second, the definition is set out as covering ‘a broad range of corrupt activities’, allowing for the possibility that certain ‘corrupt activities’ might not fall within the scope of what is proposed. And, similarly to the previous definition, there is no reference to human actors or to behaviour. The outcome is that, again, the status and scope of the definition is left uncertain and it is not applied to particular individuals or forms of behaviour. Below we see a more recent definition provided on the website of Transparency International. Extract 3 Corruption is the abuse of entrusted power for private gain. It can be classified as grand, petty and political, depending on the amounts of money lost and the sector where it occurs.39 Unlike Extracts 1 and 2, the definition above begins in authoritative terms in stating ‘corruption is …’. As it continues, however, this tone of certainty gives way to a more provisional one. We are told that corruption ‘can be classified’ in a number of ways, thereby introducing the notion that corruption is not a singular entity but one that includes multiple possibilities. Moreover, the application of any of these possibilities is stated as ‘depending on’ other factors that are left underspecified. Similarly, however, to the previous two definitions this one makes no reference to human actors or to their activities. Corruption, once more, is set out as a somewhat abstract notion.

38 Organisation for Economic Co-operation and Development, Corruption: A glossary of international criminal standards. OECD, 2007, p. 19. Retrieved from www.oecd.org/corrup tion/anti-bribery/39532693.pdf Accessed 21 February 2018. 39 Transparency International, op cit n. 22.

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In each of these three extracts, we can note how the definition fails to offer any authoritative statement of what precisely is to be understood by corruption. Instead, in each case, the definition is at best provisional and unrelated to any description of human actions. This is perhaps unsurprising: these definitions come from communications that are targeted at potentially wide and diverse audiences and specific details might not be relevant to every case. Nonetheless, the outcome is a definition in terms that are qualified and that are not applied to any named action, even potentially. The issue of what is to comprise corruption in particular instances is left entirely open.

Attributing corruption Of course, the absence of any definitive understanding of corruption does not prevent people from using the term in everyday talk as and when they choose. Indeed, the three extracts above demonstrate that individuals and organisations can use the term in exactly these sorts of ways. One feature of the term ‘corruption’ when it is applied to individuals or groups, however, is that it is far from a neutral description: usually it is deployed in a description of someone as having the characteristic of being morally wanting or culpable for actions they engage or have engaged. Such uses of the term ‘corruption’ are not the sole prerogative of international organisations or anti-corruption agencies, but instead are discursively available to anyone. In this section, we examine some such uses. The extract below comes from a study of the discourse of Vlaams Blok/Vlaams Belang, an extreme right-wing political party in Belgium.40 For a time this party attracted substantial support from Flemish voters, in one election attracting nearly one million votes, a quarter of the Flemish electorate. In 2004, however, it was forced to disband following a legal ruling that outlawed its existence on the grounds of ‘repeated incitement of discrimination’. Extract 4 comes from the party’s website prior to its disbandment. Extract 4 Belgian establishment party politicians do not serve the people. Instead, they serve their own parties, their immediate circles and their trade unions. Embezzlement of public funds, corruption and political scandals are too common in Belgium […] The Vlaams Blok refuses to play this corrupt game. We will always resist the scourge of political appointments and the accumulation of sinecures.41

40 Moufahim, M., Humphreys, M., Mitussis, D., & Fitchett, J., ‘Interpreting discourse: A critical discourse analysis of the marketing of an extreme right party’, Journal of Marketing Management, 23, 2007, pp. 539–558 and Moufahim, M., Interpreting discourse: A critical discourse analysis of the marketing of an extreme right party: The Vlaams Blok/Vlaams Belang. PhD thesis, University of Nottingham, 2008. Retrieved from http://eprints.nottingham.ac. uk/11781/1/518835.pdf. Accessed 21 February 2018. 41 Moufahim, 2008, op cit n. 40 at pp. 33–34.

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We see above one instance of how Vlaams Blok ‘marketed’ itself to the Flemish electorate to gain votes. The description is presented in the form of a contrast between Vlaams Blok and its political opponents. The latter, described as ‘Belgian establishment party politicians’, are depicted in highly negative terms in being interested only in serving ‘their own parties’ and designated others. These interests, it is argued, are evidenced by a list of activities that are described as clearly culpable and indeed illegal, in comprising ‘embezzlement of public funds, corruption and political scandals’. The description of Vlaams Blok that follows states that it ‘refuses to play this corrupt game’ and will resist other activities that are characterised as ‘a scourge’. Here the contrast between the stated activities of other Belgian politicians, and those attributed to Vlaams Blok, emphasises rhetorically the culpability of others and the credentials of Vlaams Blok. Corruption forms a main element of this contrast: whereas those others are involved in ‘corruption’, Vlaams Blok ‘refuses to play this corrupt game’. Thus, without having to make explicit what is involved in ‘corruption’, Vlaams Blok could rely upon deployment of the term to criticise others and to increase its attraction to Flemish voters, at least until the point when it was forced legally to disband. We see similar uses of the term corruption in Extracts 5 and 6. These extracts come from a different political context, one involving a speech made by former Nigerian President Goodluck Jonathan. This speech was given to the People’s Democratic Party in Nigeria on 8 September 2010, the date on which Jonathan declared that he would run as a candidate in the 2011 presidential elections. Extract 5 I set the stage for free and fair elections by constituting an electoral commission comprising of Nigerians with impeccable credentials for firmness and incorruptibility. I charged our anti-corruption agencies to speed up the war against corruption, and respect no sacred cows in the process. In the management of the economy, I advocated a more transparent banking industry, price stability, low inflation, and aggregate increase in productivity as a way to drive us to a more prosperous economy.42 Extract 6 You are all my friends and we share a common destiny. We will fight for JUSTICE! We will fight for all Nigerians to have access to POWER! We will fight for qualitative and competitive EDUCATION! We will fight for HEALTH CARE REFORMS! We will fight to create jobs, for all Nigerians! We will fight corruption! We will fight to protect all Citizens! We will fight for your rights!

42 Bello, U., ‘“If I could make it, you too can make it!” Personal pronouns in political discourse: A CDA of President Jonathan’s Presidential declaration speech’, International Journal of English Linguistics, 3, 2013, p. 88.

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My dear countrymen and women, give me your support, give me your votes and together we will fight to build a great nation of our dreams!43 As in the previous extract, in Extracts 5 and 6 we see Jonathan explicitly refer to corruption in seeking to establish his own political credentials for the subsequent election. Here he sets out corruption as something that has to be addressed vigorously, through the conduct or a ‘war’ or a ‘fight’. He also aligns himself with other Nigerians in seeking to take these steps, in Extract 5 referring to ‘Nigerians with impeccable credentials for firmness and incorruptibility’ and ‘our anti-corruption agencies’, and in Extract 6 simply deploying the collective pronoun ‘we’ to indicate that what is proposed will involve other Nigerians. Nowhere does Jonathan specify to any extent what is involved in corruption. However, by situating his claims to address corruption within a listing of other positive outcomes that he seeks to achieve (Extract 5), and by including a fight against corruption in actions in all Nigerians will participate (Extract 6), he can use the term to further his own claims as a suitable person to lead the Nigerian people. In these two cases, then, we see how speakers mobilise language of corruption to accomplish particular social outcomes, aimed at electoral success. Here, as elsewhere, there is little to be gained by asking if Flemish politicians other than Vlaams Blok or Nigerians other than Goodluck Jonathan are really engaged in activities that amount to corruption, or if these references index broader notions of ideology and inequality. Rather we can see how speakers deploy discourse of corruption to accomplish local situated outcomes without needing to ask how corruption is defined.

Arguing about corruption There are, by contrast, instances where speakers do seek to make more explicit what is to count as corruption. As with general references to corruption, however, talk about individual actions and how they are to be understood is oriented to what speakers seek to accomplish in immediate contexts. The extracts in this section are taken from a study of the coverage in the Norwegian media given to a criminal court case involving charges of corruption in the defence sector. The case revolved around the expense claims submitted by an admiral in the Norwegian navy, Atle Torbjørn Karlsvik, in particular the suggestion that he received from the navy a refund of personal expenses that did not relate to his professional duties. In Extract 7, we see how one newspaper initially reported the events at the trial. Extract 7 It might be insinuated that Karlsvik made an admiral’s mistake with brass knobs on when he listed the porn magazine ‘Sextase’ on a travel invoice

43 Ibid at p. 90.

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The description above begins by emphasising the extent of the Admiral’s culpability in stating that he ‘made an admiral’s mistake with brass knobs on’ in his claim for refund of ‘a travel invoice that had to be paid by the public’. The remainder of the extract comprises a contrast between a list of items that he claimed for and items that he ‘could have argued’ were ‘job related’. The descriptions of items claimed for immediately suggest that these items ordinarily would not be associated with the duties of a navy admiral. Instead, the descriptions themselves, and the listing of them, function rhetorically to emphasise the personal nature of the items. The second part of the contrast, listing alternative items for which the admiral might have claimed, is set out in ironic terms. This serves to indicate that even these items would not properly constitute the basis for a claim for refund, and thereby to distance further the items actually claimed for from the sorts of expenses that might reasonably be met from ‘public funds’. The description therefore highlights the admiral’s blameworthiness in submitting the invoice. As seen in the previous section, however, what is to count or not count as corruption is a participants’ concern. Thus, as the trial progressed, it soon emerged that the admiral’s actions could be presented differently, as seen below. Extract 8 It was a good day today for the Rear Admiral accused of corruption. One after another, previous generals appeared in court to provide their statements regarding the golf trips to Spain. They all agreed that it was useful for Atle Torbjørn Karlsvik to participate in the trips, where the organizational changes in the Defense Force were supposed to have been the topic for large parts of the days.45 Here we see an alternative characterisation of the admiral’s actions in taking part in one activity relevant to his expenses claim, namely ‘golf trips’. While such activities had previously been presented as personal in character and therefore not part of the ‘job related duties’ of being an admiral, here they are by contrast described as a useful part of the admiral’s duties. Indeed, the relevance of this participation to his job is emphasised through reference to ‘organization changes

44 Verdens Gang, 10 January 2006 in Breit, E., ‘On the (re)construction of corruption in the media: A critical discursive approach’, Journal of Business Ethics, 92, 2010, p. 625. 45 Dagbladet, 5 May 2007 in Ibid at p. 626.

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in the Defense Force’ and its importance to the admiral highlighted in that this job-related aspect comprised ‘the topic for large parts of the days’. We should also note the source quoted for the descriptions that support the admiral. These claims are attributed to ‘previous generals’ and are offered as a matter of consensus in that the generals ‘all agreed’ with the proposed view of the admiral’s actions. Not only does this emphasise the extent of the agreement but the descriptions of those providing this account as ‘generals’ draws upon their expertise in relation to the armed forces and hence their entitlement to speak on these matters. This then is no mere reframing of the actions for which the admiral sought repayment but one that carries the authority of individuals who can determine how his actions are to be understood. The description provided by the generals is of course very divergent from how the admiral’s claims were initially depicted in the court and in the press. What we see again is that what is to count or not to count as corruption is not an objective readily definable matter. Rather it is seen to depend upon the person providing the description and how actions are constructed in any specific case. And, where an ascription of corruption is challenged successfully, the very act of alleging corruption can itself come in for scrutiny and potential criticism. Following Karlsvik’s acquittal, those who were deemed responsible for bringing unsubstantiated allegations found themselves under fire, as seen below. Extract 9 The Karlsvik case is not only about a man and his travel invoices, but also about a deep division that is about to poison the Defense Force. And a Minister of Defense that appears to have lost her way.46 As we see here, in subsequent media coverage of the case, criticism came to focus on the actions of the Defense Force. These actions are framed in highly criticisable terms through the statement that they are ‘about to poison the Defense Force’, a statement that suggests serious if not terminal damage to the force. This is immediately followed by a criticism of the ‘Minister of Defense’ who, it is argued, has ‘lost her way’ and who therefore acted reprehensibly in arranging to bring against the admiral charges of corruption that were not upheld. Ultimately, therefore, it is the actions of those deemed responsible for anti-corruption efforts that are criticised in this instance.

Discussion and conclusions In this chapter, we have examined in detail how individuals negotiate corruption and anti-corruption through language. In so doing, our aim has been to argue and demonstrate that a discursive examination of corruption and anti-

46 Verdens Gang, 1 March 2008 in Ibid at p. 629.

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corruption talk offers fruitful insights. In contrast to previous work,47 discursive psychological analysis of corruption talk reorients examination from broader discourses or social scientific understandings to individuals and their orientations. The above analyses demonstrate that individuals offer various constructions of corruption, and of the agents involved (or not) and their activities. The analyses also show that these varying constructions are informed by and attend to the local and broader socio-political contexts within which these are offered. These constructions are used to accomplish specific social actions such as that of blaming others or presenting oneself as a more electable politician. As seen in the first set of extracts, the ways in which agencies and agents define corruption are not merely aspects of accurately identifying certain practices as corrupt. Rather, differing ways either exclude or obfuscate the role of certain agents. This flexibility also extends to ascribing corruption or anti-corruption to themselves or other agents and groups, as is seen in the second set of extracts. Here, political spokespersons presented themselves as fighting corruption and others as corrupt agents, in making claims to legitimate political leadership. Similarly, what counts as corruption can be specifically constructed for use to achieve particular outcomes, such as those of initiating legal proceedings against specific individuals. What these analyses show is that what counts as corruption (and anti-corruption) is a thoroughly social matter. The language of corruption, then, can usefully be examined and understood as actions produced by individuals or agencies in specific settings to accomplish particular outcomes. The analyses included here carry implications for studies of corruption. First, the ways in which corruption is defined has relevance for the social actions being accomplished. While several researchers point to issues with defining corruption,48 what the present analyses demonstrate is that a focus on how various definitions are being used is likely to be more fruitful. These definitions of corruption are better analysed as occasioned constructions and negotiations offered by individuals in pursuit of some social action, rather than as stable reflections of any ‘real’ state of affairs. Second, talk of corruption attends to political and moral projects. In their talk, speakers can categorise corruption as involving individuals and/or collectives. Ascribing corruption or corrupt practices to others is treated to offer legitimacy in pursuing political projects. However, as McKinlay and McVittie argue, categorising certain practices or individuals as corrupt is an ‘open’ matter.49 This can be done in various ways to offer a range of inferences in the pursuit of accomplishing social actions. These inferences can make relevant various issues of morality that are sensible in situ. As the analysis of coverage

47 See, for example, Breit op cit n. 44 and Harrison, op cit n. 10. 48 Brown & Cloke, op cit n. 2 and Gebel, op cit n. 7. 49 Op cit n. 36.

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of the actions of Admiral Karlsvik demonstrates, specific actions can be categorised as corrupt or as benefitting the admiral in a personal capacity, and therefore problematic, or as routine. In contrast to other approaches50 that might conceptualise morality in terms of ethical practice or common-sense ideas that are external to the ongoing events, here we show concerns over morality are points of development and negotiation for individuals who are involved in the ongoing events. Third, the present analyses demonstrate the role of context in how individuals make sense of corruption (and anti-corruption). In political settings, such as rallies, talk of corruption accomplishes actions of political representation and stance-taking. In more interpersonal settings, such talk might lead to accusations and legal proceedings. Finally, the present analyses also carry implications for applied aspects of corruption. One implication following from the analyses presented here is that identifying practices as corrupt or as those that might minimise corruption is problematic. Such identification results in the perspectives of those in positions of power, such as the World Bank, being given priority. While some critical discourse analysts take such a position,51 we argue for an examination of how individuals in specific settings make sense of and negotiate issues of corruption. Our analysis takes such critique further in bringing to the foreground situated discursive practices and actions of various agents and stakeholders involved, including those with power and those who are without. Just as there is no singular version of corruption, since different versions are constructed and negotiated for specific outcomes, particular practices and reforms that are cast as countering corruption are similarly aimed at specific outcomes, such as those of controlling local politics or interfering in the governance of developing nations.52 In particular, claims to anti-corruption, which themselves might involve particular versions of corrupt activities, can legitimise particular forms of funding or specific reforms. However, these anti-corruption activities might substantially deviate from situated understandings on the ground.53 Our approach here has been to examine how people themselves define, challenge, and manage issues of corruption in ways that are meaningful for them. This approach does not prioritise any singular notion of corruption or anti-corruption and therefore brings social scientific understandings of corruption closer to people. In sum, we argue for treating discourse as an active medium where speakers make sense of and negotiate among themselves what is to count as corruption (and anti-corruption) and manage issues arising.

50 51 52 53

Gebel, op cit n. 7. See, for example, Di Puppo, op cit n. 24. Harrison, op cit n. 10. Cf. Bukovansky, op cit n. 15.

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Bibliography Adaja, T.A. (2014), ‘Nigerian media and the anti-corruption campaign: A discourse of contemporary issues and challenges delimiting media potency’, Covenant Journal of Communication, 2, pp. 22–45. Bello, U. (2013), ‘“If I could make it, you too can make it!” Personal pronouns in political discourse: A CDA of President Jonathan’s Presidential declaration speech’, International Journal of English Linguistics, 3, pp. 84–96. Breit, E. (2010), ‘On the (re)construction of corruption in the media: A critical discursive approach’, Journal of Business Ethics, 92, pp. 619–635. Brown, E. & Cloke, J. (2004), ‘Neoliberal reform, governance and corruption in the south: Assessing the international anti-corruption crusade’, Antipode, 36, pp. 272–294. Brown, E. & Cloke, J. (2011), ‘Critical perspectives on corruption: An overview’, Critical Perspectives on International Business, 7, pp. 116–124. Bukovansky, M. (2006), ‘The hollowness of anti-corruption discourse’, Review of International Political Economy, 13, pp. 181–209. Craig, R.J. & Amernic, J.H. (2004), ‘Enron discourse: The rhetoric of a resilient capitalism’, Critical Perspectives on Accounting, 15, pp. 813–851. de Maria, B. (2008), ‘Neo-colonialism through measurement: A critique of the corruption perception index’, Critical Perspectives on International Business, 4, pp. 184–202. de Sousa L. (2010), ‘Anti-corruption agencies: Between empowerment and irrelevance’, Crime, Law and Social Change, 53, pp. 5–22. Di Puppo, L. (2010), ‘Anti-corruption interventions in Georgia’, Global Crime, 11, pp. 220–236. Everett, J., Neu, D., & Rahaman, A.S. (2006), ‘The global fight against corruption: A Foucaultian, virtues-ethics framing’, Journal of Business Ethics, 65, pp. 1–12. Gebel, A.C. (2012), ‘Human nature and morality in the anti-corruption discourse of transparency international’, Public Administration and Development, 32, pp. 109–128. Gray, C.W. & Kaufmann, D. (1998), ‘Corruption and development’, Finance and Development, 35(1), p. 7. Harrison, E. (2007), ‘Corruption’, Development in Practice, 17, pp. 672–678. Hindess, B. (2005), ‘Investigating international anti-corruption’, Third World Quarterly, 26, pp. 1389–1398. McKinlay, A. & McVittie, C. (2008), Social Psychology and Discourse. Oxford: WileyBlackwell. Mollenkamp, C., Craig, S., McCracken, J., & Hilsenrath, J. (2008), ‘The two faces of Lehman’s fall: Private talks of raising capital belied firm’s public optimism’, The Wall Street Journal, p. A1. www.wsj.com/articles/SB122324937648006103. Moufahim, M. (2008), Interpreting discourse: A critical discourse analysis of the marketing of an extreme right party: The Vlaams Blok/Vlaams Belang. PhD thesis, University of Nottingham. Retrieved from http://eprints.nottingham.ac.uk/11781/1/518835.pdf. Moufahim, M., Humphreys, M., Mitussis, D., & Fitchett, J. (2007), ‘Interpreting discourse: A critical discourse analysis of the marketing of an extreme right party’, Journal of Marketing Management, 23, pp. 539–558. Organisation for Economic Co-operation and Development (2007), Corruption: A Glossary of International Criminal Standards. OECD. Retrieved from www.oecd.org/corrup tion/anti-bribery/39532693.pdf. Parker, I. (2014), Discourse Dynamics (Psychology Revivals): Critical Analysis for Social and Individual Psychology. London: Routledge.

