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Photo Credit: Henri Pitkänen (via Flickr)

A new bookcase spurred me to go through all of my old grad school books, including those from a class on international corruption. I immediately noticed a trend among these books: all of them focused on the role of the government, rather than the private sector, in creating, sustaining, and cleaning up corruption. Leafing through the books I could see that there was a private sector gap in not only my bookcase but also the most cited models of corruption and governance, which means that there is a real opportunity to re-analyze these models through the lens of the private sector.

For example, in one of the most influential books on corruption, “Corruption and Government: Causes, Consequences, and Reform,” Susan Rose-Ackerman concludes that:

“Fundamental change requires commitment from the top of the government and a willingness to follow through as the anti-corruption effort unfolds. Serious reform can be carried out within any existing structure of government. Governments that make it very difficult for independent voices to be raised in criticism, however, will have an especially difficult time establishing a credible commitment to honest and transparent government (229).”

Rereading this passage, it struck me that this key conclusion on corruption does not look at the problem from the perspective of the private sector. Action and reform are framed in terms of actors in the government and political institutions. Where is the space for the private sector? How does corporate compliance fit into this model?

I then jumped on Google Scholar to see if the trends in my imperfect bookcase sample would play out more broadly:

A scan of the first few pages of results showed me that my sample was fairly representative of the trends in the corruption literature. This caught me off guard.

When I first started working at the Center for International Private Enterprise (CIPE) and learned about the Collective Action Against Corruption project in Thailand (here’s a case study on the project), I didn’t think twice about it because it made too much sense to harness the private sector as a major force behind corruption reform. In this project, CIPE worked with the Thai Institute of Directors to build a coalition of Thailand’s largest businesses to push for corruption reform through pledges (and follow-up audits) to implement anti-corruption policies and compliance programs. But my quick search showed me how anomalous this kind of project is.

My takeaway from my new bookcase-driven corruption investigation is that there is a private sector-sized gap in the prominent academic literature on corruption. Thinking back to my class on corruption, I realized that many of the concepts that we grappled with were only talked about in the context of national-level governance. And so I took a quick shot at adapting a concept from my corruption class to the private sector

My professor adapted Mancur Olson’s concept of stationary versus roving bandits (Olson applies the concept to government behavior) to corrupt government officials. In my professor’s model, a roving bandit is an official low on the chain of command who takes bribes on an ad-hoc basis. A stationary bandit, on the other hand, is more established and takes bribes on a consistent basis at a relatively consistent rate.

The stationary bandit doesn’t squeeze every last penny out of its victims because the bandit benefits when its victims become richer. The roving bandit is incentivized to take as big of a bribe as they can because they don’t know when they’ll get another opportunity. A roving bandit could be a corrupt cop taking bribes to let people out of speed tickets, while a stationary bandit could be an official in the permit office who demands a small but consistent bribe from their victims.

How would a corporate compliance strategy combat a stationary bandit as opposed to a roving bandit?

Roving bandits by their nature are harder to predict and have the potential of inflicting a major one-time expense. But, they are also easier to spot. If a company has an internal policy that forbids employees from paying bribes, it’s easier for the company to notice a new, unexpected bribe. It’s also easier for the company to blow the whistle on an errant public official.

Stationary bandits are more predictable but harder to combat. They are part of the political system, more entrenched, and have support from other government officials. In the short-run they extract fewer resources and are less easy to detect, but in the long-run they sap the economy of more resources. Companies have fewer short-term incentives to combat this kind of corruption because it causes less short-term harm and combating systemic problems is too costly for individual firms to do on their own. One strong strategy for combating stationary bandits is collective action on the part of the private sector. As shown in Thailand, this approach can expose the long-term cost of stationary banditry while also spreading out the risks and costs association with combating the stationary bandits.

This small, unscientific experiment showed me that the private sector gap in the prominent academic literature on corruption is an opportunity for the compliance community to adapt pre-existing concepts, learn about the institutional blocks to corruption reforms, and contribute to the fight against corruption.

Peter Glover is a Program Assistant for the Program Coordination Unit at CIPE.