The Role of Corporate Governance in Fighting Corruption Issue Paper

Corruption is a corrosive drain on public trust and on the legitimacy of public and private sector institutions. Its toll can be devastating to a national economy, particularly at a time when open global markets can rapidly reverse investment and capital flows if confidence and trust are compromised by revelations of systemic corruption. Corruption affects all types and sizes of business firms — from global conglomerates to small and medium-sized enterprises (SMEs) and co-operatives — each with varying degrees of resources and capabilities to deal with the consequences. It has the power to destroy firms and with them, the livelihoods of stakeholders who depend on a company’s success.

In Russia, as in many other countries, corruption remains a persistent problem. Despite Russia’s accession to the World Trade Organization (WTO) in 2012 and heightened expectations of more transparency in business, corruption risks continue to pose a significant barrier to investment. In Transparency International’s (TI) most recent Corruption Perceptions Index, Russia ranks 133rd out of 176 countries and territories surveyed with a low score of 28 on a scale where 0 indicates highly corrupt and 100 very clean.1 According to Russia’s Interior Ministry, the average size of a bribe remained stable between 2011 and 2012 at the ruble equivalent of US$9,4002 and the Prosecutor General recently estimated that damage from corruption in Russia exceeded 20 billion rubles (over US$650 million) in 2012.

In dealing with corruption, there are no simple answers. In some instances business can be a source of corruption, while in others it is simply a victim. Crucially, the private sector can be a force in developing solutions to the corruption problem, and companies around the world are taking charge. They are doing it in a multiplicity of ways. Some engage in collective action to reform the business climate to make it more transparent. Others push for ethical standards and fair practices in dealing with the government, as is the case with industryinitiated integrity pacts. Private sector solutions to corruption, however, are not only external in nature. Many companies are also beginning to look inside, seeking ways to ensure that they are not unwittingly contributing to the climate of corruption.

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CIPE

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