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Potter, J. (1996), Representing Reality: Discourse, Rhetoric and Social Construction. London: Sage. Sampson, S. (2005), ‘Integrity warriors: Global morality and the anti-corruption movement in the Balkans’ in D. Haller & P. Shore (eds), Corruption: Anthropological Perspectives. London: Pluto, pp. 103–130 Sampson, S. (2010), ‘The anti-corruption industry: From movement to institution’, Global Crime, 11, pp. 261–278. Sampson, S. (2015), ‘The anti-corruption package’, Ephemera: Theory & Politics in Organization, 15, pp. 435–443. Schegloff, E.A. (1997), ‘Whose text? Whose context?’, Discourse & Society, 8, pp. 165–187. Slager, R. (2017), ‘The discursive construction of corruption risk’, Journal of Management Inquiry, 26, pp. 366–382. Transparency International (2018), What Is Corruption? Retrieved from www.transpar ency.org/what-is-corruption. Weber, M. (1904/1949), ‘“Objectivity” in social science and social policy’ in E.A. Shils & H.A. Finch (eds), The Methodology of the Social Sciences. New York, NY: New York Free Press, pp. 49–112. World Bank (1997), Helping Countries Combat Corruption: The Role of the World Bank. Retrieved from www1.worldbank.org/publicsector/anticorrupt/corruptn/corrptn.pdf.

9

Corruption A sociological approach Jacek Kurczewski

Introduction Is a sociology of corruption possible? The actual question is not so much “is it?” but rather “how?”. Still, substantial arguments against such a sociology can be raised. First, the subject – corruption – is not well defined. Second, the nature of the phenomenon is such that it cannot be well defined. Third, a value judgment is intrinsically involved. Fourth, the “thing” in question cannot be measured. Fifth, the term can cover unrelated events and conduct – irritating for some but not linked systematically enough to produce a consistent subject of intellectual inquiry. Sixth, it is universal across the social structure, and finally, across time. So what may be said specifically about “corruption” to place it as a concept in sociology?1

The conceptual liquid At the beginning of the previous century, it was observed that “in the whole vocabulary of politics it would be difficult to point out any single term that is more frequently employed than the word ‘corruption’”. Party orators and writers, journalists, “muckrakers” and reformers, all used and use it with the utmost freedom, and it occurs not infrequently in the less ephemeral pages of philosophers’ and historians’ works. Transactions and conditions of very different kinds are stigmatised in this way, “… but apparently there is little disposition to inquire into the essential nature of corruption itself and to discriminate in the use of the word”.2 Kurer points out that the early Brooks definition of corruption as “… the intentional misperformance or neglect of a recognized duty, or the unwarranted exercise of power, with the motive of gaining some advantage

1 Kurczewski, J., ‘Is a Sociology of Corruption Possible?’ in G. Skapska and A. Orla-Bukowska in collaboration with K. Kowalski (eds), The Moral Fabric in Contemporary Societies, Brill, Leyden-Boston, 2003, pp. 157–164. 2 Brooks, R.C., ‘The Nature of Political Corruption’, Political Science Quarterly, 24(1), 1909, pp. 1–22 at p. 1.

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3

more or less directly personal” extends the scope of corruption from intrafamily conduct such as adultery, divorce and childlessness through public life to the church “… educational associations, clubs, and so on”.4 The scope of corruption continues to be expanded. For example, the UK Law Commission’s rethinking of the law on bribery extended it to include corrupt practices in the private sector.5 More recently, the non-pecuniary corrupt practices in the entertainment world have been condemned. So, the concept is dynamic and the designated object – corruption – is in motion.

Ambiguous normativity The literature on corruption has become exponentially richer in recent decades. However, it seems that the more is written about the phenomenon the less obvious are the interdisciplinary borders. So this essay is written in a partisan way, that is, assuming that the purpose of sociology is two-sided: to describe what is seen in the social life and to unmask what is hidden behind it. The issue of whether corruption is normal in social life forces us to consider at the outset the issue of what is normal. Since the beginning of the discipline of sociology this question has involved what is seen usually as an alternative: a) something is normal simply because it happens or b) something is normal simply because it ought to happen. The question is somewhat paradoxically solved in sociology though this is rarely openly acknowledged. The best statement is to be found in Peter Berger and Thomas Luckmann’s theory of institutionalisation according to which a repetitive “p” turns into an obligatory “q”.6 That is, the repetitive performance acquires the normative authority, a point stressed much earlier – in 1906 – by Sumner: “The operation by which folkways are produced consists in the frequent repetition of petty acts, often by great numbers acting in concert or, at least, acting in the same way when face to face with the same need”.7 This is seen often in research on corruption in the everyday justification: “I did it (I paid/I took a bribe) because everybody does it”. That is, conduct is expressed as normative because of habits developed over time.

Functionalist background It is not our task to delineate the borders of various disciplines that are dealing with corruption. However, one observes that actual porosity or “liquidity” of

3 Ibid at p. 4. 4 Kurer, O., ‘Definitions of corruption’, in Heywood, P.M. (ed), Routledge Handbook of Political Corruption, Routledge, London and New York, 2015, pp. 30–41 at p. 31. 5 Bribery Act 2010, ch.23, 3. See: www.legislation.gov.uk/ukpga/2010/23/contents (accessed 07 October 2018). 6 Berger, P. and Luckmann, T., The Social Construction of Reality, Doubleday, New York, 1966. 7 Sumner, W.G., Folkways, 2008, at p. 3, found at www.gutenberg.org/files/24253/24253-h/ 24253-h.htm (accessed 21 July 2018).

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Table 9.1 Four models of corruption and their governance Amount of resources at stake Small

Large

Frequency and Low PETTY CORRUPTION expected duration Individual trust, simple and of corrupt generic rules of behaviour exchanges

INDIVIDUAL CORRUPTION Brokerage, strong individual trust

High STRUCTURAL CORRUPTION Regulation, informal norms of reciprocity and conditional cooperation, menace of exit from the deal

SYSTEMIC CORRUPTION Third-party enforcement of informal norms, hierarchical subdivision of tasks within corruption networks partly overlapping with organisational roles

these borders results in mutual crosscutting of the disciplines. This is especially so in the so-called institutional or neo-institutional approach that transcends traditional economy, political sciences and sociology. Let us look for example at the basic typology of corruption as proposed by della Porta and Vanucci.8 All theoretical concepts written into Table 9.1 – individual trust, rules of behaviour, informal norms, reciprocity, cooperation, networks, organisational roles – belong to the thesaurus of sociology. No doubt, the table is the most economic way to present the openly sociological theory of corruption as dependent upon the combination of the value and permanence of the corrupt relations. Such a basic theory allows for focusing the further inquiry on specific type of corruption. Della Porta and Vanucci, in several publications,9 developed a deep understanding of the most complex type of systemic corruption as exemplified by Italian political corruption. They did this by pointing to several institutional elements that add up to the “hidden order” of corrupt practices. The very central concept of “order” around which they narrate the adaptive relations and actions by the corruption actors is the functional concept per se. Similarly, the sociological character of further analysis of the types of power networks as developed by the persistent student of the Russian sistema is beyond dispute even if the sources are not so clearly marked.10

8 Della Porta, D. and Vannucci, A, The Hidden Order of Corruption, Ashgate, Farnham, 2012 at p. 39. 9 Ibid. See also Della Porta, D. and Vannucci, A., Corrupt Exchanges, New York, Aldine, 1999. 10 Ledeneva, A.V., ‘Russia’s Practical Norms And Informal Governance: The Origins of Endemic Corruption’, Social Research, 80(4), 2013, at p. 1147.

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In practice, however, the neo-institutionalist perspective is closely linked with the old-functionalism that remains the prose most social scientists speak. This functionalist analysis may be paired with methodological individualism as when della Porta and Vannucci say, for instance, that “adapting to the fragmentation of the party system, corrupt entrepreneurs had less incentive to pay specific parties, balancing their contact with different party factions instead”.11 This remark seems in fact to combine the presumption of rationality with the agency of human actors. In some analyses, however, the problem arises of the assumption of intentionality of the adaptive effects such as reduction of risk and increasing of trust and predictability of rewarding transaction with the others.12

Sociology of the normative Behind the neo-institutionalist discourse a sociologist may also discover the old tradition of sociological study of the normative. The sociology of corruption in its beginnings arrived at the persuasive distinction made by Harold Lasswell and Abraham L. Kaplan: “Many activities which are disapproved of by those who bear a given culture are, nevertheless, expected to take place. Bribery may be almost the universally reprobate, yet it is taken for granted that some officials will succumb to temptation. A certain amount of countermores activities are, thus ‘normal’ (in both a statistical and normative sense), and must be included by a candid observer as part of the culture. … Social order is the pattern of mores and countermores institutions”.13 For R.K. Merton this is, seemingly, another conflict between the binding culture and illicit opportunities. This is most likely to allow for fulfilment of socially acceptable aims even if at its core there is “sociological ambivalence” about the conduct. Merton defines the situation as “the major social norms and the minor counter-norms alternatively govern role-behaviour”.14 The case of the briber or bribee are classed as “neither cultural conflict nor social conflict, but a contradiction between the cultural structure and the social structure”.15 There are innovative elements of many activities that are classed as corruption. However, we cannot deny the existence of the well-established cultural or counter-cultural practices, or rather some social context, in which such practices are not innovative at all. To this belongs “bribery”. Decades of the rather repetitive research and conceptualisation have not resulted in anything newer than statements like Fiori’s:

11 Della Porta et al, op cit n. 8 at p. 105. 12 See also Chapter 12 of this volume: “Social norms and attitudes towards corruption: Comparative insights from East Africa”. 13 Lasswell, H. and Kaplan, A.L., Power and Society, Routledge, London, 1952, at p. 50. 14 Merton, R.K., Sociological Ambivalence and Other Essays, The Free Press, 1976, at p. 31. 15 Ibid, at p. 11.

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Jacek Kurczewski that in social life in general, and in the economic sphere in particular, the relationships between formal norms and informal social norms can be interpreted in terms of either reciprocal complementarity or conflict. The concept of complementarity illustrates how the two kinds of norms cooperate with and reinforce each other, and describes under what circumstances formal norms can or cannot replace informal rules. Conversely, the notion of conflict between different kinds of norms distinguishes two forms of antagonism: prohibition (which occurs when one type of norm prohibits enforcement of the other), and mutual exclusiveness (which occurs when one type of norm crowds out the other), without this entailing prohibition.16

A nice statement, but not very rewarding in terms of intellectual curiosity. In fact, it seems that something more interesting might be taken from corruption studies. Here, Ledeneva is my favourite as she not only writes about the two sets of norms, a sociological standard that we shall try to shake up a bit later, but introduces a third, namely, the “unwritten rules” that according to her “should not be confused with informal rules” if understood as “meta-rules, or rules about the rules” prescribing “how formal and informal constraints can be circumvented or partially enforced” to “navigate” between formal and informal sets of rules, and between the “rules and their enforcement”.17

Study of scandals as dramatisation of corruption In this domain as well as in the others one may discern, the essentialist approach to corruption is distinguished from the constructionist approach. The moderate version of the latter can be detected in the concept of scandal that is more or less reflexively used in practically any historical study of corruption. Although a concept of scandals entered into social-scientific use in the 1980s,18 the development of the systematic study is more recent.19 In Poland, M. Fuszara pointed to Sherman’s conditions of the successful scandal, meaning that the presentation of it mobilises public opinion.20 Later, G. Makowski included this approach in his version of a constructionist theory of corruption as a social problem.21 We will

16 Fiori, S., ‘Formal and Informal Norms: Their Relationships In Society And In The Economic Sphere’, Review of Social Economy, 76(2), 2018, pp 198–226 at p. 198. 17 Ledeneva, A.V., ‘Unwritten rules: How Russia really works’, Centre for European Reform, accessed at https://issuu.com/centreforeuropeanreform/docs/120902165622-75d161 85c7f6434596f2b65606c7ec43, 2001, at pp. 9–10 (accessed 07 October 2018). 18 Sherman, L.W., ‘The Mobilization of Scandal’, in A.J. Heidenheimer, M. Johnston and V.T. LeVine (eds), Political Corruption, Transaction Publishers, 1989, pp. 887–991. 19 Thompson, J.B., Political Scandal: Power and Visibility in the Media Age, Cambridge: Polity Press, 2000. 20 Fuszara, M., ‘Corruption as Portrayed by the Press’, Polish Sociological Review, 126, 1999, pp. 281–299. 21 Makowski, G., Korupcja jako problem społeczny (Corruption as Social Problem), Warsaw, Trio, 2008.

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return to these later when discussing the sociological approach to systemic transition and transformation of corruption. However, Kantola and Vesa provide a good example of an analysis of scandals in the political context in their study of public scandals in Finland.22 They studied the mediatised scandals involving Finnish elites since the 1970s. The scandals occurred in areas of financial corruption, sexual behaviour and drinking-related public episodes, with the authors pointing out that the number of scandals is on rise and that the media is the decidedly dominant instigator of public disclosures. They conclude that: [t]he moralities of the Finnish elite scandals show how society’s moral order has been revised and renegotiated in recent decades. Over time, new, stricter moralities have appeared governing appropriate elite behaviour in areas such as financial conduct, drinking and sexual harassment. These changes in moral order are linked to wider societal transformations. The relatively solid political system of a class-based society has been shaken by individualization, middle-class allegiances, shifting voters and financial liberalization. All this has meant that, in the more egalitarian societies, authorities are questioned in the name of democracy, openness and transparency. The norms for elites have become more restrictive, and their social morality violations are taken up in public more readily than before.23 Following Thompson,24 media analysts discern four “concepts” – or we rather should say functions – of mediatised scandals.25 First, scandals may be seen as an entertaining element of modern pop-culture, of no significant consequence with all its superficiality and short-term life. Secondly, there is the functionalist concept of scandal which claims that scandals serve to confirm the standards and conventions that are breached by the activities in question. Thompson derives this view from Emile Durkheim’s concept of religion, indicating that, in the modern media world, scandal can be deemed as a secularised form of sin, which is indispensable for society to face their own vices and experience them in the process of disclosure, condemnation and punishment. Confidence in the social order is thereby confirmed by means of a public demonstration of this order’s ability and determination to combat sin. We need sinners’ breaching standards to be revealed to feel better about ourselves, as those who do not commit

22 Kantola, A. and Vesa, J., ‘Mediated Scandals as Social Dramas: Transforming the Moral Order in Finland’, Studia Sociologica, 56(4), 2013, pp. 295–308. 23 Ibid at p. 304. 24 Op cit n. 19. 25 Pawelczyk, P., ‘The impact of scandal on public opinion’. Accessed at https://repozytorium. amu.edu.pl/bitstream/10593/12662/1/ssp-2014-3-045-056.pdf, 2014 (accessed 21 July 2018).

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Third, scandal is thought of as harming the public discourse by diminishing the level of debate and giving secondary importance to rational arguments. Fourth, scandalising media, instead of idealistic images of politicians, present realistic images of people coping with everyday problems as well providing “infotainment” to a mass audience. Incidentally, scandalisation is becoming an effective way to mobilise media audiences, data on which is then sold to advertisers, which is especially significant for the mass media operating in a free market.

Scandals as factors of evolution So “it is also time for us to domesticate scandal, the same way sin was domesticated by Christianity” concludes Pawelczyk.27 A good point, but it is a pity that he ignores anti-clerical Polish author Wacław Nałkowski who, commenting on the Dreyfuss affair, wrote explicitly about the evolutionary effect of scandals, a concept that fits well the constructivist approach to corruption.28 In fact, the history of the rhetoric of corruption is all due to scandals. This is amply illustrated by the long history of criminalising the commercial private use of public offices in England. Modern secularisation blinds scholars of corruption to the link between the development of civil morality and simonia i.e. the sale of the sacred (offices but not only) and the Reformation as the public debate on corruption within the Church. Swart describes the conflict of opinions and practices that continued for centuries in England concerning the immorality of selling offices and other controversial practices in the Crown’s service.29 The consolidation of dominant opinion on the matter was slow and developed in a piecemeal manner. Though there was earlier legislation prohibiting selling certain offices, “… there appear to have been no reported cases brought under either the 1551[-2] or the 1809 Act for 130 years”.30 It was only in the second half of the 19th century that we witnessed the transformation of what would be called today an overwhelmingly corrupt society

26 Ibid at p. 51. 27 Ibid at p. 54. 28 Nałkowski, W., ‘Skandale jako czynnik ewolucyi’ (Scandals as Factor of Evolution), Przegląd Tygodniowy, 40, 1898 https://pl.wikisource.org/wiki/Jednostka_i_ogół/Skandale_jako_ czynniki_ewolucyi (accessed 6 October 2018). 29 Swart K.W., Sale of Offices in the 17th Century, The Hague, Martinus Nijhoff, 1949. See also Chapter 2 of this volume: The history of corruption. 30 The UK Law Commission, Legislating The Criminal Code: Corruption, www.lawcom.gov.uk/ app/uploads/2015/04/c145-Corruption.pdf, 2015 at p. 20 (accessed 7 October 2018).

