“Ethics and Corporate Governance in the Fight against Corruption”

Building the institutional framework for better companies and better societies is a learning process, where the public, private, and civil society sectors share mutual responsibility to strengthen good governance, particularly in the context of developing countries. All stakeholders must ensure that the rules of the game are written and applied for the benefit of all of society and not for the private gain of the few. If that is not the case, corruption can take its most extreme form: state capture, where a country is run for the benefit of political elites colluding with narrow private interests at the expense of the society at large.

This Feature Service article is based on the report of the International Consultation on the “Role of the Private Sector in Ethics and Corporate Governance in the Fight against Corruption,” held in Paris earlier this year by the Global Corporate Governance Forum and CIPE. As the Consultation emphasized, today the sustainability agenda and business ethics are at the forefront of good governance debate, and the sensitive topics of bribery and corruption are no longer taboo in corporate board discussions. Still, challenges persist. The scale of annual bribery is estimated at US$1 trillion worldwide. Only with collective effort from stakeholders across different facets of society – engaged in dialogue and learning how to advance the practice of new principles and standards – can true progress occur.

Daniel Kaufmann, Director of Governance and Anti-Corruption Program at the World Bank Institute and one of the Consultation’s participants, said, “To make a difference in the fight against corruption, we need transparency-related reforms with spine, not rhetorical ones.” Such reforms indeed pay off. As Kaufmann and his team have calculated, there is a 400 percent governance dividend derived from reforms that achieve good governance and control corruption. This means that in the long run, countries that implement such reforms can achieve a four-fold increase in per capita income.

Article at a Glance

  • Building ethical businesses around the world commands the full spectrum of leadership and commitment within firms, countries, and the international community.
  • Private sector efforts to fight corrupt practices should start with corporate governance, effective transparency, and disclosure mechanisms.
  • A more integrated approach should also include codes of conduct, compliance programs, and initiatives to improve the ethical behavior and culture at all levels of a firm.
  • Developing countries are not only sources of corruption, they are also the emerging frontiers in the global fight against bribery and extortion.

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