Is there a benefit for business in corruption?


Date : 31/05/2017

TI-Belgium was very pleased with an invitation to participate in a debate-evening at the Management Café of the Centre Emile Bernheim. The Centre Emile Bernheim is part of the Solvay Brussels School of Economics and Management, a faculty of the ULB. The mission of the Management Café is to promote better communication between the business world and academic institutions.

The central question of the evening was:

IS THERE A BENEFIT FOR BUSINESS IN CORRUPTION?

Corruption is making headlines every day in Belgium and abroad. Politics, business.... No institution seems to be spared from the abuse of entrusted power for private gain. What are the limits of corruption? What if we face it? How to imagine an uncorrupted world and is there perhaps a benefit for business in corruption?

Speakers:

Moderator:

Vincent Giolito, moderator for the evening, welcomed everyone present. Despite the beautiful weather, all seats were taken to debate around the topic of corruption and its effect on the business environment.

Q: What is Transparency International and the ICC about?

A: Mathieu Maes
The Corruption Perceptions Index of Transparency International reflects the perception of citizens about corruption in the public sector. Belgium scores 15th on the worldwide ranking. It is an indicator of the governance and business climate of a country. Corruption, governance, jurisdiction, the social and economic society are all interrelated. Although not bad, he hopes Belgium will do better in the close future. The ICC is the world’s largest business organisation promoting international trade, responsible business conduct and a global approach to regulations to accelerate inclusive and sustainable growth to the benefit of all. ICC has an important role to play, as a ‘global government’ does not exist. The organisation develops rules for trading, Incoterms, documentary credits, different types of necessary documents, etc… When the ICC was founded shortly after the WOI in 1919, it was with a conviction that healthy economic relations between countries would help to prevent conflicts.

Q: What is corruption?

A: Khalid Sekkat:
A very short definition would be: “Corruption is giving something to get a profit”.
Corruption is one of the oldest practises in the world. It was already included in the Babylonian law code. There are a lot of types of corruption: small (petty) and grand.
Facilitation payments to civil servants are an example of petty corruption.
Grand corruption is situated at government level.
You can find corruption everywhere: sports, education (e.g. fake diplomas), unions… and it does not always involve monetary payments. Government jobs that are privileged for a circle of family members, is also a form of corruption.

Q: Could you talk a bit more about corruption in Belgium?

A: Mathieu Maes:
In Belgium, corruption is illegal by law. Article 245 and 140 of the Penal Code describe corruption, including the difference between active and passive corruption. We should be aware that proposing a corrupt act, is already a legal offence.

A: Khalid Sekkat:
Corruption is illegal, but the meaning of corruption varies in different countries. Corruption is estimated to be ‘worth’ around 1 trillion USD per year (see footnote: TI, 2013) , the equivalent of the GDP of, for instance, 5 countries. However, its effect on slowing down economic growth is much more important. An interesting article about this topic is “The Facts” by Daniel Kaufmann (This article originally appeared in the Summer 1997 edition of Foreign Policy).

Q: What can we do to avoid corruption?

A: Khalid Sekkat:
To avoid petty corruption, there are several options.  For instance:

In the USA, the FCPA is an effective tool for fighting grand corruption and Transparency International’s CPI, is a good tool to rank countries according to the risk for corruption.
To avoid grand corruption, the focus must be on:

A: Mathieu Maes:
The definition for corruption depends on the culture, but companies should have a clear vision. The EU and governments also fight against corruption. Grand corruption is more under control today, than before. There should be a global response against corruption similar to the global response for environmental issues, migration, etc. Figures are important to demonstrate the need for fighting corruption. In Belgium, data illustrating how many corruption cases went to court for instance, is not available. There is certainly room for improvement.

Question from the audience:  TI’s best friend is transparency. Internet makes our world more transparent. You can find information about individuals online, for instance on the website: www.pipl.com. Is it a good idea to have a transparent, online list with “clean” and “dirty” people.

A: Mathieu Maes
That would be useful but there are a lot of difficulties: privacy and data protection, ethical and legal barriers, trustworthiness, etc.

A: Khalid Sekkat
If it is proven to be legal however, why not?

Question from the audience: How does TI collect data for the CPI?

A: Mathieu Maes
It´s a survey conducted by an independent company based on a TI methodology.

A: Khalid Sekkat
There are other methodologies to measure corruption. The World Bank uses another technique based on enterprises’ experiences.

A: Mathieu Maes
A proper due diligence before entering in a business relationship, is very important. International laws like the UK Bribery act, the US Foreign Corrupt Practices Act (FCPA) and the French “Loi Sapin II”, encourage companies to have a very professional approach. This type of legislation can for instance, when you are confronted with corruption in your company and you cannot prove you took preventive measures, lead to a conviction for a criminal offence.

A: Khalid Sekkat
All cultures refuse corruption, but the definition for corruption and the corruption tolerance level, vary in different countries.

A: Mathieu Maes
There is indeed no “one size fits all” solution against corruption. Transparency, the rule of law, the concept for justice varies in different countries.

A: Khalid Sekkat
The big challenge is reducing grand corruption and to change the culture.

A: Mathieu Maes
In Belgium and France alike, it is mandatory for a public servant who is aware of an act of corruption, to report to the authorities.  Corruption in the private sector, is more difficult to disclose. Especially as there is no legislation in Belgium to protect whistleblowers. In France, the recent “Sapin II” law, makes it mandatory for citizens as well to report corruption and they are protected by law against retaliation.

Question from the audience:

Internet creates many ratings, for instance, Trip advisor, etc… Why does it not exist for enterprises to rate their compliance?

A: Khalid Sekkat
It involves reputation, monitoring by justice, international coordination, and so forth.

A: Mathieu Maes
The role of the media is to monitor. This is a motivation for companies to work on compliance, as it can have an important impact on their reputation.

Question from the moderator:

Is corruption becoming more difficult because there are more controls? 

A: Khalid Sekkat
Transparency International is doing a very good job and Khalid remains optimistic.

A: Mathieu Maes
This situation is not going to change dramatically. We speak about culture, morality, adaptation, democracy and corruption from different points of view. Corruption is close to us, the civil society. Companies are implementing compliance programs to prevent corruption, and this will improve the situation during the next years.  We should bear in mind that companies are trying to control corruption, but employees are also controlling companies in order to avoid misconduct.  More and more, employees pay attention to the ethical values of their employer.

 

Footnote *: TI (2013), Literature review on costs of corruption for the poor, Literature review on costs of corruption for the poor,
http://www.u4.no/publications/literature-review-on-costs-of-corruption-for-the-poor/downloadasset/3165. Accessed 20/06/2017

 

2017-08, Jorge Payán and Hanneke de Visser, TI-Belgium