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into the modern state based upon exemplary civic morality and standards of honest administration. The first of the Prevention of Corruption Acts 1889– 1916 was enacted following revelations by the Royal Commission on Malpractice in the Metropolitan Board of Works. The second statute, the Prevention of Corruption Act of 1906, followed the report by the Secret Commissions Committee of the London Chamber of Commerce. The third statute, the Prevention of Corruption Act 1916, was passed following a series of World War I scandals involving contracts with the War Ministry.31 This process continues to the present. In 1994 two British MPs were exposed by the Sunday Times for accepting £1,000 from a journalist to ask question during the time-honoured institution of question time at the House of Commons. That “cash for questions” scandal led to a series of further media investigations that resulted in relatively lenient sanctions. However, in the long run, the scandal led the then prime minister, John Major, to set up the so-called Nolan Committee that developed the seven standards used to monitor ethical conduct of public life.32 This piecemeal reactive development of law against corruption in the United Kingdom continued until further scandals resulted in the Bribery Act 2010. There is a fifth function of successful scandals, which dramatises the moral change of opinion. This might be illustrated with the recent explosion of the “Me too!” campaign institutionalising the condemnation of the extortion of sexual favours within the entertainment sector and thus extending further the scope of the corruption beyond the world of public administration. This evolution of moral standards deserves to be included in the “civilizing process” theory of Norbert Elias. It also takes us back to the general notion of corruption put forth by Brooks. However, there is no reason to assume that such a process will continue in the same direction. Social circumstances and backlashes may provoke retrogression.

Constructing social problems as politics The scandals (and the moral panics) that accompany corruption history have been analysed as independent events even if they have similar patterns and result in the same outcomes. The scandal is built around a certain event that really happened and this assumption of reality is basic to its success; the “fake facts” may explode as meta-scandals. Sociologists had developed, however, a more fundamental approach, taking both the anti-essentialist perspective that puts in “brackets” the actual reality of a phenomenon and the “real” as to what had

31 Fennell, P. And Thomas, P.A., ‘Corruption in England and Wales; An Historical Analysis’, 11 Int J Soc L, 1983, p. 172, 174, 185–186. 32 Kurczewski, J., ‘British Search for Standards of Conduct in Public Life’, The Polish Yearbook of Civil Service 2004, pp. 98–115.

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been construed. Such a constructionist perspective seems effective in explaining corruption. In this chapter we focus on selected cases of the use made of the concept of corruption pointing to the sociological explanations of the discourse of corruption. From the definition to research designs, corruption is political. By saying this we mean not only the specific “political” type of corruption but that the whole area of corruption is political. Such a link is seen in those studies that relate the societal elite’s concept of corruption that determines the dominant cultural construction of corruption. Vinod Pavarala has examined how members of five elite groups in the state of Andhra Pradesh – bureaucrats, industrialists, judges, journalists and politicians – define corruption.33 It is important to know these constructions because, as we are told, the elites dictate the ‘tone of the discourse’ about corruption and its possible solutions. Bureaucrats, the industrialists and the politicians feel more comfortable with a narrow legalistic definition of corruption as bribery or misappropriation of public resources, while the judges and the journalists prefer a ‘broad/moralistic’ definition (gift-giving, nepotism, lying or even intellectual corruption). ‘The politics of definition’, according to Pavarala, depends on the actors’ structural locations, and their interests and stakes in the system explain how they look at corruption.34 Not surprisingly, three elite groups – industrialists, bureaucrats and politicians – who have access to the structural power or discretionary controls that can benefit their own community – refuse to categorise nepotism as corruption. And for the same reason, judges and journalists without such power can easily include nepotism as a type of corruption. Each group escapes its own responsibility and blames others. The politicians, for example, point their fingers at the bureaucrats and refuse to accept that the prevalent political culture itself may be a source of corruption. This mutual blaming can also be seen between opposing political parties. The 19th century battles between Democrats and Republicans and between the Whigs and Tories as to the development of ethical standards has not disappeared but instead intensified (and can be observed in any country in which freedom of expression is practised, at least partially). The recent waves of mutual accusations are institutionalised in investigative commissions set up by ruling factions. These have mushroomed in parliaments such as the Polish and Brazilian and are vivid illustrations that the blaming of others for corruption is easier where there is significant distrust of the honesty of politicians and parties. This open moral panic makes accusations easier, particularly as such accusations can be politically fatal even if they are never substantiated.

33 Pavarala, V., ‘Corruption as a Site for Contested Meaning: Elite Constructions in India’, Qualitative Sociology, 14(2), pp. 405–422. 34 Ibid.

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Political transformation of corruption into economic and social problems Grzegorz Makowski, a Polish student of corruption, followed the history of public debate on corruption in Poland after the transition from Communism in 1989.35 He discovered that despite individual futile attempts, such as that made by this author in 1990,36 the topic of corruption raised in connection with several actual or potential scandals was marginal in the media.37 This was the case until a sudden outburst of interest in the years 1999 and 2000 after the World Bank, at the request of Deputy Prime Minister Balcerowicz, prepared the first report on corruption in Poland. Makowski develops a detailed analysis of the conversion of corruption into a Polish social problem.38 The basic assumption in his analysis had been famously expressed by van Dijk, “In the field of complex crimes, statistics of police-recorded or court-recorded crimes are a source of disinformation”.39 So, the definition of corruption as a social problem cannot be based on actual empirical evidence but necessitates developing such measures as Transparency International (TI) indices or other measures that would support the idea that corruption is a social problem. In classifying the World Bank as the decision-maker, Makowski follows the signal analysis by Polzer who explains that: The Bank serves as a significant case study because it is the preeminent single actor in the “development industry”. In addition to, and perhaps more importantly than, its economic leverage over poor governments, the Bank is the representative of the mainstream discourse of development, thereby strongly influencing other development actors’ frames of reference. Specifically, it has taken a leading role in promoting the anti-corruption agenda, both within its own programmes and in support of “international efforts.40 Polzer’s analysis focuses on reasons behind the change in the Bank policies that led to the global construction of corruption as a social problem. From being taboo it has been promoted to being “the largest single inhibitor of equitable

35 Makowski, op cit n. 21. 36 Immediately after the transition in Poland started, as a parliamentary adviser of the solidaritybased OKP civic parliamentary faction in Polish Seym, I put forward a proposal to declare 1990 a ‘Year of Clean and Transparent Government’. The motion was rejected by anti-communist and reform-hungry parliamentarians. 37 Makowski, op cit n. 21, at p. 254. 38 Ibid. 39 Van Dijk, J., ‘The international crimes victims survey and complementary measures of corruption and organised crime’, Crime Prevention Studies, 22, 2007 at p. 132. 40 Polzer, T., ‘Corruption – Deconstructing the World Bank Discourse’, DESTIN Working Paper Series LSE No. 01–18, 2001, at p. 2.

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economic development,” according to James Wolfensohn, the then president of the World Bank. Once something becomes a “concept,” it is given fixed characteristics and parameters: it becomes an object of study, policy and intervention. While corruption was discussed in the academic world and at the fringes of World Bank research before 1996, it did not have the central characteristic which allowed it to be recognised as an “operational concept” by the Bank: it was too political. Only once the transition to an economic “concept” had been made, could the project of defining, measuring, and finding causes and effects be commenced. Once it was thus accepted, a whole new realm of experience and information became relevant and “sayable”.41 Polzer was followed by Ivan Krastev who put bluntly that: Designed as consensual and non-political, the global anti-corruption policy package promoted by the World Bank resulted in re-cycling some of the most contested policies and aspects of the Washington consensus. The local was blind to notice the normative nature of the current anti-corruption crusade because for them ‘corruption’ was never normal policy issue. The ‘local’ was hijacked by the rhetoric of anti-corruption. In the ideas of democracy activists’ anti-corruption politics is by definition progressive and reformist.42 According to this critical sociological approach, at the core of the successful conversion of corruption into a social problem was the concern of large international US companies that they would lose their competitive edge in global markets with the introduction of the Foreign Corrupt Practices Act in 1977. The “cleaning” and making “transparent” of local markets such as emerging markets in the postcommunist world was simply in the economic interest of the strong economic and political global players. This does not mean that corruption was or is not present in these societies. However, the critical theory of converting corruption into a social problem explains why activities formerly tolerated or neglected suddenly became the major focus of international political and economic pressure. But again, the change in some areas of social life seems illusory. Kaja Gadowska conducted extensive research into the informal structure of the Polish mining industry after the transformation.43 This industry, which even today is economically important, resisted calls for its privatisation and is

41 Ibid at p. 10 where she also cites James Wolfensohn. 42 Krastev, I., ‘When “Should” Does Not Imply “Can”’, The Making of the Washington Consensus on Corruption, 2004, at p. 30. See: www.colbud.hu/honesty-trust/krastev/pub01.PDF (accessed 7 October 2018). 43 Gadowska, K., ‘Clientelism in the Silesian Coal Mining Industry’, in Political Corruption in Poland, Arbeitspapiere und Materialien – Forschungsstelle Osteuropa, Bremen Working Papers of the Research Centre for East European Studies, Bremen, 2005.

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composed of several state-owned enterprises monitored by special public agencies, though surrounded by a multitude of the private small and larger coal selling firms. The number of miners employed by the coal industry has declined significantly since the beginning of regime transformation, through mass lay-offs accompanied by generous compensations such as year-long paid holidays. The miners, however, remain a numerously strong and politically dangerous group, organised in their dozens by the militant trade unions, competing in their demands and securing employment for union activists. In coal mining we can discern a pathological power structure. Gaining entrance to the circle of power is not easy; however, once you enter it and accept its rules, it is largely possible to forecast remaining in the structure until the retirement. The system of power which has evolved is so strong that all state, social, political and economic entities have to take it into account. From a long-term perspective, the mining establishment, though not free from political pressure, is relatively immune to political shake-ups. Its members want to cooperate with every government because they are well aware that survival of the sector depends on the corresponding restructuring policy, and frequently on the specific decisions of individual politicians.44 The opening of formerly politically and structurally much isolated ex-communist countries meant also opening up to the corrupt practices accompanying a sui generis colonisation by transnational corporations. This had been well researched in the pharmaceutical industry and its relationship with Polish medical practitioners, advertisement and patients’ organisations. Polak conducted a profound study based on interviews, official documents, media reports and legal acts leading to the reconstruction of complex multi-layered systems.45 The first level of corruption involved the building of the principal–agent relationships between the companies and individual physicians. In exchange for “loyal cooperation and drug prescription”, physicians secured a constant flow of invitations to congresses, professional training courses and promotional meetings in attractive holiday locations with lush accommodation and banquets. As the second layer, Polak describes the much more substantial financial support offered by the companies to the “key opinion leaders”; that is, the most recognised specialists, ward and hospital directors, and consultants. Their role is assessed objectively through the citation coefficients as well as through their role in drugs and medical equipment procurement, and the financial gratification is legalised through “… signing contracts for lectures, consultations and quasi-scientific or marketing

44 Ibid at p. 40. 45 Polak, P., Nowe formy korupcji. Analiza socjologiczna sektora farmaceutycznego w Polsce (New Forms of Corruption. Sociological Analysis of Pharmaceutic Secor in Poland), Nomos, Cracow, 2011.

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research. Essentially, this means corruption shifts out of the realm of illegality and the black market into official economic activity where cash flow is documented and all due taxes paid”.46 The third level of corruption consists in developing the patron–client relationship with private patient organisations that become lobbyists for their sponsors. Finally, the pharmaceutical companies strive to develop cooperation with the public administration critical in areas such as drug registration and constructing the lists of publicly reimbursed pharmaceuticals and medical procedures. However, since the marketisation of drug distribution these processes are not country specific at all. For instance, even in Finland, which is considered the cleanest country in the world,47 in 2003 such financial support to drug companies was provided by 71% of 55 patient organisations.48

Partial definitions The Polish mining industry or global pharmaceutical market as areas of institutionalised and organised corruption show that the problem escaped the narrow disciplinary or sectorial borders and became a pervasive component of everyday life everywhere. With the passage of time, as we had anticipated,49 the concept of corruption underwent further extension. With the most recent scandals concerning allegations of sexual molestation and rape, the private “business” relations in the entertainment industry as well as in the world of politics must be included. There is no reason why the definitions that focus on trust or abuse of formal rules for private gains of non-pecuniary character should be waived in any domain. The dynamic character of the concept of corruption makes it difficult, if not impossible to attempt the systematic theory of corruption, if it is needed at all. The pragmatic way out of the conceptual problem is to focus on a particular type of corruption. The misappropriation of public funds for private purpose has been censored conduct since the glorious days of the Athenian Republic.50 We are accustomed in the era of the internet to follow scandals concerning such types of political corruption all around the globe. Another disease with deep historical record is the simple buying of votes. As it is naturally limited to contexts where the ballot occurs and the votes are counted, the practice is less apparent. In the history of corruption studies the topic is known not only from the history of Tammany Hall in New York from

46 Ibid at p. 409. 47 2003 TI index of corruption as retrieved from www.transparency.org/research/cpi/cpi_2003/ 0#results//on07/10/2018. 48 Op cit n. 46 at p. 193. 49 Kurczewski, op cit n. 1. 50 Taylor, Claire. ‘Bribery in Athenian Politics Part I: Accusations, Allegations, and Slander’, Greece & Rome, 48(1), 2001, pp. 53–66.

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51

the 1790s until 1960s, but from the sophisticated research by Hugh SetonWatson on buying votes in the Habsburgs’ Hungary.52 From my own memory, however, even in context of the fake elections at the national and local elections of the Polish communist “People’s republic”, the ballots in the sport associations were taken seriously, so there was room for the practice of bribing the delegates to the assembly meeting in order to secure the victory of the candidate for an office.

Bribery under communist rule and an anthropology of gifts One moves back from a theory of scandals into the potential theory of bribery, which seems to be the most trivial of the types of corruption; that is, the most trivial as it seems to be the best defined. However, as in the previous parts of this chapter, some doubts have been cast on the supposed equivocality of the term “bribe”. It is here that the sociology, anthropology and economy of gifts meet each other and a multidisciplinary analysis is inevitable. In 1969 a representative quota sample survey of Polish public opinion asked about the acceptance of various gifts to be offered to physicians before and after the health service performed. The question discerned money, gifts of kind and flowers as well as their value. The exact wording of the question was: “According to your opinion what may physician accept from a patient under his or her care in the hospital? Can a physician accept something from the patient after the latter left the hospital?”.53 For the patient–physician relationship, private pecuniary gratification was rejected by the overall majority. However, more than 18% considered it appropriate for a patient to provide a substantial gratification to the physician after he or she had performed the service. The majority of Poles living then in a system of socialised health service (similar to that of the British) found it proper also to give what was considered a “symbolic” recognition of the service received. Basically, it was considered acceptable to provide a gift but not to bribe to jump the queue or to receive better hospital conditions or special medical treatment. Anna Kubiak, in autumn 1988, the last year of Communist rule in Poland, surveyed the experience, representation and evaluation of bribery on a random sample of 400 inhabitants of the large industrial city of Łódź.54 The majority (59.3%) of respondents pointed to the negative effects of bribes and

51 For a brief summary of Tammany Hall, see: https://en.wikipedia.org/wiki/Tammany_Hall (accessed 7 October 2018). 52 Seton-Watson, H., Corruption and Reform in Hungary. A Study of Electoral Practice, Constable, London, 1911. 53 Kurczewski, J. & Solarz, J., ‘Zawód lekarza w opinii publicznej (Medical Profession in Public Opinion)’, 117, Ośrodek Badania Opinii Publicznej i Studiów Programowych, Warsaw, 1972 at pp 20–21. The survey sample was 3212. 54 Kubiak, A., Łapownictwo w świadomości mieszkańców Lodzi (Bribery in Cosciousness of Inhabitants of Łódź), Instytut Socjologii UŁ, Łódź, 1992.

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symptomatically the positive functions of corruption-as-bribery were been considered: some 53% said that a bribe would secure a better quality service or product and 25% pointed to the improvement of material standards of living on part of the bribe-takers and a chance for better quality for bribe-givers. The qualitative interviews led Kubiak to list seven functions of corruption, some negative and some positive: 1) in context of general shortage of basic goods a bribe “normalises” disorganised exchange transactions; 2) bribes are destructive as they devoid an exchange of its normal character; 3) bribes provides the payer with some security to get on with their daily lives; 4) bribes implement social justice as recompensation for heavy, responsible or extra skilled work and services that often are very poorly remunerated; 5) bribes redistribute income creating new groups of better economic status independent of the official criteria of stratification such as education; 6) bribes make ill-functioning economic and administrative structures more efficient, acting like a “glue” on social relations; and, 7) bribe-taking and bribe-giving is the marker of social success and entrepreneurship.55 In 1964, Adam Podgórecki’s national representative survey in Poland found that 22% of respondents declared that success in getting things done necessitated the paying of additional funds, i.e. bribes, as well as having the right “private connections”.56 At the end of state socialism in Poland in 1988, Kubiak was confronted with a paradoxical situation of there being an almost universal conviction about the presence of bribery and its necessity (about 98%), and simultaneously its relatively rare occurrence in the actual experience of the respondents (21% said that they had to pay a bribe in the last year while 50% said that never paid a bribe in their life).57 A more developed conceptualisation of bribery was that forwarded by Alena Ledeneva, in her study of “blat”.58 Ledeneva distinguishes three “regimes of blat”. First, the regime of equivalence based upon mutual utility (vzaimopoleznost”) or mutual help (vzaimopomoshch’) such that there is an equal exchange between the givers and receivers to secure desired goods or services. Second, the affective regime in which participants, e.g. friends, are bound by personal ties independent of blat transactions. Between friends the requests can be unlimited, but at the same time, I will require from my friend to see why I can’t help without taking offense. If I can’t, I can’t. He is supposed to believe that if I could I would do my best.

55 Ibid at p. 81. 56 ‘Łapownictwo: mity i rzeczywistość’ (Bribery: Myths and Reality), editorial debate, Gazeta Sądowa, 7(252), 1974, pp. 1–5. 57 Op cit n. 54 at p. 29. 58 Ledeneva, A.V., Russia’s Economy of Favours: Blat, Networking and Informal Exchange, accessed at www.colbud.hu/honesty-trust/ledeneva/pub03PDF, 1996 (accessed 21 July 2018).

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It is mutual trust in each other. The relationship is based on the belief that we are friends and will do everything to maintain it.59 Third is the “regime of status”, that is an asymmetrical relationship linked with the pattern of patron–client relationships “… where the superiors are supposed to know the ways, to control them, and to take responsibility, while the subordinate is to be loyal and respectful”.60 All of these three types of “blat” are verbalised in such a way that its economic contents and impact tend to be hidden under the affective idiom of social relations. In this way, the corruptive practices are transformed into the neutral and standard categories of everyday social interaction. So even the detailed ethnography of the paradigmatic corrupt transactions reveals the discursive conversion, this time from social problem to the everyday normalcy. Moreover, it may be pointed out that: … bribery is a democratic form of corruption. Any public agent, postal clerk, immigration officer, court janitor, or housekeeper in the public hospital may be [the] subject of bribery by an interested client. If bribery becomes the paradigm for corruption, this is a convenient defence for the elites, since it detracts attention from the upper echelons and keeps public focus on government employees in general.61 The widespread use of bribes as in the heydays of the socialist-state market shortages and administrative rationing62 should not blind us as to the permanent presence of various forms of corruption in the wider sense. This is the case both during the earlier, more stable decades of the communist regime, as well as in the context of the qualitative change in forms and agents of corruption in the new market economy after the political transformation.

