Insights & Reports > Kroll Global Fraud Report

The Global Fraud Report talked with Robin Hodess, Director of Policy and Research at Transparency International – the global civil society organization dedicated to fighting corruption – about the current state of the issue and what companies might do about it.

GFR: How have the world’s current economic difficulties been affecting the risk and incidence of corruption?

RH: We are concerned that corruption risk could be increased by the global downturn: creating more competition for scarcer contracts makes the threat greater, so we have to be more vigilant. It is still too early to talk about where corruption may become more of a threat, because the crisis is still unfolding and the solutions on offer are just taking shape). Transparency is very relevant to the credit crisis in particular. A core problem in the markets was a lack of transparency. By creating a greater focus on transparency and accountability, we think we will see a stronger financial system, and this is crucial as a backbone to sound and fair economic development.

GFR: Many countries, including some with problematic reputations for corruption, are responding to the downturn with bailouts of financial institutions and significant government stimulus programs. What issues will this pose for anti-corruption efforts, and is there anything that companies should do?

RH: We want governments to come clean on the decisions being taken in terms of which companies are being bailed out. This speaks directly to some of the controversies that have occurred over executive pay and how bailout money is going to be used. Which companies are being supported and what they are doing with the money are issues which need to be made clear; better governance and accountability should be enforced. Beyond that, the packages should be designed to assist market growth and stability, but not to finance protectionism, which could lead to further corruption.

As for the stimulus packages infrastructure projects are notoriously at risk of corruption. The bigger the project, the greater the risk, particularly when contracts have to do with sensitive issues or large public works. In these cases, there must be adequate systems in place. For development projects, the national governments themselves must have strengthened systems and not just rely on international institutions. We suggest that all the bidders on a project sign an integrity pact stating that there will be no corrupt dealing on it. By companies going public that a bid will be corruption-free, it raises the stakes. We have seen integrity pacts in many countries, and the approach has been fairly effective in keeping costs down and corruption out of big infrastructure.

GFR: Transparency International’s 2009 Global Corruption Report will have a special focus on corruption and the private sector. What particular issues do you expect to be highlighting and where do you think corporate anti-corruption efforts should be headed?

RH: Governments have a challenge in providing the structures and systems necessary to fight corruption, but there are challenges on the supply side too. The 2009 report is a stocktake of the mechanisms companies have in place to fight corruption, what the state of the art is, and all aspects of the corporate issues which contribute to the corruption dilemma – extending well beyond cases of corporate bribery.

We think that anti-corruption programming and training should be integrated into the non-financial reporting which has seen such a surge in recent decades. At the same time, there is a strong business case for fighting corruption, to satisfy investors and create sustainable markets. It is clear that globalization puts pressure on companies, who have to operate where governments sometimes have considerable difficulties in fighting corruption. But corporations from many of those emerging market countries are also becoming world players and have to rise up to the global level of corporate governance.

Dr. Robin Hodess, Transparency International’s Director of Policy and Research since December 2003, joined the organization in June 2000 to manage its flagship publication, the Global Corruption Report. She came to Berlin from New York, where, since 1998 she had been a programme officer for the Carnegie Council on Ethics and International Affairs, responsible for the Council’s program on economic globalization, “Justice and the World Economy”.