In a paper on “The Impact of Corruption in Post Conflict Environments on Contracting Agencies”, Mark Carruthers of Centerra says that corruption prospers at all levels in our society. He defines it as (1) Systemic – as an integral part of the economy (2) Political – Corrupt interaction between high level officials and the private sector (3) Grand – Corrupt practices shape the policies of the government at the expense of citizens and (4) Petty/Bureaucratic – low level corruption usually involving public officials. Mark says that corruption may be cultural and entrenched (i.e., a society has established that low level government employees accept bribes for passports, visas, driving licenses, etc.), however, high level patronage networks involving political, government and social leaders (tribal leaders and war lords) allow corruption to become pervasive and thrive. When corruption becomes entrenched it fosters criminal networks, waste, fraud and has a debilitating effect on security.
With a commission for such services an accepted practice, the use of a “Middle Man” and/or a “fixer” in the private sector to provide access to individuals of influence or to facilitate a contract is common in developing countries. To quote Mark Caruthers, “A “fixer” will not have the influence of a “middle man”, however he/she will act as the interface between the company and the local authorities and businesses. Who may otherwise find it difficult to access local markets without a ‘middle man’ or ‘fixer’. Both increase cost and the risk of corruption through actions such as false invoices produced in the host nations language and receiving of commissions.” Bribery being the fundamental basis of corruption, companies who do not pay bribes fail to get contracts. The potential impact of corruption on any business which was middlemen and/or fixers therefore depends upon the payment of bribes.
The World Economic Forum’s (WEF’s) Global Agenda Council’s (GAC) on “Transparency and Anti-Corruption” has been proposing (as does Mark Carruthers) that companies should follow the OECD’s good practice guidance and internal controls, ethics and compliance or the World Bank’s “Integrity Compliance Guidelines” (crafted by Panel Member Nicola Bonucci) and have a clear policy on corruption, including the process for vetting partners, employees, and subcontractors. With a training program for all staff on corruption policies and reporting requirements, companies should be required to report corruption and the impact that it may have on service delivery.
Unfortunately Mark Carruthers honestly believes, “The first step is to formally recognize that corruption is a significant factor in achieving mission success and then establish a clear process for assessing corruption risk and identify any actions to be taken. Prior to implementing programs an acquisition department should undertake a thorough analysis of the risk of corruption, the forms it may take and who is likely to be involved.” What is alarming is that the paper Mark has written proposed that we must formally acknowledge that corruption may be a factor and honestly assess the potential impact.
To be fair, while being brutally honest, Mark is not a hypocrite in saying that it is now common practice to employ personnel in developing countries with a deep understanding of the cultural, political and business landscape to carry out risk (1) an assessment of the human terrain to assess the risk of corruption (2) analyse services and contracts where corruption most likely such as construction and procurement (3) the form it may take and (4) the individuals/networks most likely to support corruption. He advises establishing parameters about tolerance for corruption, what approach to take and what leverage can be used to reduce the impact of corruption and establish mechanisms to address corruption and practice policies internally by (1) Establishing clear guidelines on the level of tolerance for corruption(zero tolerance being the correct message) (2) Identify individuals tasked with monitoring corruption and associated mitigation efforts (3) Train all staff in corruption and anti‐corruption practices and are signed by an individual recognized by host country bureaucrats and security forces at all levels. Translations should be checked for accuracy and signed by all relevant parties (4) Set standards for the corporate entity’s policies on corruption. Establish expectations and communicate issues early, requiring companies to report any instance of corruption while establishing a clear reporting system when instances of corruption occur.
The central theme of Mark’s excellent paper is that govts’ needs to balance the immediate requirements against the likelihood of corruption, and set a clear policy on the tolerance of corruption with the policy being disseminated to all levels and with all stakeholders containing clear reporting guidelines and the consequences for failure to report. Personnel responsible for monitoring corruption within the contracting process for mitigating this risk” must be aware of local customs and local laws. Companies must be aware of their Govt’s stance on all levels of corruption and not only have adequate measures in place to prevent corruption, but now report all suspected corruption.
Corrupt practices are usually kept hidden as a well-known “secret” for various reasons, according to Mark Carruthers one examine not ignore the debilitating effect on the companies and their personnel who are forced to adopt corrupt practices to sustain their business in an environment where it is a done thing. Those who practice corrupt means are as guilty as those who use corrupt means. To achieve their objectives, are the corruptors any less guilty than the corrupt?
During GAC’s recent meeting on “Transparency and Anti-Corruption”, it was noted that international companies were finding it exceedingly difficult to work in countries like Afghanistan, Iraq, etc without condoning corruption. That may be so but on the other hand the international community has measures and means to address corruption even though in some developing countries the opportunity for, and the pervasiveness of, corruption makes prevention difficult. While business corporate entities condone corruption in order to conduct their operations. Unfortunately over a period this becomes destructive for good governance. Disruption in local governance guarantees corruption of some nature. Combining these with political factors, makes combatting corruption difficult and reputational risk through the impact of corruption on the private sector and NGO’s. Once we accept the lack of governance and bend to cultural norms in any country, the extent and impact of corruption tends to increase the level of crime. Needless to say this erodes security.
Are we surprised to see countries like Iraq and Afghanistan worse off than they were a decade ago when they were ruled by corrupt cruel despots? (With thanks to Mark Carruthers for his excellent paper and based on discussions in WEF’s GAC “Transparency and Anti-Corruption Panel in Abu Dhabi recently).