Is there a necessary relationship between power structures and corruption? My conclusion from this review of some studies of corruption is that the sociological approach is exactly the kind of questioning required of all normative, conceptual, theoretical and empirical statements related to corruption. Take my final example, the figure presenting the three types of local political culture I

59 60 61 62

Ibid at p. 6. Ibid at p. 9. Kurczewski, op cit n. 32 at p. 302. Hankiss, E., Társadalmi csapdák/Diagnózisok (Social Traps/Diagnoses), Budapest: Magvetö, accessed at: https://pl.scribd.com/document/144829896/ Polish translation (1986) Hankiss-Elmer-Pułapki-społeczne-1986, 1979, (accessed 22 July 2018).

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Table 9.2 Three types of political culture Type of political structure

Clientelist

Clique

Bureaucracy

Power

Individual

Collective

Official

Source

Personal power

Collective power

Rules

Reciprocation

Obedience

Reciprocity

Legalism

Base of advancement

Merits

Equality

Competence

Leading principle

Loyalty

Solidarity

Service

used to show that there is no one that is deemed to be responsible for corruption prevention.63 All three types – clientist, clique, bureaucracy – can develop in ways that are morally condemnable or applauded, sometimes both. Not all masonic lodges are like Italian Gelli’s P2 lodge64 and not all Catholic brotherhoods are led by people like Fr. Maciel Degollado.65 Similarly, the strong patron sometimes may be even seen as an epitome of anti-corruption, such as Lee Kuan Yew, the late Singaporean president in the years 1959–1990. Perhaps less angelic but not less popular, Chicago mayor (1955–1976) Richard Daley was never charged with corruption (contrary to many of his collaborators) and ranked as the sixth best mayor in American history! The fact that his constituency re-elected him for years and years has proven that clientelist political culture may be consciously accepted in a well-established democracy and by no means is a feature of corrupt and despotic “alien” cultures. This clientelist structure would be more neutrally described as egocentric. Certainly the specific type of so-called “charismatic” political culture introduced into political theory by sociologist Max Weber belongs to this general category as well.66 As for “cliques”, Polish sociologist of law Adam Podgórecki introduced a “sensitising concept” of the “dirty community” of informal networks. These existed within all official organisations under the communist rule, allowing private interests to benefit despite the official facade of the institutionalised “socialist” and pro-social goals. In contrast, in 2003 I encountered in Kudowa a group of women who ran an anonymous charitable network called “Klika” (The Clique), providing voluntary assistance to about 140 handicapped persons in the

63 Kurczewski, op cit n. 32. 64 See, ‘Propaganda Due’, Wikipedia, https://en.wikipedia.org/wiki/Propaganda_Due#Refer ences (accessed 7 October 2018). 65 See: ‘Marcal Maciel’, Wikipedia, https://en.wikipedia.org/wiki/Marcial_Maciel (accessed 7 October 2018). 66 See Roth, G and Wittich, C. (eds) Max Weber Economy and Society: An Outline of Interpretive Sociology, Berkeley, University of California Press, 1978, pp. 1111–1112.

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67

local area. The Klika fulfilled all criteria of a clique. It was: (1) informal and hostile to official recognition that would enable it to be sponsored by local government and its agencies; (2) secret and unwilling to publicise individual input to the degree that the membership was passed from mother to daughter; (3) based on intimate friendship and personal communication; and (4) used the personal network to fulfil its own goal. Very cliquish but – in this case – very altruistic. In other words, both clique and clientelist (better: egocentric) models may serve good and/or bad aims. There is nothing in the structure of relationship that necessitates corruption as its goal, function or effect. So what about bureaucracy, which in Max Weber’s narrative becomes the prerequisite of nonpartisan and altruistic civil service for Commonwealth or common good? On paper it looks as if the two columns on the left in the above table should be darkened as though deemed for eternal damnation while the right one represents Heaven on Earth – the realm of impersonal and honest rule by rules and on the merits of the case. However, even here the sociology disclosed long ago the: structural invitation to corruption [by] the observation that application of all the rules and procedures of an organization inevitably admits of a high degree of discretion. Rules can only specify what should be done when the actions being considered fall clearly into unambiguously specifiable categories, about which there can be no reasonable grounds for disagreement or conflicting interpretation. But such categories are a virtual impossibility, given the inherently ambiguous nature of language. Instead, most events fall within the penumbra of the bureaucratic rules where the discretion of office-holders must hold sway.68 This part of Chambliss’ theory is strikingly relevant in the context of Ledeneva’s discussion of the “unwritten rules”.69 But the conclusion of this classical study of US urban corruption may sound even more depressing: Ultimately, the office-holder has license to apply rules derived from a practically bottomless set of choices. Individual self-interest then depends on one’s ability to ingratiate himself to office-holders at all levels in order to ensure that the rules most useful to him are applied. The bureaucracy then is not a rational institution with universal standards, but is instead, irrational and pluralistic.70

67 Kurczewski, J., ‘Lokalne wzory kultury politycznej. Podsumowanie’ [Local Patterns of Political Culture. A Summary’], in Kurczewski, J. (ed), Lokalne wzory kultury politycznej, Trio, Warsaw, 2007a, pp. 571–586 at pp. 579–580. 68 Chambliss, W.J., ‘Vice, Corruption, Bureaucracy, and Power’, Wisconsin Law Review (4), 1971, pp. 1150–73 at p. 1153. 69 Ledeneva, op cit n. 17. 70 Ibid at p. 3.

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It is assumed that bureaucracy and corruption exclude each other. Of course, some bureaucracies such as, possibly, the 20th century British Civil Service, deserve such a judgement. However, the ideal of the rational bureaucracy construed by Max Weber continues to dominate teaching rooms and planning rooms of organisers of institutional structures everywhere, making them blind to the trappings of functioning of the well-minded institutions. This results from a naive identification of Weber’s normative mode71 of the impersonal and thus impartial relations between a bureaucrat and clients with the social reality. The organised corruption of imperial bureaucracies in world history as well as in the present should warn us against such sentimental idealisation.

Conclusion: Do we gain by extending the concept? The growing concern with corruption as a social plague means researchers now see it everywhere round the globe, whatever the appearances. Corruption has become a transnational phenomenon. The best studies, such as those of Chambliss,72 della Porta and Vanucci73 or Ledeneva74 present almost all of social reality as places where corruption is likely to occur. But because of this, the concept loses its socialscientific power. Think of the widest possible definition by Brooks that covers all transgression of rules; myself I had proposed to refer to public trust as well: “corruption is the abuse of public trust”.75 But trust is present everywhere as the glue of social relations and expectation of abidance by rules is universal even if universally unfulfilled. If the “hidden order” of corruption coincides with the social order in general, the rules and the roles, types of relationships and social networks, then there is nothing specific that sociology of corruption has to offer except for moral condemnation. The general image of society as corrupt may be justified but tells as little as acknowledging that people are sinful. And one expects something more than “domestication of sin” from the disciplined social sciences. More can be gained not from extending the concept and definition of corruption but in its fragmentation and deconstruction combined with theoretical abstraction. But at the theoretical level one needs to dispense with the concepts of everyday life, whether vague or specified in a legal language such as the concept of “bribery”. The concepts that are of practical value may help in bribing someone but not in the development of sociological theory. The movement of the concept of corruption is a fascinating historical process deserving meticulous observation. In general terms – however – there is no hard core of corruption as such that is of theoretical interest for sociology. More interesting is the sociology of social transformation and the use of corruption in the context of changing normativity and its political or cultural reasons.

71 72 73 74 75

This point is stressed by Polzer, op cit p. 19. Op cit n. 68. Op cit n. 8. Ledeneva, op cit n. 17. Kurczewski, op cit n. 1 at p. 164.

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10 The morality of corruption in organisations Davide Torsello

Introduction This chapter deals with the normative and moral aspects of corruption by taking an anthropological perspective. It focuses on moral aspects of work in public administration, making use of ethnographic field data gathered in 2016–2017 as part of a large European Union research project.1 The main thrust of this chapter is the critical analysis of morality as a proxy for the emergence of corruption in organisations. The main argument is that morality needs to be problematised because of the existence of plural moral standards that make corruption acceptable in situations that may fall into the category of ‘grey areas’. Morality is best addressed when it is contextualised into the culture of the organisation as well as into a larger framework of social and institutional transformation. The chapter engages with different moral aspects of corruption by introducing an ethnographic perspective that relies on data collected from interviews in different organisational contexts. The working assumption is that corruption is perceived as a morally unacceptable act whenever the different (and often conflicting) layers of moral judgement, that the anthropological literature on corruption has identified, make it difficult to interpret the individual and social consequences of the act. This is not due to the hard-to-define scope of the moral act, i.e. what morality means in a social context only, but to the contingencies of the act in the individual, social and organisational contexts. Morality is constructed by the individual who perceives its scope and boundaries by creating reference points to situations that happen in his or her working life, or within an organisation. All the cases described here are from individuals who make decisions within organisational contexts. Whether and how far their moral judgements are imbued with norms and values and are, hence, embedded into the social context is not the main scope of this chapter. The main objective is to question whether

1 Anticorruption Policies Revisited: Global Trends and European Responses to the Challenge of Corruption was a large-scale research project funded by the European Commission’s Seventh Framework Programme. The project started in March 2012 and ended February 2017. Details can be found at: www.anticorrp.eu.

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an approach that considers the conflicting and multi-layered moral stances that individuals take when dealing with corruption can be used to explain the complexity of this phenomenon. Perhaps it would be more fruitful to consider morality as ‘embedded in action’ or part of the dialectical relationship between choices and practices in the everyday working life. The chapter starts by providing an overview of the individual motivations that underpin corrupt behaviour. In the second half of the chapter, attention will be given to the relationship between the domain in which moral claims are built and transmitted to individuals making decisions about accepting or refusing corruption in organisational contexts.

Individual motivations and moral order Anna is a middle manager who spent almost all her career at the urban planning division at the municipal office of a town in the Lombardy region, in northern Italy. She agreed to be interviewed but asked this interview to be done separately from other colleagues, and she eventually refused to take part in a focus group. One of the reasons for her refusal was that she was the one who worked closer to Luca, another middle manager who was indicted for accepting a bribe from a local company to win the bid for the reconstruction of the town cemetery. Anna is nervous at the time of the interview; she knows that she could possibly be the only one to have been physically present when Luca was having negotiations with the company, although she denies having ever seen exchange of banknotes. After a long preliminary talk that did not deal expressively with corruption, Anna starts feeling slightly more relaxed and she abandons herself to lengthy considerations about morality. One part of such considerations deals with the op(juxta-)position between what she defines as social stigma and working moral. Then it is hard to say, for me, as for most of my colleague I guess … If the guy would come one day and tell me ‘I needed a new car, that’s why I bought it’, out of nothing, and this is a Mercedes, that I would never afford, shall I believe that he bought it out of his salary? Not really, the fact that this happened … I mean he said it, that he was going to buy a car, at least. If, say, my colleague come back to work and I don’t see any trace of changes in his lifestyle, why should I worry? At least until someone would tell me that he actually built a 15.000 Euro worth swimming pool in his garden. That’s morally irreprehensible, I can’t accept it. Not because I didn’t know it, but because this is about the shame he is going to bring to our administration. This is a social stigma we are going to bear thanks to these one or two figures in the municipal office. Then our citizens will think that we are corrupt, if one takes the money to build a real pool, or to buy a new car. It is not like I decide to buy an inflatable pool for my children, it costs 750 Euro or even 1500, it’s still a gift, it is acceptable if it does not affect the work and the social moral of our organization. The fact

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Davide Torsello is that it is hard, nowadays and after all so many scandals to keep a solid working moral if social stigma has fallen on us from inside and outside.2

Anna pauses and then she seems more relieved, after all she feels she is not accusing anyone among her colleagues, she is just giving an explanation as to how people fail to keep moral standards that are solid and rooted both in society and in the organisation to which she belongs. Tim is an anti-corruption expert. He is invited by prestigious academic centres, business schools, anti-corruption organisations as well as professional organisations for compliance officers, attorneys and other organisations of specialists and professionals to present and consult on anti-corruption. It is not difficult to assess that these activities may be rather lucrative. But what these organisations want from Tim is something more than a well-calibrated and at times introspective talk on anti-corruption. Tim has something more than that: he has come out of the tunnel, he was a corruptor and now he is on the other side. The details of how this happened are not extremely relevant for this chapter; corruption happens in surprising similar ways around the globe, and between public and private sectors.3 More relevant to this chapter is the sum of the motivations that led him to pay bribes several times, as a sale manager of a large multinational corporation operating in a number of countries in Asia, Africa and South America. When telling his story, Tim is absolutely calm; he is accompanied by his personal lawyer after all, a professional who has many stories to tell. When he started working in one of the countries for which he was responsible, Tim found it difficult to develop the business in the way he had hoped. He started to feel his skills and expertise were inadequate, particularly given company expectations, and began to question his abilities. Then he met someone who suggested he might improve his sales figures by taking ‘better care’ of someone in a ministerial office. Tim was initially resistant – it offended his sense of ethics – but as time went on and his sales figures continued to lag, he decided to adopt a different approach.4 Tim described the situations into which he fell and how he decided to pay one bribe, and then another. He was not trying to justify his actions. Instead, he was framing himself in the role of a successful sales manager, one who scored very high and who did not have any sense of lost integrity after paying bribes. Tim was receiving more and more bonuses with no one questioning the means by which he was achieving his success. He felt omnipotent and increasingly became less influenced by the need to feel a sense of right and wrong. However, as his sales figures improved Tim found he was spending more and more time

2 Anna, 47 years old, interviewed 20 June 2016. 3 Torsello, D. (ed), Corruption in the Public Administration: An Ethnographic Approach, Cheltenham, UK: Edward Elgar, 2016. 4 Tim, 53 years old, interviewed 21 May 2015.

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away from home. He was missing his family but was unable to honestly explain the reasons for his absences. If you find yourself in a situation in which you can’t stand not telling the truth to your family there is something wrong in what you are doing. This is the advice I give to those who are staggering or on the edge to fall, pick up the phone and call your family, you may get an unexpected strength to bring the decision back into your hands.5 The evocative power of these words brings back the attention to the domains in which ethical considerations and assumptions for decision-making operate. Tim’s case is far from being isolated. The challenges he faced while selling in a country where corruption was a recognised problem are typically those of many business people. His moral standards were purportedly high at the times when he started to visit the country, as he said, ‘according with my social origin from a country in which it is uncommon to bribe’. However, this moral stance changed drastically when he felt pressure to improve sales and to comply with company’s expectations. As in many other organisational contexts, Tim’s decisions did not have solid integrity values in the organisation on which to anchor, and the disconnect between what counted as morally good and as satisfactory in performance, as a work moral, started to widen. Tim’s narrative, however, stresses the first point, the individual decision to resort to bribing, since he never mentioned having pressure to do so from the company he worked for. It was his own decision, after all, and he himself enjoyed the fruits and paid the consequences of such a decision alone. The second aspect that concerns how morality came to be defined as influencing the decision-making process was the resorting to the narrative of his relationship with his family. This narrative brings back the focus from the individual to the social level, through the prism of the family. If one has to interpret the multi-layered dimensions in which moral acts are said to be playing roles in the decision how to bribe, here a second disconnect comes into play: that between societal (family) and personal standards. Tim’s narration underlines that the moment in which ‘being lonely in an unknown country’ started becoming a sensitive issue for him was conflated with the moment in which knowing many people and being able to summon them for any kind of request was a separate level of moral order. Here ‘adjusting to local moral expectations’ was the key element of disconnect between personal and societal integrity. This disconnect is explained in terms of the increasingly evident dissonance between the public and private integrity that Tim was expressing in his relationship with the organisation for which he worked and his family. The explanation that corruption brings in a (fake) kind of social order in which it is morally acceptable and expected to broaden the scope of personal

5 Ibid.

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relationships to find ‘the right person at the right time’ has been provided by a number of ethnographic works on corruption.6 The question that remains unanswered is: do particular working conditions in an organisation or in the social and market context of its operations create the space for disconnecting the different layers (personal, social and organisational) through which morality is intervening into decision-making processes? And if they do it, how do individuals react to dealing with these conditions when they appear uncompromising? A potential answer comes from the Italian narrative introduced at the start of this chapter. Anna tells the story of a corruption deal struck by one of her colleagues. Anna makes sense of the choice to operate in illicit terms by using a societal moral standard in which ‘stigma’ (her word) is brought to the whole organisation by the means of the decision of one individual. Her moral compass is the value of the bribe. A 15,000 Euro garden swimming pool or a more expensive car are bribes that pertain to the higher domain of social morality, whereas smaller amounts relate to work ethical standards and are, as such, more acceptable. However, such a narrative does not take the standpoint of judging morality according to the value of bribes only. It builds a framework from which to assess whether the social and work (organisational) domains are intermingled when determining whether certain conduct is good or wrong. More severe moral offences are described by her as those in which social and work ethics are intertwined, whereas less valuable offences (as she herself said, ‘people would laugh at accepting a bribe worth a children inflatable swimming pool’) are those in which these two domains stay separate.

Moral and individual standards forged at the organisation Howard is a famous attorney in his country. His audit company became famous for dealing with the investigation of a system of bribing developed by a large multinational corporation. Howard worked in a team of many attorneys whose task, in cooperation with two large audit firms, was to gather as much information they could on the history of this scandal. Howard had the uneasy task of interrogating the responsible employees and managers in the company, some of whom eventually ended up in jail. The conversation with him was extremely insightful, although not so much in the volume of information that could be gathered, which was extremely controlled and filtered, as one would expect. The strong value of this narrative lies in the

6 Ruud, A. ‘Corruption as everyday practice. The public-private divide in local Indian society’, Forum for Development Studies 2, 2000, pp. 271–294; Turner, S. ‘Corruption narratives and the power of concealment: the case of Burundi’s civil war’, in Nuijtel, M. and Anders, G. (eds.) Corruption and the Secret of Law: A Legal Anthropological Perspective, Aldershot: Ashgate, 2007, pp. 125–142; Pezzi, M. ‘La corruzione come “malattia”: implicazioni sociali e culturali del considerare la corruzione come malessere dello Stato italiano’, Palaver 1, 2017, pp. 5–29; and Znoj, H. ‘Deep corruption in Indonesia: discourses, practices, histories’, in Nuijtel, M. et al, at pp. 53–76.

