Cures for Corruption

Corruption threatens public life and corporate culture. Caspar von Hauenschild of the anti-corruption campaign group Transparency International explains the consequences for society.

Why was Transparency International founded?
The founders Peter Eigen and Michael Wiehen, both former directors of the World Bank, saw so many public funds simply disappearing. As a result, instead of fighting poverty some governments simply increased their countries’ debts and dependence. Transparency International tries to raise awareness of this vicious cycle.

How does Transparency International define corruption?
Transparency International’s official definition of corruption is ‘the misuse of power for private gains’. Any employee of a company, any officer in a public institution, or any politician is a potential offender or victim.

Private gains can either be cash or any other kind of monetary benefit. Small gifts like a pen with the company logo or a normal invitation to a business lunch do not count.

However, if your decisions are influenced by an invitation to a fancy hotel for the weekend or expensive opera tickets you are using your position for your personal advantage – and this is corruption.

How does corruption damage the reputation of companies? 
There are three major risks for companies. First, corruption leads to distorted competition. The service or product linked to the highest bribe gains market share.

Second, a corrupt company risks being blacklisted. It gets extremely hard for listed companies to offer their services because no one really wants to make a deal with companies suspected of corruption.

Third, corruption undermines a company’s promotion of a fair and sustainable corporate culture and nullifies any publicized code of conduct. This is the most severe damage because the employees’ solidarity and the company’s credibility are destroyed. 

What does corruption mean for wider society?
Corruption is paralyzing the infrastructure of social welfare systems, education, and public life. Democracy, or any other kind of ideology, is not sufficient to base decisions on anymore. It’s all about the size of your wallet now.

The result is that useless and over-inflated public investments are promoted because the more expensive a project is the more bribe money will be paid to the decision-makers. Those projects are often financed through loans and future generations will suffer from the huge public debts incurred.

How does it affect individuals? 
Corruption is a crime. Taking part in it might send you to jail and destroy your reputation. It is also the end of your career because your company cannot protect you against the law.

Experiencing corruption around you will damage your sense of morality and ethics, and your trust in democracy and politics will be replaced by frustration. Eventually, you might ask yourself why you need to act ethically while the authorities get away with fraud.

You produce a yearly corruption ranking. How useful is this? 
Corruption cannot really be measured but our Corruption Perceptions Index (CPI) indicates the perception of corruption in 150 countries. Many politicians, economists, investors, and risk managers are interested in the reports. They need evaluations of not only their own countries but also of potential trading partners and competitors.

What kinds of corruption are most common and where? 
Corruption happens everywhere, in politics, economics, and science. There are hundreds of methods depending on country, culture, and history.

It includes everything from small payments to avoid a speeding ticket to enormous bribes for executives and cabinet ministers.

Any decision-maker with a weak character working in a chaotic environment who regards his salary as too low is susceptible to corruption. Companies have to define it as a potential risk and need to raise awareness within their corporate culture.

Has the concept of corruption changed in the 21st century?
The perception of corruption has definitely changed. Global networking and information exchange makes it easier to discover and expose corruption publicly via  the internet and other media, leaving people more aware of corruption.

Public prosecutors are also able to work more efficiently. A couple of years ago, they hardly knew where to start looking for corruption. Now they are able to investigate even the smallest hints of wrongdoing and share their knowledge with others more quickly. Everyone has become more aware.

How can we best fight corruption?
Companies and public institutions need to set up  fair and sustainable compliance management systems. That means identifying areas vulnerable to corruption and establishing anti-corruption training for employees. Training should be an ongoing process, supported by e-learning tools, hotlines, information distribution and so forth. 

It also includes collective actions and coalitions together with business competitors. The industrial sector has become the pioneer of this practice. They started to realize that the best offer should win and not the one with the biggest bribe on offer.

Source: allianz