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sensitivity that Howard showed in describing the inner motivations and the individual causes that led to the deterioration of the business practices in the company. Most of these motivations, as described by Howard, fell into the category of ‘human factor’. It was a very bad scene to see senior managers going to jail. It never happened before and no one would even think about it. The times when in the company bribes were tax-deductible items as PR expenses were gone, a long ago. Still few in the company’s high spheres had taken the effort to communicate this properly, to managers dealing with customers and big projects, particularly in ‘sensitive’ countries. It seemed, when we entered the company, that time had frozen. The kind of hierarchy you would expect from such a corporation was dominating everything, and it affected the way people worked, of course. If something was OK at the top than that was it. You didn’t need to question it, because you didn’t have many chances to know the reasons why or simply how things could have been done differently. I am not arguing that the top was corrupt, I am saying that all in the company and in its international bases was set so that values could not be easily transmitted. When it comes to those managers who were caught in corruption deeds, you would not say. Most of them were persons with high moral profiles. None of them had problems in their family or would betray spouses or friends, they were respectful citizens. The reasons why they would do such things is not personal, they had no greedy intentions. The human factor is such, ungraspable in its nature.7 This narrative points out the organisational failures that underscore the disconnect between work and social values. The vivid portrait provided by Howard is not only another story of bad management or of falsely directed organisational values. This is the story of a powerful multinational, which for many years was unable to build a culture of integrity in its operational structures. Howard’s consideration about the human factor, which is difficult to manage, covers a number of aspects that relate to poor integrity management. One is that recent organisational studies have pointed out how an excessive focus on one instead of another approach to organisational corruption has led to a sort of theoretical impasse.8 While taking different disciplinary approaches, both frameworks consider the individual as an unethical decision maker. On the one hand, some of this literature focuses on corruption as deviance or criminal action. On the other hand, more recent approaches depart from the study of corruption as

7 Howard 63 years old, interviewed 13 April 2014. 8 Misangyi, V. F., Weaver, G. R. and Elms, H. ‘Ending corruption: the interplay among institutional logics, resources and institutional entrepreneurs’, Academy of Management Review 33 (3), 2008, pp. 750–770.

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collusion.9 Such approaches have the advantage of leaving space for the anthropological quest for multiple or conflictual moral explanations, which is evidently misaligned with legalistic and criminologist approaches. The collusion approach is not only open to the introduction of multi-layered explanations of why corruption happens, or how and why it is rationalised and in some cases normalised,10 but also the role of organisations and their structures in fostering unethical forms of behaviour. In this sense, there is a shift in attention, thanks to the slowly increasing interest shown by the field of social psychology,11 from the organisation as structure, toward the aspects in the everyday operations of the organisation that lead to socialisation patterns, such as its cultural features. Some theoretical approaches in organisational behaviour have, for example, emphasised the weight of internal socialisation patterns in determining either adjustment to unethical behavioural practices by new employees, or reinforcing of ethics and organisational values by the means of strengthening group prosocial behaviour and identity building mechanisms. These approaches, which do not share the anthropological focus on a more holistic understanding of the phenomenon, are nonetheless promising since they widen the attention from the narrow individual vs. rules and laws approach to a more nuanced and multiactor perspective. In the case described by Howard, the collusion aspect is prominent. If one had to trace the line of the disengagement of personal integrity standards with company modus operandi the meeting point of these two layers would be in the concept of the ‘human factor’. Empirical work on corruption in business organisations has shown that in the majority of cases senior executives, when asked to provide a justification for corrupt conduct, provided a ‘rotten apple’ explanation, which could conflate with the human factor explanation. However, the ‘human factor’ is something more. It contrasts the social level at which the moral standards of the corrupt managers are built, with the organisation’s functional and structural aspects that create (whether this truly happens or not) a proper work environment for unethical behaviour. The human factor is the oxymoron through which organisational failures are brought down to the level of social morality and they serve the function of obfuscating who is the guilty. It matters

9 Ryvkin, D. and Serra, D. ‘The industrial organization of corruption: monopoly, competition and collusion’, at: http://faculty.smu.edu/dserra/RyvkinSerra_IO_Corruption.pdf, 2017, (accessed 6 October 2018); Palmer, D. ‘Extending the process model of collective corruption’, Research in Organizational Behavior 28, 2008, pp. 107–135; and Kawata, J. and Papp, M. ‘The meta-language of politics, culture and integrity in Japan’, Human Affairs 23(2), 2013, pp. 246–254. 10 Ashforth, B. E. and Anand, V. ‘The normalization of corruption in organizations’, Research in Organizational Behavior 25, 2003, pp. 1–52. 11 Darley, J. M. ‘The cognitive and social psychology of the contagious organizational corruption’, Brooklyn Law Review 70(4), 2005, pp. 1117–1194; and Yolles, M. ‘A social psychological basis of corruption and sociopathology’, Journal of Organizational Change Management 22(6), 2009, pp. 691–731.

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little whether the manager bribed to secure business or whether his or her superior instilled a culture of urgency and performance. What matters is that the human factor can provide a shield to either the company or the individual, by making replaceable and interchangeable moral stances that can work together, but do not meet at any point.

Organisational motivations Studies on corruption in organisations have increasingly pointed out the importance of paying due consideration to the organisational conditions under which the corrupt act takes place.12 This entails, as mentioned above, adopting an approach that looks at the corruption as ‘collusion’ rather than a mere criminal act with its individual valence. In these approaches there is a tendency to look at some of the aspects that characterise the culture of organisations, namely leadership, communication, motivation, task clarity, organisational change (including acquisition and mergers) and value creation and transmission. However, apart from some articles that provide literature reviews, these contributions are scattered and there is not enough clarity upon which factors and aspects of the culture of organisations matter most for determining how collusion patterns take shape, also due to the scarcity of empirical work. In the cases described above interviewed officials pointed out three main aspects of the culture of their organisation which were stained by corruption. The first is leadership and communication. During the focus group that followed the interview sessions, one mid-level manager indicated that: Of course the first step, when these things happen, would be to blame the top of management. I don’t feel like doing that, I am not in the position to judge, but what matters is that there is clarity of information, of orders and tasks … sometimes I, we had the feeling that communication got stuck somewhere, there was a dark curtain which we could not penetrate, and this is risky.13 Similarly, another participant in the focus group added: This is right. If I am all the times clear that my boss expects this from me, and this is clear that ethics is an important standard for our work, I have clear ideas. But if we have to keep compromising (navigare a vista) most of the time, and this is what we usually do, how clear can I be then on what is expected from me, and how this has changed?14

12 Luo, Y. ‘An organizational perspective of corruption’, Management and Organization Review 1(1), 2005, pp. 119–154; and Misangyi, et al, op cit n. 8. 13 Giulio, 44 years old, interviewed 12 May 2016. 14 Martina, 34 years old, interviewed 12 May 2016.

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Both manifestations of caution about the unclear patterns of communication from the leadership evoke an organisational culture in which not only are channels of communication with leadership scarcely accessible by lower levels, but ambiguity can be created when such poor communication is intermingled with long-lasting conditions of impermanence and change. These latter findings have emerged also in other worldwide ethnographic studies of organisations under the threat of corruption.15 A second aspect that concerns organisational cultural elements is the transmission and sustainability of values. The morality of integrity in the work of public administrators is often endangered by cases that render it shaky and fuzzy. One female interviewee told this story: The introduction of the anti-corruption specialist as part of the new legislation for anti-corruption is a contested recent development in the culture of public administrations. Few of us have understood what it means to be employing and paying an extra person who should be specialized on antibribery. The fact is that, sometimes and I am not speaking about my job place alone, this person is an already existing official in the organization, moved to such occupancy. There is nothing wrong if he is a person tutta d’un pezzo (characterised by strong personal integrity), however, this is not always the case. If such specialist has in his past career some skeleton in the closet, how do you think we should feel about all this new complex and burdensome legislation?16 Integrity and situational integrity are seen by the literature as determinant aspects that cement or crack an organisational culture’s ethical standards. The difficult turning point is when one accepts the existence of conditions of situational integrity: this happens when the moral standard that becomes widespread in an organisation is one that may tolerate corruption when pursuing the objectives and goals of the organisation. The double moral standard becomes one that finds acceptance and eventually may become a good solution if it leads to positive resolving of problems or hitting the targets, even though it requires compromising ethical and moral standards. Corruption is accepted, perhaps not willingly, but under conditions that are dictated by deadlines (mostly for public administration contexts) or the need for meeting targets (in business organisations). It would be a field for further investigation whether managers who adopt multiple ethical standards in decision making about corruption are typically esteemed and respected persons within the organisation, since they are seen as doing their best for it, at least until scandals arise. The Italian and Tim’s cases presented in this chapter are testimonial to this aspect. Colleagues of those

15 Torsello, D. (ed). Corruption in the Public Administration: an Ethnographic Approach, Cheltenham, UK: Edward Elgar, 2016. 16 Paola, 37 years old, interviewed 12 May 2016.

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found to accept bribes did not indicate the existence of pervasive and repeating practices of misconduct; they were mostly described in terms of persons attaccate al lavoro (dedicated to their job) or even caring about the good performance and service provided by the organisation itself. Finally, another research area that would prove promising is to investigate the relationship between situational integrity and sociability patterns in organisations. It is, in essence, relatively rare to find cases of askew or anti-social personalities marking the characters of individuals who accepted or paid bribes. This suggests that moral standards that look at sociability and the importance of socialisation patterns within organisations actually may be agents that breed, facilitate or at least tolerate corruption.17 This approach would reinforce more general findings according to which, in some social contexts, petty levels of corruption are tolerated as patterns of sociability or the counterpart of cold and anonymising rational (and transparent) bureaucracy, which is present in different perspectives in social science disciplines.18

Does morality matter at all? The glimpse of the organisational lives offered by the cases considered in this chapter provides a complex and contradictory picture in terms of the moral implications of working under conditions of shaky integrity. Moral standards are undoubtedly contrasted with the content and meaning of everyday practices. An amoral explanation in the style of the famous Banfield’s argument about southern Italy19 does not catch the complexity of the situation. Corruption does not happen conditionally in the context of the circular explanation of the kind: ‘everybody does it, so do I’. Neither it can be easily assumed, as some mainstream literature does, that immorality or a lack of morality dominate the scene, mixed perhaps with generalised distrust.20 If this was the case the managers who operate under conditions of situational integrity would be aprioristically objects of widespread distrust, which would in turn generate cynical attitudes and a refusal to engage in corruption. Situational integrity is seen positively by some members of the organisation, who see in the spirit of service the necessity to compromise when targets, goals and even jobs are at stake. The argument that under particular external socio-cultural conditions organisations become corrupt entities could be adopted here, but this would not shed any significant light on why corruption emerges or is a resilient phenomenon. On the contrary, the stigmatisation of corruption as a cultural practice, as some

17 Note, however, that this topic is beyond the scope of this chapter. 18 Torsello, D. ‘Corruption as social exchange; the view from anthropology’, in Hardi, P., Heywood, P. M. and Torsello, D. (eds), Debates of Corruption and Integrity, New York: Palgrave, 2015, pp. 159–183. 19 Banfield, E. C. The Moral Basis of a Backward Society, Glencoe, IL: The Free Press, 1958. 20 Uslaner, E. M. Corruption, Inequality and the Rule of Law, Cambridge, UK: CUP, 2008

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anthropological and, more recently, economist literature has pointed out,21 serves the scope of further contextualising and relativising morality by exalting its variability across societies. The relativism of the assumption is that morality is not culturally specific. Rather, corruption is a matter of culture as it is determined by the essential features of its culture and eventually it becomes a feature itself. This approach does not account for some of the above-mentioned recent findings on integrity in organisations that point out why and how patterns of corruptibility are extremely similar in different organisations, as they impinge on similar organisational cultural aspects, such as those described in the previous section. On the other hand, the approach to corruption as culture hides an important reality: the common acknowledgement that corruption is bad for all, including (and especially) for citizens of countries in which it is a major problem. When relativising corruption as culture, and morality as a contextual axiom of culture, the positive versus negative aspects of this phenomenon can eventually be put in the forefront of analysis, providing a distorted version of the social reality. What is the use of moral(istic) explanations in the study of corruption? As pointed out above, if moral standpoints are taken as yardsticks for measuring the impact of corruption in society they may be of poor help in addressing not only the question of why corruption happens, but eventually also that of why it is tolerated and accepted in societal contexts. However, ethical standards are those against which members of an organisation (where corruption typically is staged) measure their behaviour in the course of daily work operations, in particular in the case of business transactions. In this case, discharging morality completely may have the counter effect of creating a behavioural void, an empty space in which illicit patterns of behaviour occur disconnected from one another, and all as individual expressions of greed. Experience and empirical research have abundantly shown that this is not the case. In the organisation where employees are socialised and learn how to bribe or to avoid bribing, there can be barely any instances of individual crimes alone. From this perspective, moral standards matter, as they are role models of behaviour, modelled or not on the features of the culture of the organisation, but still constituting ways in which stories, myths, cases and examples are gossiped about, told or explained in the best of situations. Under these premises, moral standards matter when the unit of study is not a society but an organisation, as expression of a more or less fragmented entity which shares a common style of work, functioning of processes, rituals and relations that makes up its culture. Morality matters since it regulates transactional patterns within and outside organisations. These

21 Smith, D. J. A Culture of Corruption: Everyday Deception and Popular Discontent in Nigeria, Princeton: Princeton University Press, 2007; and, Banuri, S. and Eckel, C. ‘Experiments in culture and corruption: a review’, World Bank Policy Research Working Paper 6064, 2012, at: https://openknowledge.worldbank.org/bitstream/handle/10986/9355/WPS6064.pdf? sequence=1.

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transactions are assessed as ethical or unethical, or a mixture of the two as situational integrity approaches have shown. The most significant finding of this paper is that moral concerns are of relevance for the study of corruption in two cases. The first is when corruption is contextualised in the daily work of organisations that make use of morality to transmit ideas about what is acceptable or not. They typically do so not only by communicating values from leadership (which indeed happens more rarely) but more importantly by dealing with moral standards in the everyday patterns of socialisation within and out of the organisation. The second concerns the problematising of moral claims in social contexts in which corruption is a daily issue. Here, instead of delegating culture as the explanation for the resiliency of corruption, it may be fruitful to gather more empirical evidence on how moral standards become poisoned in social contexts. This may be achieved by taking into account the role of legal systems and pluralism, historical conditions, institutional transformation and dependence from wide and global business interests.

Bibliography Ashforth, B. E. and Anand, V. (2003), ‘The normalization of corruption in organizations’, Research in Organizational Behavior, 25, pp. 1–52. Banfield, E. (1958), The Moral Bases of a Backward Society. New York: Free Press. Banuri, S. and Eckel, C. (2012), ‘Experiments in culture and corruption: a review’, World Bank Policy Research Working Paper 6064. Retrieved from https://openknowledge. worldbank.org/bitstream/handle/10986/9355/WPS6064.pdf?sequence=1. Darley, J. M. (2005), ‘The cognitive and social psychology of the contagious organizational corruption’, Brooklyn Law Review, 70(4), pp. 1117–1194. Hardi, P., Heywood, P. M. and Torsello, D. (eds) (2015), Debates of Corruption and Integrity. New York: Palgrave. Kawata, J. and Papp, M. (2013), ‘The meta-language of politics, culture and integrity in Japan’, Human Affairs, 23(2), pp. 246–254. Luo, Y. (2005), ‘An organizational perspective of corruption’, Management and Organization Review, 1(1), pp. 119–154. Misangyi, V. F., Weaver, G. and Elms, E. (2008), ‘Ending corruption: the interplay among institutional logics, resources, and institutional entrepreneurs’, Academy of Management Review, 33(3), pp. 750–770. Nuijtel, M. and Anders, G. (eds) (2007), Corruption and the Secret of Law: A Legal Anthropological Perspective. Aldershot: Ashgate. Palmer, D. (2008), ‘Extending the process model of collective corruption’, Research in Organizational Behavior, 28, pp. 107–135. Pezzi, M. (2017), ‘La corruzione come “malattia”: implicazioni sociali e culturali del considerare la corruzione come malessere dello Stato italiano’, Palaver, 1, pp. 5–29. Ruud, A. (2000), ‘Corruption as everyday practice. The public-private divide in local Indian society’, Forum for Development Studies, 2, pp. 271–294. Ryvkin, D. and Serra, D. (2017), ‘The industrial organization of corruption: monopoly, competition and collusion’, Retrieved from http://faculty.smu.edu/dserra/RyvkinSer ra_IO_Corruption.pdf.

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Smith, D. J. (2007), A Culture of Corruption: Everyday Deception and Popular Discontent in Nigeria. Princeton: Princeton University Press. Torsello, D. (2015), ‘Corruption as social exchange; the view from anthropology’, in Hardi, P., Heywood, P. M. and Torsello, D. (eds), Debates of Corruption and Integrity. New York: Palgrave, pp. 159–183. Torsello, D. (ed) (2016), Corruption in the Public Administration: An Ethnographic Approach. Cheltenham, UK: Edward Elgar. Turner, S. (2007), ‘Corruption narratives and the power of concealment: the case of Burundi’s civil war’, in Nuijtel, M. and Anders, G. (eds), Corruption and the Secret of Law: A Legal Anthropological Perspective. Aldershot: Ashgate, pp. 125–142. Uslaner, E. M. (2008), Corruption, Inequality and the Rule of Law. Cambridge, UK: CUP. Yolles, M. (2009), ‘A social psychological basis of corruption and sociopathology’, Journal of Organizational Change Management, 22(6), pp. 691–731. Znoj, H. (2007), ‘Deep corruption in Indonesia: discourses, practices, histories’, in Nuijtel, M. and Anders, G. (eds), Corruption and the Secret of Law: A Legal Anthropological Perspective. Aldershot: Ashgate, pp. 53–76.

11 Using systems thinking to understand and address corruption in the criminal justice system in fragile states Cheyanne Scharbatke-Church and Diana V. Chigas Introduction Corruption is a pernicious force at all levels of society in fragile states;1 undermining development outcomes, reinforcing poverty and, increasingly, contributing to the security challenges that destabilise nations. Systemic corruption distorts the rule of law, keeps essential basic services out of reach of the poor, exacerbates grievances and reinforces illicit power structures within the state apparatus. Far from being a moral failure, in fragile states acts of petty corruption are often entirely rational; driven by the uncertainty of the environment, social pressure and needs. The international community has made fighting corruption a key element of Goal 16 of the Sustainable Development Goals—promoting just, peaceful and inclusive societies2—and has committed substantial resources over the last decade to anti-corruption programming.3 Yet our success in combatting corruption has lagged behind the field’s realisation of the influence of corruption on peace and development agendas. A 2015 Department for International Development (DFID) study found only four types of interventions to be effective (and only under certain circumstances), while the rest were contested or ineffective.4

1 The World Bank defines fragility as “[p]eriods when states or institutions lack the capacity, accountability, or legitimacy to mediate relations between citizen groups and between citizens and the state, making them vulnerable to violence.” World Development Report 2011: Conflict, Security and Development. Washington, DC: World Bank, 2011, p. xvi. 2 United Nations. Sustainable Development Agenda. New York, NY, 2015: UN. SDG 16.5. www. un.org/Sustainable development/peace-justice/ (accessed 15 April 2018). 3 The United States government, for example, invested approximately $1 billion per year between 2007 and 2013, while the UK’s Department for International Development (DFID) invested £22 million in 2013–2014 alone in anti-corruption initiatives. See United States Agency for International Development. Analysis of USAID Anticorruption Programming Worldwide (2007–2013): Final Report. Washington, DC: USAID and Management Systems International, 2014, p. 1 http://www.usaid.gov/sites/ default/files/documents/1866/AnalysisUSAIDAnticorruptionProgrammingWorldwideFinal Report2007-2013.pdf (accessed 15 April 2018). 4 Rocha Menocal, A., et al. Why Corruption Matters: Understanding Causes, Effects and How to Address Them—An Evidence Paper. London: DFID, 2015, pp. 55–79. https://

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Indeed, there is increasingly strong evidence of ineffectiveness for some popular interventions—such as anti-corruption authorities, civil service reform and aid conditionality.5 This chapter contends that one reason for this disappointing record is that anti-corruption programmes are derived from analytic frameworks and approaches to programme development that are ill-suited to the complex and adaptive nature of corruption, especially in fragile and conflict-affected states. It outlines a new way of analysing corruption using systems thinking tools which capture this complexity. It goes on to highlight the key features of the systems analysis process. The chapter concludes with a few insights into the process along with the phenomena of corruption gained from case studies in the criminal justice sector (CJS) in Democratic Republic of the Congo (DRC), Uganda and Central African Republic (CAR).6

assets.publishing.service.gov.uk/media/57a08979e5274a31e00000d0/61212-corruptio n_evidence_paper_final_16Feb15.pdf (accessed 15 April 2018). 5 Independent Commission for Aid Impact. DFID’s Approach to Anti-Corruption and its Impact on the Poor. ICAI Report 37. London: ICAI, 2014, p. 5. https://icai.independent.gov.uk/wpcontent/uploads/DFIDs-Approach-to-Anti-Corruption-and-its-Impact-on-the-Poor-FINAL. pdf (accessed 15 April 2018). See Rocha Menocal, A., et al. Why Corruption Matters: Understanding Causes, Effects and How to Address Them—An Evidence Paper. London: DFID, 2015. https://assets.publishing.service.gov.uk/media/57a08979e5274a31e00000d0/61212-corrup tion_evidence_paper_final_16Feb15.pdf (accessed 15 April 2018); Johnson, J., Taxell, N. and Zaum, D. Mapping Evidence Gaps in Anti-Corruption: Assessing the State of the Operationally Relevant Evidence on Donors’ Actions and Approaches to Reducing Corruption. U4 Issues 2012:7. Bergen: Chr Michelsen Institute (CMI), 2013; Hanna, R. et al. The Effectiveness of Anti-Corruption Policy: What Has Worked, What Hasn’t and What We Don’t Know—A Systematic Review. London: EPPI-Center, Social Science Research Unit, Institute of Education, University of London, 2011. 6 The three case studies were part of a project initiated in 2012 to develop new ways to analyse corruption in order to generate more effective anti-corruption programming. Originally housed at the Cambridge, MA-based NGO, CDA (http://cdacollaborative.org/), the project developed and tested a systems analysis methodology in three contexts: Lubumbashi, DRC (2013), Northern Uganda (2016) and CAR (2017). The methodology was revised after each test, in an effort to streamline the process while making it as rigorous as possible. Work in DRC and CAR was funded by the US Department of State and included the design and piloting of an intervention in DRC based on the analysis. Work in Uganda, which included development of an approach for analyzing and addressing social norms driving corruption, was funded by a grant from the Carnegie Corporation of New York to the Institute for Human Security at the Fletcher School of Law and Diplomacy, Tufts University. See Scharbatke-Church, C. and Chigas, D. Facilitation in the Criminal Justice System: A Systems Analysis of Corruption in the Police and Courts in Northern Uganda. Medford, MA: Fletcher School of Law and Diplomacy, 2018. https://sites.tufts.edu/ihs/corruption-in-the-criminal-justice-sector-2/ (“Uganda case”); de Coster, L., Scharbatke-Church, C. and Barnard-Webster, K. Pity the Man Who Is Alone: Corruption in the Criminal Justice System in Bangui, Central African Republic. Cambridge, MA: CDA, 2017. http://cdacollaborative.org/wordpress/wp-content/ uploads/2017/10/Pity-the-man-who-is-alone.pdf (“CAR case”).

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What’s the problem with the way corruption is commonly understood? To date, one conceptual model has dominated the anti-corruption field’s thinking of how corruption happens and what is needed to address it: the “principal-agent” approach.7 The “principal-agent” theory is best articulated through a “formula” developed by Robert Klitgaard: Corruption ¼ Monopoly þ Discretion  Accountability:8 In other words, corruption arises when an “agent” (e.g., the court clerk, rank and file police officer or administrative judge), acting on a “principal’s” behalf, pursues his/her own private interests at the expense of the “principal’s” (e.g., the Minister of Transportation, the Inspector General of the Police, or the Minister of Justice), and, by extension of the public good. It occurs as a function of the degree of monopoly the “agent” has (i.e., whether they are the sole source of authority for that activity), the discretion or leeway they have to make decisions about how to conduct the activity and the level of accountability they have to the “principal”, (i.e., whether they will be sanctioned or punished for behaving improperly). According to this theory, combatting corruption requires restricting monopoly and discretion and increasing accountability, for example, through monitoring mechanisms such as citizen “watchdogs”, transparency measures such as Publish What You Pay and sanctions such as increased fines. To limit agents’ discretion, checks and balances are used such as electronic filing processes or requiring two individuals (“four eyes”) to conduct transactions. The “principal-agent” model makes corruption analysis and programme design easy. Analysis typically involves measuring how much corruption there is and where it is (i.e., tracing the money) and/or completing a “checklist” of what is missing from the “solution” of constraining monopoly and discretion and increasing accountability. Yet the conclusion from this research is that these analyses do not lead to effective programming, because the model is grounded in assumptions—often implicit—that do not match the reality of how corruption functions and persists in fragile and conflict-affected societies. Assumption 1: The “principal” is principled. Many scholars in recent years have criticised the “principal-agent” framework, noting that the assumption of a

7 In 2015 this project reviewed corruption and anti-corruption literature, programme evaluations and project documentation from the top eight OECD DAC donors and found that the majority of programmes were based, implicitly or explicitly, on a principal-agent model. (USAID, GIZ, DFID, SIDA, IRDB, Ministry of Foreign Affairs Denmark, Department of Foreign Affairs and Trade Australia, MCC). Evaluation reports of these donors’ corruption-related programmes available in their databases were also identified, and a more detailed analysis of a sample, selected randomly, amounting to 50% of the documents, was conducted. 8 Klitgaard, R. Controlling Corruption. Berkeley, CA: University of California Press, 1988.

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“principled principal” in most non-Western contexts is inappropriate.9 In other words, it is argued, there is no benevolent “principal” who will hold the agents accountable and enforce the rules in a fair manner for the public good. Corruption, it is noted, is not an exception to the norm—it is the norm, and any strategy that assumes that leadership will ensure that policies and rules against corruption are implemented is bound to fail. This is consistent with what was heard in the project’s case studies. Interviewees in both Uganda and CAR noted, “the fish rots from the head”; there is no leadership to enforce or model anti-corruption, as corruption is a means both to private gain and consolidation of political power for the ruling party. Indeed, police and judicial officials are rewarded for conforming to corruption practices, by promotions and other benefits, and punished—either personally or professionally—if they refuse to engage in corruption.10 The critics of “principal-agent” approaches11 have proposed an alternative way of understanding corruption: in contrast to the notion of corruption as a failure of leaders or citizens to control or hold accountable those who fail to act with integrity, it should be conceptualised as a dilemma of “collective action”, in which it is in no one’s interest to be non-corrupt because they cannot trust or believe that others will do the same. Yet, as is elaborated below, while it is an important insight that group dynamics and intra-group trust affect people’s behaviour and need to be addressed if anti-corruption efforts are to have impact, the “collective action” framework also makes assumptions about corruption that do not capture or address its complexity in real life. Assumption 2: Addressing enablers of corruption is sufficient. The “principalagent” model focuses on factors that enable corruption. It assumes that by closing off opportunities for people to engage in corruption, one can “fix” the problem. This is a narrow view of what motivates people to engage in corruption and effectively equates enablers of corruption with drivers. While opportunity,

9 See, e.g., Marquette, H. and Peiffer, C. Corruption and Collective Action. Corruption and Collective Action University of Birmingham: Developmental Leadership Program and U4 Anti-Corruption Resource Centre, 2015; Persson, A., Rothstein, B. and Teorell, J. Why Anti-Corruption Reforms Fail—Systemic Corruption as a Collective Action Problem. Governance 26(3), 2013: 449–471; Mungiu-Pippidi, A. Corruption: Diagnosis and Treatment. Journal of Democracy 17(3), 2006: 86–99. 10 In CAR, it was noted that the authorities rewarded those who bring back money and remove those who do not bring in enough. Over time, this results in the promotion of corrupt people into positions of authority, reinforcing collusion mechanisms and the consolidation of a “topdown ‘pyramid’ system” in which everyone protects and controls each other. CAR case, p. 22. In Uganda, the behaviour of Kampala-based authorities was specifically mentioned as supporting normalisation of corruption, both because leaders “turned a blind eye” to what was happening in the north, and because central authorities were perceived to be participating in corrupt practices themselves. “How would Satan accuse someone of evil spirits of doing bad things if Satan is far worse?” Uganda case, p. 32. 11 See examples, supra note 9.

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incentives and impunity for corruption are often important enablers, they are not the reasons why corruption occurs. One is typically not corrupt simply because one has a monopoly, because of insufficient oversight or because it is difficult to act with integrity when others are not. Rather, other forces and motivations—ranging from financial need, social pressure and family obligations, to fear of negative professional consequences or actual violence, and many more—interact with the enablers to determine whether opportunities for corruption are taken up. In Uganda, for example, magistrates and police officers experience significant social pressure to obtain status symbols (e.g., cars, houses, good schools for their children) and other visible markers of wealth and power as a means to survive and navigate society. They also report experiencing significant pressure from, and a sense of obligation to look after family and peers. Consequently, even if they wish to operate with integrity, they can be pressured to engage in corruption out of fear of social and professional consequences for refusing to comply.12 In CAR, Muslims, who are effectively blocked from holding official positions in the justice institutions, often are quick to offer pre-emptive payments (i.e., bribes) to officials. They do not believe police will treat them fairly and are motivated by fear and community shame to avoid as much as possible any engagement with the criminal justice system.13 This does not mean that analysing and addressing the enabling environment is not important. It is. But this experience found that it is not sufficient. As Paul Heywood, a leading British scholar on corruption, has suggested that, in practice, people’s motivations are more complex and not always rational or consistent.14 Understanding how corruption works requires analysing the interaction between these enablers and the underlying drivers, whether structural (need), attitudinal (family loyalty) or behavioural/transactional (because everyone else does it). Assumption 3: Corruption is a “simple” problem. No one argues that corruption is simple or easy to understand or address. Yet corruption analysis and anti-corruption strategies, both those based on the principal-agent and collective action theories, conceptualise it as a simple problem. Here simple does not mean easy or obvious, but rather refers to the way the causal dynamics of corruption are understood and addressed. Two assumptions are particularly problematic: first, that the problem can be understood and addressed separately from the larger context, by identifying, isolating and targeting the different “pieces” of the problem. Second, that, like a difficult engineering problem, a reliable and general solution can be found with the application of enough technical expertise and best practice.15

12 Uganda case, pp. 27–30. 13 CAR case, p. 31. 14 Heywood, P. Combatting Corruption in the Twenty-First Century: New Approaches. Daedalus. Vol. 47(3): 83=97, 2018. See also Kahneman, D. Thinking Fast and Slow. New York: Farrar, Straus and Giroux, 2011. 15 The Cynefin framework, on which we have based our typology, distinguishes “simple” (cause-effect relationships are well-known) from “complicated” (cause-effect relationships are knowable with expertise and analysis), “complex” (where cause-effect relationships are usually

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The reality of corruption, which the project’s research found on the ground in DRC, CAR and Uganda, is quite different. First, people have different definitions and different experiences of corruption, different notions of what kinds of corruption are bad or not so bad, and different ideas on what type of corruption would be a priority to address and why. In other words, there is no agreement on what the “problem” is—a classic characteristic of a complex problem. Second, this project found that the “parts” cannot be analysed and addressed in isolation, separately from each other or from the surrounding context. A complex problem is complex precisely because it has many interdependent causes that interact with each other, making the problem difficult to understand and address just by analysing the elements or breaking it down into “manageable” parts. This is because the system is more than the sum of the individual parts—it is the result of the interactions and relationships among the parts. As a result, similar programmes addressing similar causes of corruption (such as low police pay) in different contexts may have different outcomes. For instance, while evidence in eastern DRC suggested that ensuring police received full and regular salary payments improved their motivation to serve with integrity, in Ghana doubling of salaries of police on transport routes worsened corruption.16 Moreover, what seems like reasonable and solid anti-corruption strategy can become a “fix that fails”17 because of the interdependence and dynamic, nonlinear relationship of causes and effects. For example, while the Anti-Corruption Court within the Uganda High Court began in 2008 with some successful high-level prosecutions of corruption, it soon became, in the words of several citizens interviewed in 2016, the “cleaning house”—a reference to the now

known only in retrospect, but not in advance, and do not necessarily repeat across different contexts) and “chaotic” (where no systematic cause-effect relationships are identifiable). Snowden, D. and Boone, M. A Leader’s Framework for Decision Making. Harvard Business Review 85(11): 68–76, 2007. For purposes of clarity the full typology has not been introduced and the ideas of simple and complicated are blended under the header “simple”. 16 See Palladium. Independent Evaluation of the Security Sector Accountability and Reform Programme: Theory of Change Synthesis Monitoring Report. London: UKAid and Palladium, December 2015. https://assets.publishing.service.gov.uk/media/57a08976e5274a 31e00000c0/61623-Security_Sector_Accountability_Police_Reform-ToC_Monit_Rep_ Final-Eng.pdf (accessed 16 April 2018); Foltz, J.D. and Opoku-Agyemang, K.A. Do Higher Salaries Lower Petty Corruption? A Policy Experiment on West Africa’s Highways. Madison, WI: University of Wisconsin–Madison, Department of Agricultural and Applied Economics, 2015. In Ghana, researchers found that while higher salaries decreased income-related pressures to take bribes, pressures from other factors (family expectations, and expectations of entitlements and responsibilities that come with increased status) increased, leading police to increase their efforts to collect bribes and the value of the bribes they got. As a result, although the number of times truckers paid bribes when stopped decreased, the amounts of the bribes increased. 17 A “fix that fails” is a systems archetype describing a situation in which an action temporarily improves a problem symptom, but has unintended consequences that in the longer run make the problem worse. See Stroh, D. Systems Thinking for Social Change. White River Junction, VT: Chelsea Green, 2015.

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common practice of people acquitted of corruption holding a press conference on the courthouse steps to announce their “proven” innocence. This complexity makes corruption highly adaptive and resilient to any interventions to change it.

Rethinking corruption: Systems analysis To rethink anti-corruption efforts, the project concluded, the field needed to reconsider how it understood corruption: • • • • •

Transforming the conceptualisation of corruption from individual exceptions to the norm of integrity (i.e., a few bad apples) to patterns of behaviour that are the norm. Understanding corruption as a complex problem that has no single cause, effect or solution. Reframing the characterisation of corruption from moral ills to functional strategies and responses to the surrounding context. Focusing on what drives the patterns of behaviour (e.g., greed, fear, survival, social pressure etc.) in a particular context as well as on what enables them (e.g., poor oversight, monopoly, lack of transparency etc.). Widening the scope of inquiry when seeking to understand how corruption functions in a particular sector or community to include different types of causes (attitudinal, structural, behavioural, social etc.), and their connection to the wider political, social, economic and cultural context.

The project turned to systems thinking as a promising approach that could offer a better set of foundational assumptions and tools for understanding the complexity and resilience of corruption to change. Systems thinking emphasises understanding corruption in its broader context and analysing relationships and dynamic interactions among structures, behaviours and relationships.18 There are many different types of systems thinking approaches and tools. This project used systems mapping, or causal loop diagramming. This tool was first developed by Peter Senge in his seminal book, The Fifth Discipline,19 to help stakeholders build a visual picture of how multiple factors interact to generate patterns of corrupt behaviour in a particular context, as a means to broaden their view of the problem beyond what they usually assume or experience and understand the underlying dynamic elements of it. It is useful to note that systems mapping is: • •

not a description of how corruption happens, not an overview of the amount or frequency of corruption,

18 See Meadows, D. Thinking in Systems: A Primer. White River Junction, VT: Chelsea Green, 2008. 19 Senge, P. The Fifth Discipline: The Art and Practice of the Learning Organization. New York: Doubleday, 1990.

208 • • •

C. Scharbatke-Church and D. V. Chigas not a map tracking illicit money flows, not an account or list of all causes, not just a political analysis or stakeholder map, or quantitative modelling, although these can, and often are, a part of a systemic analysis.

A systems-based corruption analysis starts with identification of forces that drive and enable corruption, as well as their effects. Drivers are the factors that cause people to participate in corruption; namely the structural, attitudinal and behavioural, causes of corruption. These can and should include “mental models”— ways of thinking about the situation, or about issues, generally implicit, that often influence behaviours. Enablers are factors that make corruption possible— lack of transparency, impunity, etc. Effects are outcomes of corrupt practices. In systems analysis, effects can also be causes, so it is important to include them. For example, in Uganda’s criminal justice system, the normalisation of corruption is both an effect of officials taking bribes, failing to apply formal rules and peer pressure to conform to corrupt practices over the long term, as well as a cause of non-application of formal rules (especially as young recruits do not even learn what the rules are), lack of oversight and, indirectly, pressure to conform. This is the kind of vicious cycle that makes corruption “sticky”. Similarly, nepotistic hiring practices can result in police and judicial ignorance of standard operating procedures or principles of judicial independence, which, in turn, leads to intended and unintended abuses of power. In this way, one form of corruption can be a cause of another form of corruption. Once factors have been identified and analysis of their inter-relationships conducted, they are organised into a visual map. The maps consist of: • •

•

Variables: The key factors, (drivers, enablers or effects) of corruption. Causal links: Arrows that show the relationship and direction of influence between the variables. These can be in the same direction. For instance, as one factor goes up or down the other factor does the same—depicted as a solid line or a “+”—such as, when citizen perceptions that justice is for sale increases, so does the likelihood they will pay a bribe. Or the causal relationship can be opposite. For instance, as one goes up or down, the other factor does the opposite—depicted as a dotted line or a “–”, such as, when the likelihood of negative personal or professional consequences for refusing to take bribes goes up, police officers’ willingness to take risks to resist corruption goes down. Feedback loops: Occur when a driver leads to effects that eventually come back to influence it. There are two kinds: Reinforcing—where factors get progressively worse (vicious) or better (virtuous) over time as the variables reinforce each other. Or balancing—where factors interact to restore an equilibrium (as a thermostat does when the temperature gets too hot or cold) to prevent things from getting worse (stabilising) or keep them stuck (stagnating). Feedback loops form the basic plot lines of the systems map and story; they help to understand how the interactions between the drivers

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produce patterns of corruption. More importantly, understanding them is important for programme development, as strategies to reduce corruption will differ if the dynamic is balancing (as with the Uganda Anti-Corruption Court described above) or reinforcing (as with the relationship between nepotism and bribery). The resulting causal loop “system” map provides a visual tool to help stakeholders identify leverage points for change in the system. A leverage point is a place where modest input or engagement has the potential to have impact and ripple effects in the system. It also serves to test assumptions and theories of change for anti-corruption programming and identify what dynamics might undermine effectiveness. The following is the systems map of corruption in the criminal justice system in Northern Uganda in 2016.20 The map depicts bribery as a self-perpetuating vicious cycle at the heart of the way the police and courts working on criminal matters function. Judicial officers and police are poised and pressured to seize opportunities for bribery, feeding the reality that justice is influenced heavily by money and power, and the perception among citizens that justice is for sale. CJS providers operate with limited resources and experience significant social pressure to obtain social status symbols that are beyond their legitimate earnings. An environment of limited oversight, combined with pressure to provide for family and gain social status, helps to normalise corrupt acts—so much so that there is peer pressure within the professions to participate, and people who resist experience social or professional sanctions. Citizens participate in these dynamics for fear of the consequences of being trapped inside the CJS, as they believe individuals will suffer dire consequences. Their readiness to offer bribes is buttressed by uncertainty and helplessness and a lack of knowledge of the laws and procedures used by police and criminal courts. Citizens are not always the victims; they also manipulate the CJS to obtain favourable outcomes.

Taking it to the field: Conducting a systems-based corruption analysis The systems-based corruption analysis methodology evolved with each case study as the team learned from mistakes, identified tactics that generated useful data

20 The Uganda analysis was based on 111 interviews with citizens, NGO representatives and personnel dealing with criminal cases within the police and courts and the conclusions were validated with a large group of NGO representatives. See Scharbatke-Church, C. and Chigas, D. Facilitation in the Criminal Justice System: A Systems Analysis of Corruption in the Police and Courts in Northern Uganda, 2018, accessed at: https://sites.tufts.edu/ihs/files/2018/02/ Facilitation-in-the-Criminal-Justice-System.pdf (accessed 31 October 2018). It is an occasional paper from the Institute for Human Security at the Fletcher School, Tufts University, with assistance from Saskia Brechenmecher, Teddy Atim, Juliet Hatanga and Sophia Dawkins.

Image 1

Negative experiences in justice forum

Life is tough– you just have to pay

Expectation of mistreatment

Trust in police/courts

Language barriers

Distance

Citizen dependence on wealth and powerful connections

R3: Manipulation of justice system

Look at status symbols to identify connections

Investment in visual markers of wealth and power

Effort and capacity to manipulate system/ leverage power Grab what you can get today– future is uncertain

Opportunity (constraints) for corruption

Need to supplement income

Normalization of corruptionlearned behaviour

Magistrates (and others, e.g., police) seize opportunities to demand/take bribes (from R1)

Application of formal rules

Peer pressure to conform with corruption in the workplace

pressure to comply

R10: Professional-peer

R9: Normalization of corruption in the workplace

Fear of penalty/transfer for refusing to participate

Likelihood of peer and professional ostracization for refusing to comply with corruption

Responsibility to provide for family/community

Resource and capacity constraints of police/courts

Retention/siphoning at higher levels Education/skills

R8: Resource constraints

Transaction costs/ inefficiency

Budget

Strength of personal beliefs and ethics against corruption

Willingness to take risks

Social pressure to have status R7: Pressure symbols on CJS to demand bribes

Corrupt acts

Degree to which access to justice depends on wealth and power

CJS incentive to increase transparency

Level of education

Lack of knowledge about CJS system

of knowledge

R4: Citizen lack

Resistance to corruption

B11:

resistance

Countervailing forces against resistance to corruption

B13:

Level of aggrievement of others (in system)

R12: Reinforcing

Judicial officers and police seize opportunities to demand/take bribes.

Vicious Cycle of Bribery

R1:

Citizen vulnerability to bribes

Citizen perception you have to pay for justice

Spread of rumors and misinformation

Quality of evidence collection

Likelihood of offering or accepting to pay a bribe

Desperation

Life is more valuable than money

Lack of access to justice

Citizen difficulty distinguishing between corrupt and non-corrupt acts

Uncertainty and helplessness loop

R6:

Feelings of helplessness/ giving up

Use of multiple (formal and informal) fora

shopping

R5: Forum

People’s uncertainty about where they can obtain justice

Weakening of local dispute resolution systems

(Mob) violence

+

desperation

R2: Fear and

Fear

Resignation

Effort/capacity to manipulate system/leverage power (from loop R3) Individual resistance to corruption

Sense of impunity

Endorsement or modeling of the centre

Level of oversight

R11: Lack of oversight

Level of punishment-free benefits from corruption

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and sought to make the process replicable. The final iteration comprises several standard elements of analysis: a literature review, refinement of data collection instruments, data collection, analysis (the project calls it sense making) and validation/feedback. It is the way these steps are conducted that distinguishes this process from traditional analysis and makes the process contextually grounded.21 The people define the problem: Identifying the problem is a critical step in developing an analysis and effective response. In complex contexts, however, even the nature of the problem can be contested.22 Initially, the project adopted the Transparency International definition of corruption—the abuse of entrusted power for personal gain—as the point of departure.23 It has the advantage of encompassing a wide array of situations—different sources of power (elected, unelected, business and social contexts), different kinds of personal gain (from money to future influence or favours) and different notions of personal gain (individual, clan, political party etc.). However, from a programming perspective this definition is too broad to provide a useful foundation for programming; bribery and nepotism, for example, have different dynamics and require different strategies. To address these programmatic limitations, the team listened to people’s views to develop an understanding of what constituted corrupt behaviours in each context. This approach complicates the data collection phase because the problem definition and associated research instruments have to be refined during the data collection. The complication is worth the effort because of the value in deriving the work from the locally understood conceptualisations.24 This approach revealed some interesting differences between contexts. For instance, in Northern Uganda people believed that absenteeism (when a full-time job holder is absent in order to conduct other income-generating practices during work hours) constituted corruption. In DRC and CAR, while this practice exists, it was not viewed as a form of corruption. Similarly, sexual favours, the practice of exchanging a sexual act in return for a service that should be free or to obtain a

21 A detailed description of the complete systems-based corruption analysis methodology, complete with interview protocols, is available on the website of the Fletcher School’s Institute for Human Security. See Scharbatke-Church, C. Understanding Corruption in Criminal Justice as a Robust and Resilient System: An Analysis Process Using Systems Thinking Tools. Cambridge, MA: CDA and Fletcher School, 2017. Available at https://sites.tufts.edu/ihs/files/2018/ 02/Understanding-Corruption-in-Criminal-Justice-as-a-Robust-and-Resilient-System.pdf. 22 Chigas, Diana and Cheyanne Scharbatke-Church. June 2016. Taking the Blinders Off. Questioning How Development Assistance is Used to Combat Corruption. http://cdacollabora tive.org/wordpress/wp-content/uploads/2016/07/Taking-the-Blinders-Off-Aid-and-Cor ruption.pdf. 23 See the Transparency International Anti-Corruption Glossary. www.transparency.org/gloss ary/term/corruption. 24 Researchers may also struggle with the lack of complete comparability that this approach creates between contexts. While a valid concern, the purpose of this analysis process is to inform relevant and effective programming and as such contextual granularity is critical. See also Chapter 8 of this volume for a an analysis of a linguistic approach to corruption: Discourse of corruption and anti-corruption

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What is a mental model? A mental model is an implicit, typically unconscious and automatic filter or lens that is used to understand one’s environment or an event in that environment. What are social norms? Social norms are mutual expectations held by members of a group about what is appropriate and typical behaviour. Compliance is maintained through negative social sanctions e.g., gossip or positive reinforcement.

reward like a promotion, was deemed to be inappropriate in Uganda but not viewed as a form of corruption, whereas in the DRC, this was clearly viewed as a form of abuse of entrusted power for personal gain. Expand the topics of interest in the data collection: A systems perspective inherently broadens the topics of interest in data collection because typical sectoral boundaries do not reflect the borders of actual systems. The types of data needed to grasp how the system functions extends far beyond the usual focus of corruption analysis on quantity, frequency, actors or tracing the money. It includes drivers, enablers and effects of corruption, as well as interactions between them, functions corruption serves, bright spots and anti-corruption efforts. •

•

Drivers & Enablers: For systems analysis, one needs to gather information on what motivates people to engage in corruption (i.e., the drivers), in addition to the environmental conditions that make it possible (i.e., the enablers), and how the factors interact. This involves identifying structural, attitudinal and behavioural/transactional forces causing corruption or promoting integrity, as well as social norms and mental models driving them.25 This broader view enables programmes to identify what will enable or inhibit change. Functions: Systems thinking asserts that patterns of behaviour fulfil some form of function—even if the outcomes are socially negative. Corrupt patterns of behaviour would not persist if they did not fulfil some political, social or economic function or need in some manner. It may be a way for new economic elites to challenge old political orders, a way to achieve social mobility, a way to escape oppression, or a means to achieve stability

25 Structural factors refer to the physical and social, political and economic systems, infrastructure and institutions in which people live—e.g., legal system, institutional rules, social norms, economic policy, distribution of power etc. Attitudinal dimensions refer to norms, beliefs, values and intergroup relations that affect how groups behave, such as perceptions, mental models about the system, religious values, beliefs about family etc. Behavioural/transactional factors are processes used by and interactions among key people dealing with the problem— e.g., leadership, lobbying, political interference, threats etc. See Ricigliano, R. Making Peace Last. Boulder, CO: Paradigm Publishers, 2012.

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26

•

•

after conflict. For example, bribery in the courts in Uganda is perceived to be the only way in which a plaintiff is able to get the wheels of justice to turn. It is important to understand what those functions are to understand what is at stake, what the consequences of change may be and what resistance to change might arise. Bright Spots: Identifying where there may be outliers to the usual behaviour enables a more complete sense of the system. These “bright spots” are positive developments (i.e., a reduction in corruption) or factors that act against the negative dynamics (e.g., positive deviance). They are a key piece of information from a programme-design perspective. Even when the influence of these positive developments is weak, they offer implementers insights into where the system might be evolving on its own, and into possibilities and existing capacities for change that could be reinforced. In Uganda and DRC, the research found “islands of integrity” within the CJS.27 These were court clerks, police officers, judges or correctional guards who had gained a reputation for operating outside of the norm—i.e., they attempted to follow rules and procedures rather than abuse their power for personal gain. Anti-corruption efforts & effectiveness: When efforts are undertaken to combat corruption, they too become part of the system and should be analysed. Information about anti-corruption efforts—formal/informal, governmental and NGO, national and international, and perceptions and evidence of their effectiveness is important to gather to understand where attention is being given and the gaps. Evidence of effectiveness (or ineffectiveness) can also provide important insights into how corruption dynamics work and is very useful for developing new responses to corruption and dealing with resistance to change.

Understand the difference gender makes to corruption dynamics: The analysis also benefits from an exploration of how gender manifests in the system. This includes understanding the different experiences of men and women by disaggregating data by gender as well as directly inquiring into perceptions about the differences that exist. For instance, a follow-up question to a story about an incident involving corruption would be, “would anything be different in this story if the (protagonist/victim) was a woman/man?”. This line of inquiry revealed differences between women and men in types of corruption experienced, consequences of corruption and perceptions of engagement in corruption. For instance, in CAR, after bribery, political interference is perceived by men to be the most frequent form of corruption, while for women it is sexual

26 See Marquette, H. and Peiffer, C. Grappling with the “Real Politics” of Systemic Corruption: Theoretical Debates vs. “Real World” Functions. Governance, 1–17, 2017. 27 The motivation for people to act contrary to the system in these environments is not particularly well understood. We found religion, education and family upbringing as the three most common explanations for these choices.

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favours. In the DRC and Uganda (and to a lesser extent in Bangui), the perception that women are less corrupt is strong, yet empirically this did not hold true for frequency and degree of demands.28 Rather, a combination of factors account for this phenomenon; with fewer women in powerful positions, perceptions of women to be outside of the “trusted networks” and less pressure on women to support extended family, they had fewer tools and drivers to engage in corruption. At the same time, they adopted more subtle strategies for engaging in corruption than their male equivalents. For instance, a female citizen who needs to bribe a corrections officer to bring food to her incarcerated husband will quietly ask if the officer will step around a corner or outside so that they can discuss the problem. Once out of sight, she will discretely transfer funds to him. Gender has direct implications on identifying interventions that are relevant to different groups as for instance women may feel more empowered to resist corruption because they experience less pressure to participate. Balance participation and methodological rigour in analysis: The team arrived at a three-step process to develop a causal loop map of the corruption dynamics in the CJS. The process balances rigorous qualitative data analysis methods with participatory approaches to ensure the map is nuanced, grounded in the context and evidence-based. •

•

•

Step 1: Sense making: The team jointly assesses patterns and contradictions in the data, identifies causal connections and develops a preliminary systems map. The participatory element of this step can be limited to the research team or can be fruitfully expanded to include people in the community. The discussion also produces the coding book for the qualitative analysis. Step 2: Code & Analyse: Key to the rigour of the analysis is the coding of the qualitative data. This step is particularly important to ascertain demographic differences in perception and experience, which is difficult to do with precision in the sense-making step, as well as to verify initial identification of drivers and of relationships among them. Step 3: Finalise Map: The initial systems map is reviewed against the more nuanced findings to refine the depiction of relationships. At this step, greater participation of a variety of stakeholders can be useful to confirm or correct the conclusions of the map.

Maps can be particularly off putting when presented in their complete form. It is important to underline that the value of the map is in the story it tells about what is happening in the corruption “system” and the conversations that it can

28 de Coster, L., Scharbatke-Church, C. and Barnard-Webster, K., with Ekomo-Soignet, K.M., Woodrow, P. and Sende, A. Pity the Man Who Is Alone: Corruption in the Criminal Justice System in Bangui, Central African Republic. Cambridge, MA: CDA Collaborative Learning Projects, 2017. http://cdacollaborative.org/wordpress/wp-content/uploads/2017/11/ CDA_SEP2017_v8LR.pdf.

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generate about what can be done effectively to shift the patterns. The way the map is presented is thus critical to helping people use it effectively to identify what programmes should address. This process “built up” the map in presentations with communities or NGO representatives—in effect telling the story of each loop and physically creating or unfolding the map in front of the group, allowing them to interject, query, reflect and challenge throughout the process. This helps “tell the story” of the map more effectively and enables deeper understanding and reflection on the logic and conclusions underpinning the map. The mapping process is where the value lies, perhaps more than in the static map itself. The conversations that occur to build the map create a conceptual frame that is holistic and enables the bridge from analysis to programming, especially if those responsible for designing and implementing the resulting intervention can participate. This connecting of the programme design to the analysis of the issue is a key benefit of the mapping process.

From analysis to intervention design: Using the map A causal loop map allows one to take a more holistic view of a problem, but its utility goes beyond its role in analysis. The map offers a bridge between analysis and intervention design. It provides a different way of looking at potential responses (e.g., anti-corruption programming) by making critical gaps in programming more evident, assessing the plausibility of proposed theories of change or by highlighting where collective efforts may be possible. In Uganda, for instance, a mapping of existing anti-corruption programming in the CJS with development agencies and their implementing partners revealed that the vast majority of programmes focused on enablers of corruption—such as lack of oversight, lack of education and insufficient application of formal rules. Very few drivers of corruption were being addressed. And when the theories of change behind the existing programmes were plotted onto the systems map to understand their potential impacts, it became clear that even if the existing programmes were successful, many factors would block their impact on the core dynamic of the system: the vicious cycle of bribery (see R1 on the map). This was either because impacts would be blocked by other dynamics in the system, or because they were targeted in areas where the good impacts would be isolated. For example, a number of programmes sought to address citizens’ lack of knowledge about the justice system (see R4 on map). This is an enabler of corruption, as it allows officials to take advantage of citizens who do not know their rights or understand official processes. However, in examining the plausibility of the theories of change, it was not possible to determine how an increase in citizens’ knowledge of their rights would effectively combat corruption, without other linked interventions.29

29 Indeed, it seemed that increased knowledge of rights sometimes increased the perception of citizens that justice can be bought, as unwanted outcomes (e.g., delays in processes,

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For example, consider a rural farmer who is being asked to pay for the “airtime” of a police officer so that the farmer’s complaint can be registered at the station. Even if the farmer could know that police phone calls should be free and complaints are not called in for registration, she would not be a position to say no to the fee. Whether because of concerns for personal safety or future relationship, or simply the need to have help to right a crime, the power dynamics would make it difficult; this officer is the farmer’s sole opportunity for justice. This does not mean an education intervention is bad, but that it could be improved by adding elements that address other, connected dynamics of corruption. Finally, the map can be used to identify collaboration opportunities between organisations and potential leverage points for change in the system, particularly novel ones beyond the usual suspects. The Kuleta Haki textbox describes how a novel approach was developed based on the identification of “islands of integrity” in the CJS in DRC.

Kuleta Haki30 Kuleta Haki (“Provide Justice” in the local Swahili dialect) seeks to leverage the collective power of a network of approximately forty judicial actors, joined by approximately sixty more civil society allies, who each have a reputation for operating with integrity. Starting in August 2015, the network focused specifically on corruption found in preventive detention and police custody. The Strategy: The Kuleta Haki strategy aimed to build strength-in-numbers based on support to the bright spots—that is, those islands of integrity which are the rare and perhaps weak positive elements in the context. The overarching theory of change was multi-faceted: If people from within the CJS who act with integrity can establish strong relationships with each other, then they will feel more protected and empowered to act against corruption more openly and often because they will have support (e.g., emotional, hierarchical, tactical) from those inside the system. And: If those with integrity show that resisting corruption is possible, this will encourage resistance by others who have been participating in corruption but feel it is not right because they will know it is possible and they will not be isolated for doing so. And: If those inside the CJS are connected with islands of integrity working in criminal justice but

acquittals, etc.) that resulted from proper functioning of the courts were viewed as corrupt (and indeed might have resulted from lack of evidence due to incompetence stemming from corruption in other parts of the system). 30 For a more complete description of Kuleta Haki, its theory of change, monitoring strategies and reflections from participants, see the Corruption in Fragile States blog (https://sites. tufts.edu/ihs/blog/the-corruption-in-fragile-states-series/).

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not employed by the government then these relationships will provide additional motivation, information and protection because they are not under the same hierarchy as those working within.31 The key, and novel, component of the programme was that it connected “islands” inside and outside the government, including civil society, across multiple sectors. What difference did it make? Members across the network took more concrete actions to resist corruption (e.g., saying no to offers of money, waiting rather than giving in to corruption, saying no when a boss asks for a case to be passed through etc.) with more frequency.32 In the first 18 months of the project, resistance was almost entirely limited to bribes and extortion; however, the final review showed promising results in terms of members also resisting political interference in judicial processes.

Insights on corruption and anti-corruption Approaching corruption from a systems perspective has generated insights about corruption and anti-corruption programming. These reinforce the notion that classic approaches to analysing corruption, such as the Klitgaard equation, while useful in terms of understanding enablers, do not offer a complete enough understanding of the forces at work. The systems analyses identified important drivers of corruption dynamics that merit further inquiry by the anti-corruption field. The power of social forces. Corruption is often understood in terms of the financial benefits that it confers on the abuser of power, whether motivated by greed or by need.33 The recent recognition of the importance of needs-based corruption is particularly relevant in fragile contexts, where government employees (e.g., policemen, court clerks) receive meagre salaries, irregularly.34 Yet even this more nuanced understanding of the motivations/drivers behind acts of corruption is incomplete, as, for citizens and for officials alike, “need” or survival must also often include the social cohesion that is critical for survival. Maintaining one’s personal network in most fragile states is essential and thus can be equally powerful as a financial incentive as a motivator for corruption. The more fragile the context, the more important social cohesion drivers appear to become. In the

31 See Scharbatke-Church, C., Barnard-Webster, K. and Woodrow, P. “Collective Action Against Corruption in the Criminal Justice System: Innovative Practice Brief.” Cambridge, MA, USA: CDA Collaborative Learning Projects, 2017. 32 As part of the adaptive management strategy, the project conducted an internal mid-term evaluation and an externally conducted final review. In addition, monitoring data was regularly collected using the Most Significant Change approach. 33 Bauhr, M. Need or Greed? Conditions for Collective Action against Corruption. Governance. Vol 30, No. 4: 561-581, 2017. 2016. 34 In our 2017 research in Lubumbashi, DRC police officers reported not receiving their salaries for periods up to six months.

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summer of 2017 in Bangui, CAR judges expressed fear of reprisal, including physical threats, if they refused requests from family members to intervene in legal proceedings.35 More broadly, social norms—or mutual expectations within a group that dictate what is appropriate behaviour—that are prevalent in people’s social networks and help sustain cohesion, emerged as key factors maintaining negative dynamics. In Uganda, the systems analysis suggests that it would be difficult to shift corruption dynamics without addressing social norms, as they act as a significant brake on the sustainability and impact of many positive developments—from improved capacity and oversight to accountability and education. Many efforts, for example, tried to address professional peer pressure to conform with corruption experienced by police officers at work in Northern Uganda (see R9, R10 and R11 on systems map)—from increasing the level of oversight to demanding the application of formal rules and promoting transparency. However, even if these were successful, if the fear of internal, informal penalty (e.g., ostracisation by fellow police officers, distrust, social marginalisation etc.) is not addressed, the likelihood of reducing normalisation of corruption is limited. These kinds of social sanctions are the way social norms are maintained within a group and can reverse any positive momentum generated by the civil society initiatives. Corruption is not just moral failure. Corruption serves a purpose in a community. It may not be one with socially positive outcomes when viewed collectively, but it has a function. This is why framing corruption as moral problem does not reflect the reality of people’s experience and can even be counterproductive. This research highlighted the real dilemmas people—both citizens and officials—face when deciding how to behave. Often the rationale behind these actions are entirely rational, and even moral, if understood from a different perspective. A woman with no assets or familial connections attempting to have her husband released from pre-trial detention in the DRC, after he has been held days beyond the legal limit, may be willing to offer sexual favours or money to the officer in charge to have him released. Her neighbours inform her of the horrific conditions of the jail, where there are no latrine facilities, no beds, blankets and no regular food or water provision. As one interviewee in Northern Uganda poignantly stated, “life is more valuable than money”. In these kinds of circumstances, common interventions such as awareness-raising campaigns that preach resistance as a moral choice will not be effective, as they do not respond to the realities of this citizen. Understand how corruption is a driver of violent conflict. The fact that corruption can be a driver of conflict is not a particularly new insight as there are

35 This research took place in the summer of 2017. For more information see the full report: “Pity The Man Who Stands Alone” at http://cdacollaborative.org/wordpress/wp-content/ uploads/2017/11/CDA_SEP2017_v8LR.pdf.

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innumerable conflict analysis efforts that state this fact. The relationship of corruption to conflict is, however, complex. Corruption is both a driver of conflict and a potentially stabilising factor, and the question of how corruption interacts with the factors that drive violence in a society is rarely explored in analysis and even more rarely addressed in programming. In the analysis in CAR, the links to the recent crisis and potential future conflict were evident by looking at the different experiences of the Muslim community in Bangui with the criminal justice system. Corruption blind programming can make corruption worse. The professional siloing of sectors, and the resulting siloing of anti-corruption, is a serious obstacle to tackling corruption. One of the challenges faced throughout this project was getting sectoral specialists (e.g., criminal justice, peacebuilding) outside of the corruption field to engage in a discussion about corruption. Many sectoral programmes—from judicial reform to strengthening of the police, to health and education reform—do not address corruption, and indeed refer to corruption as a stand-alone problem to be addressed separately by “anti-corruption programmes”, even though, in fact, corruption will always be interwoven within functional sectors (e.g. health, education) or systems.37 In the worst cases, these “corruption-blind” programmes—i.e., sectoral programmes that do not consider the role of corruption or their effects on corruption—actually worsened abuse of power for personal gain that was already ongoing in the sector. In CAR, for example, millions of dollars were spent after the 2012 crisis on programming for the reform of police, courts and corrections. Yet this effort systematically avoided addressing the very real and persistent corruption that was integrated into every facet of the CJS. With their increased resources, from boots, vehicles and weapons to superior understanding of the law, police and judicial officials were better able to manipulate the system to their personal benefit to a greater degree. Officers with smart uniforms, proper boots and weapons exude more authority than those who do not. This increases the sense of threat associated with an interaction and thus the need to acquiesce to an extortion demand. Not only did corruption undermine the effectiveness of CJS reconstruction efforts, but the programmes worsened the corruption— which hindered their effectiveness. Some common anti-corruption strategies—such as awareness raising of corruption —have counterintuitive effects. Campaigns to increase awareness of corruption— from “I paid a bribe” sites to media campaigns—are common in anti-corruption programming. Many seek to shock people by expressing how frequent or commonly occurring a corrupt pattern of behaviour is, with the hope that this will galvanise citizens to demand accountability. However, research on social norms suggest that this runs the risk of backfiring—i.e., contributing to an increase in

36 For example, see Chayes, S. Thieves of State: Why Corruption Threatens Global Security. New York: Norton Publishing, 2015. 37 This project found this in all three of the test sites.

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corrupt behaviour.38 In other words, if a campaign, for example, publicises information that police officers demand bribes from eight out of ten women who report sexual assault at the police station, it can actually increase police demands for bribes. The “social norms approach” has shown that individuals will increase or decrease their actions to align with what they think others are doing and what they think others think they should be doing.39 In this case, officers who are only demanding money from half of the women will see how they are missing out on an opportunity and may increase the frequency of their demands.

Conclusion Diminishing the abuse of power for personal gain is critical to ensure that access to justice is not dependent on wealth or connections, that hiring and promotions are merit-drive and that poor women are not forced to use their bodies in exchange for government services that are supposed to be free. To be successful in this endeavour, the anti-corruption community needs to step back from business-as-usual and adopt analysis and programme-design processes that reflect the inherent complexity involved in the problem and possible solutions. Systemsbased corruption analysis offers a powerful tool to this end. With a more complex understanding of drivers and enablers of corruption and their inter-relationships, interventions can be designed strategically to target what causes corruption. This will likely entail far more complex programmes that are multi-faceted, and possibly strategic linkages between multiple actors and with other interventions. This, of course, will require investment of time and effort to gain an understanding of corruption in a particular context, and to develop programmes that are more complicated and difficult to manage and implement. Yet the pay-off is potentially great: more plausible theories of change, with a better chance of addressing corruption sustainably.

Bibliography Bauhr, M. (2016), Need or Greed? Conditions for Collective Action against Corruption, Governance, 30(4), pp. 561–581. Chayes, S. (2015), Thieves of State: Why Corruption Threatens Global Security. New York, NY: Norton Publishing. Chigas, D. and Scharbatke-Church C. (2016), Taking the Blinders Off. Questioning How Development Assistance Is Used to Combat Corruption. Retrieved from http://cdacolla borative.org/wordpress/wp-content/uploads/2016/07/Taking-the-Blinders-Off-Aidand-Corruption.pdf.

38 This research has been done on a wide range of behaviors from littering to college campus drinking, but to our knowledge has not been tested on corrupt patterns of behavior. 39 Cialdini, R. Crafting Normative Messages to Protect the Environment. Current Directions in Psychological Science, 105–109, 2003.

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Cialdini, R. (2003), Crafting Normative Messages to Protect the Environment, Current Directions in Psychological Science, 12(4), pp. 105–109. De Coster, L., Scharbatke-Church, C. and Barnard-Webster, K. (2017), Pity the Man Who Is Alone: Corruption in the Criminal Justice System in Bangui, Central African Republic. Cambridge, MA: CDA Collaborative Learning Projects. at http://cdacollaborative.org/ wordpress/wp-content/uploads/2017/11/CDA_SEP2017_v8LR.pdf. Foltz, J.D. and Opoku-Agyemang, K.A. (2015), Do Higher Salaries Lower Petty Corruption? A Policy Experiment on West Africas Highways. Madison, WI: University of WisconsinMadison, Department of Agricultural and Applied Economics. Hanna, R. et al. (2011), The Effectiveness of Anti-Corruption Policy: What Has Worked, What Hasn’t and What We Don’t Know—A Systematic Review. London: EPPI-Center, Social Science Research Unit, Institute of Education, University of London. Heywood, P. (2018), Combatting Corruption in the Twenty-First Century: New Approaches Daedalus, 47(3), pp. 83–97. Independent Commission for Aid Impact. (2014), DFID’s Approach to Anti-Corruption and Its Impact on the Poor. ICAI Report 37. London: ICAI, p. 5. https://icai.independ ent.gov.uk/wp-content/uploads/DFIDs-Approach-to-Anti-Corruption-and-its-Impacton-the-Poor-FINAL.pdf (accessed 15 April 2018). Johnson, J., Taxell, N. and Zaum, D. (2013), Mapping Evidence Gaps in Anti-Corruption: Assessing the State of the Operationally Relevant Evidence on Donors’ Actions and Approaches to Reducing Corruption. U4 Issues 2012:7 Bergen: Chr Michelsen Institute (CMI). Kahneman, D. (2011), Thinking Fast and Slow. New York, NY: Farrar, Straus and Giroux. Klitgaard, R. (1988), Controlling Corruption. Berkeley, CA: University of California Press. Marquette, H. and Peiffer, C. (2015), Corruption and Collective Action. Birmingham, UK and Bergen, Norway: University of Birmingham Developmental Leadership Program and U4 Anti-Corruption Resource Centre. www.u4.no/publications/corruption-and-collect ive-action.pdf. Marquette, H. and Peiffer, C. (2018), Grappling with the Real Politics of Systemic Corruption: Theoretical Debates vs. Real World Functions, Governance, 31(3), pp. 499–514. Meadows, D. (2008), Thinking in Systems: A Primer. White River Junction, VT: Chelsea Green. Mungiu-Pippidi, A. (2006), Corruption: Diagnosis and Treatment, Journal of Democracy, 17(3), pp. 86–99. Palladium. (2015, December), Independent Evaluation of the Security Sector Accountability and Reform Programme: Theory of Change Synthesis Monitoring Report. London: UKAid and Palladium. Retrieved from https://assets.publishing.service.gov.uk/media/ 57a08976e5274a31e00000c0/61623-Security_Sector_Accountability_Police_ReformToC_Monit_Rep_Final-Eng.pdf. Persson, A., Rothstein, B. and Teorell, J. (2013), Why Anti-Corruption Reforms Fail— Systemic Corruption as a Collective Action Problem, Governance, 26(3), pp. 449–471. Ricigliano, R. (2012), Making Peace Last. Boulder, CO: Paradigm Publishers. Rocha Menocal, A., Taxell, N. et al. (2015), Why Corruption Matters: Understanding Causes, Effects and How to Address Them—An Evidence Paper. London: DFID, pp. 55–79. https://assets.publishing.service.gov.uk/media/57a08979e5274a31e00000d0/61212corruption_evidence_paper_final_16Feb15.pdf (accessed 15 April 2018). Scharbatke-Church, C., Barnard-Webster, K. and Woodrow, P. (2017) “Collective Action Against Corruption in the Criminal Justice System: Innovative Practice Brief.” Cambridge, MA, USA: CDA Collaborative Learning Projects. Retrieved from https://www.

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cdacollaborative.org/publication/collective-action-corruption-criminal-justice-system/ (accessed 10 February 2019). Scharbatke-Church, C. (2017), Understanding Corruption in Criminal Justice as a Robust and Resilient System: An Analysis Process Using Systems Thinking Tools. Cambridge, MA: CDA and Fletcher School. Retrieved from https://sites.tufts.edu/ihs/files/2018/02/ Understanding-Corruption-in-Criminal-Justice-as-a-Robust-and-Resilient-System.pdf. Scharbatke-Church, C. and Chigas, D. (2018), Facilitation in the Criminal Justice System: A Systems Analysis of Corruption in the Police and Courts in Northern Uganda. Retrieved from https://sites.tufts.edu/ihs/files/2018/02/Facilitation-in-the-Criminal-JusticeSystem.pdf. Senge, P. (1990), The Fifth Discipline: The Art and Practice of the Learning Organization. New York, NY: Doubleday. Snowden, D. and Boone, M. (2007), A Leader’s Framework for Decision Making, Harvard Business Review, 85(11), pp. 68–76. Stroh, D. (2015), Systems Thinking for Social Change. White River Junction, VT: Chelsea Green. Transparency International. Anti-Corruption Glossary. Retrieved from www.transparency. org/glossary/term/corruption. United Nations. (2015), Sustainable Development Agenda. New York, NY: UN. SDG 16.5. www.un.org/Sustainabledevelopment/peace-justice/ (accessed 15 April 2018). United States Agency for International Development. (2014), Analysis of USAID Anticorruption Programming Worldwide (2007–2013): Final Report. Washington, DC: USAID and Management Systems International, p. 1. www.usaid.gov/sites/default/files/docu ments/1866/AnalysisUSAIDAnticorruptionProgrammingWorldwideFinalReport20072013.pdf (accessed 15 April 2018). World Bank. (2011), World Development Report 2011: Conflict, Security and Development. Washington, DC: World Bank, p. xvi.

12 Social norms and attitudes towards corruption Comparative insights from East Africa Claudia Baez-Camargo, Abel Dufitumukiza, Egidius Kamanyi, Saba Kassa, Robert Lugolobi and Cosimo Stahl BASEL INSTITUTE ON GOVERNANCE

Introduction Despite more than two decades of concerted efforts by the international development community to address corruption, progress remains far from satisfactory, especially in those countries where corruption is endemic and pervasive.1 Such cases of seemingly entrenched corruption highlight the importance of increasing our understanding about context-specific drivers of corrupt behaviours.2 Traditionally, anti-corruption has focused on the incentives and constraints that impinge on individuals’ cost-benefit calculations and decisionmaking as determined by the law and associated regulatory frameworks.3 Nevertheless, a growing body of evidence suggests the relevance of more intuitive, automatic, quasi-rational and non-rational decision-making factors that take

1 Department for International Development, Why corruption matters: understanding causes, effects and how to address them: evidence paper on corruption, Publications – GOV.UK. DFID, ODI and U4, 2015, available from: (accessed 30 October 2015). 2 Persson, A., Rothstein, B. & Teorell, J., ‘Why Anticorruption Reforms Fail – Systemic Corruption as a Collective Action Problem’, Governance, 26 (3), 2013, pp. 449–471; Marquette, H. & Pfeiffer, C., Corruption and Collective Action. Birmingham, University of Birmingham, 2015, available from: (accessed 25 September 2017); and, Baez-Camargo, C. & Passas, N. Hidden agendas, social norms and why we need to re-think anti-corruption, Basel, Basel Institute on Governance, 2017, available from: (accessed 15 August 2017). 3 Klitgaard, R., Controlling Corruption, University of California Press, 1988, available from: (accessed 2 March 2016); and, Rose-Ackerman, S. Corruption and Government, New York and Cambridge, Cambridge University Press, 1999, available from: (accessed 13 October 2015).

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place in the subconscious mind4 and which may be heavily influenced by contextual factors grounded in sociality, collective ways of thinking and culture. This chapter presents empirical evidence from the application of a behavioural research perspective to shed light on how collective practices of petty corruption are experienced, understood and ultimately justified from the perspective of those directly engaging in them.5 The focus is on the interactions between ordinary citizens and low- to mid-level officials in the health sectors in Rwanda, Tanzania and Uganda. These three countries are suitable for comparison given that they have achieved very different anti-corruption outcomes, despite having socio-cultural similarities and having adopted robust anti-corruption legislation. This variation provides an excellent opportunity to explore potential entry points for novel anti-corruption approaches based on the evidence about citizens’ beliefs, attitudes and behaviours vis-à-vis corruption, how these relate to local social practices and how they might be influenced by policy.6 The chapter is organised as follows: following this introduction, section two explains the relevance of behavioural elements of sociality, in particular through the role of informal social networks prevailing among service users and providers, and places these dynamics in the broader context of anti-corruption frameworks. Section three shows the manner in which unwritten norms and values upheld by the social networks are associated with corrupt practices in the health services in Tanzania, Uganda and Rwanda. Section four discusses the implications of the research findings, namely that social rules and expectations constitute a normative framework that coexists with the legal one. Problems arise when both are not mutually reinforcing, creating ambivalent attitudes towards corruption. It then

4 Kahneman, D., Thinking, Fast and Slow, New York, Farrar, Straus and Giroux, 2011, available from: