Transparency International has achieved a great deal since its launch, but as corruption continues unabated, is it time for a new direction?
For more than two decades Transparency International has helped lead a global anticorruption movement of civic groups and anticorruption agencies, including many in-country Transparency International chapters.
Over 20 years, TI has successfully positioned itself among the most important NGOs operating on the international level. Its success in placing corruption on the global political agenda is an impressive achievement.
In its first 10 years, TI helped create a flurry of anticorruption awareness-raising tools and indices that culminated in the signing of the UN Convention Against Corruption in 2003. Few other advocacy fields – not human rights, environmental rights or indigenous rights – have been through such a meteoric rise to prominence.
Yet while we all might know more about it, by most accounts corruption has not diminished in any marked sense.
It raises the question whether Transparency International ought to change strategy and move away from its focus on advocacy and research, to that of an organisation more dedicated to popular mass mobilisation.
Some critics want TI to develop practical tools to enable people to fight corruption in their individual lives.
Others take issue with TI’s annual Corruption Perception Index, a ranking of countries that highlights malpractice while offering little clue about which aspects of corruption are most serious, or how to fight them.
TI is aware of the index’s shortcomings. “We realise the CPI is a blunt tool,” says Robin Hodess, research director at Transparency International, pointing to an array of other diagnostic tools introduced since the 1995 launch of the CPI. These include the Global Corruption Barometer, which looks at citizens’ perceptions and experiences of corruption, and the Bribe Payers Index, which ranks exporting countries according to the perceived likelihood that their firms will bribe abroad.
But again, is a global index going to change corruption levels on the ground? Steven Sampson, a professor of social anthropology at Lund University in Copenhagen who has written widely on what he calls the “anticorruption industry”, asks: “If the Bribe Payers Index were not there, would it make a difference in the rate of corruption in Mongolia?”
TI does much more at the local level than it did in the past. In some countries, for example, TI legal advice centres help victims of corruption gain access to the judicial system. TI has also had considerable success with integrity pacts assuring transparency in public contracting, which have served to increase awareness about corruption as a policy issue in local government and in the media.
“The phase we are in is getting the laws to come alive,” says Hodess. For an advocacy organisation with no enforcement capacity, however, turning those laws into practice will prove challenging.
While laws have the capacity to change behaviour, they do not always have popular support. That requires political will and a build-up of trust between citizens and government, says Sampson.
Meanwhile, the task has only become more complex as corruption-fighting itself has undergone a conceptual expansion – encompassing an ever-growing list of hidden social practices linked to everything from climate finance and political party lobbying to conditional cash transfers in the banking system, arms trade procurement and post-conflict reconstruction.
TI’s general strategy remains true to what founder Peter Eigen first aimed to accomplish in 1993 – coalition building with major international actors from business, development and government circles.
Berlin was at that time a new meeting point of east and west, and it’s said that Eigen, a recently retired World Bank staffer, chose to locate the TI secretariat in Berlin because of the city’s emerging government sector – though cheap rents certainly didn’t hurt. At that point, operations were largely funded by Eigen’s pension and, besides, the kitchen in his wife’s house could be used for a home office.
Twenty years on, TI Berlin-based secretariat employs 178 full-time staff and has an annual €22.8m budget. Much of that money is used to keep corruption at the top of the international agenda in dealings with policy-making offices at the European commission in Brussels and the United States Agency for International Development’s office of democracy and governance, along with various governance units and lending offices at the World Bank, the United Nations, and the OECD anti-bribery convention-monitoring office.
The secretariat also leads a network of affiliated chapters with offices spanning more than 100 countries. The real heartbeat of the “TI movement”, these national chapters receive some financial support from Berlin but, for the most part, have to conduct self-financed campaigns to uncover suspicious payments or raise media awareness.
Sampson says a disjuncture exists between the elite, professionalised secretariat and local chapters carrying forth more grassroots activism.
The local chapters are beholden to the Berlin HQ and have to spend a lot of time fundraising and writing reports in order to justify the continued support – an activity that robs genuine social movements of their vitality, says Sampson, who has spent time studying the national chapters of Romania, Bosnia and Kosovo, among others.
In developing tools for measuring and fighting corruption, TI views itself as a purveyor of an informed, “evidence-based advocacy” that engenders credibility and, in turn, access to those at the levers of power.
“We want to participate because we think we have something substantial to say, based on this evidence, and based on the fact that we are present in 100 countries on the ground,” says Hodess.
Hodess states the questions around which TI frames its investigations: how does corruption work? How and what does it affect? And what works to stop it?
By the late 1990s, TI had already shifted beyond its initial focus on the public sector, assembling a number of tools for business that looked at what companies needed to do to set up anticorruption systems. In addition, TI started producing surveys of business people examining the underlying cause of corrupt practices and, more recently, developed diagnostic tools for civil society to be a watchdog on business.
The drivers in much of this activity are anti-graft laws of national governments, namely America’s Foreign Corrupt Practices Act and the UK Bribery Act, which both impose steep penalties on firms that conduct business by unethical means. Since the financial crisis in 2008, the G20 has helped broaden that reach to a number of newer economic players.
Take, for example, Brazil’s new law to combat corruption, which came into effect in January, and honours the country’s commitment to curb illicit payments under the OECD’s anti-bribery convention. In many ways the Brazilian statute is harsher than its US and UK counterparts. It requires no proof of the top boss’s intent or knowledge: so long as the charged company benefits from corrupt acts committed by an employee – even one acting through a subsidiary or a subcontractor – it may be found liable.
Focus on the banks
The global financial crisis also served to focus attention on the banks, which Hodess says gets at the heart of illicit financial flows underpinning the international trading system.
“Everyone recognises that in the poorest countries development assistance is still critical,” says Hodess. “But if you are looking at ‘aid’ versus ‘trade’, trade is much bigger than aid. What enables trade? It’s finance, whether development bank finance or, more importantly, private banking.”
The G20 has done more than many observers expected, but the jury is still out given the inability of the body’s anticorruption and private finance working groups to come to any agreement, Hodess cautions.
“They’ve taken on automatic exchange information about taxes, which is to do with curbing illicit tax flows, but more broadly this cleaning up of tax havens looking at secrecy jurisdictions and things like beneficial ownership regarding companies. This is all tightening the rope around illicit finance, which ultimately will have an impact on where corrupt monies can go.”
In Africa alone, the numbers are staggering: between $50bn and $80bn a year in income is lost in illicit financial flows across borders, according to a recent report, the vast majority through international trade.
Going forward, TI will be especially focused on the enforcement component. “It’s kind of a virtuous circle,” Hodess explains. “One part of the system moves to a better place, the laws improve, and then you expect there to be a compensatory improvement in practices.”
Indian companies, for example, do pretty well on country-by-country reporting, because, says Hodess, “there’s a law in India which requires them to do it”.
A push for disclosure of payments to governments on a country-by-country basis is now a pending matter before the European commission. What started in the oil and gas sector as a multistakeholder initiative may soon become a requirement for all publicly traded companies in the EU; no small matter in the war against corrupt practices.
Indeed, blanket statements that corruption hasn’t decreased miss the point. There are pockets of success – where corruption has been exposed and more prosecutions are under way. But in an overall sense of there being less corruption in the world, perhaps more time is needed.
“The difficulty lies in having a society understand why even ‘a little’ corruption is a problem,” says Hodess. “That is something that takes longer.”
For more than a decade Transparency International has made available a range of tools and information instruments, sometimes referred to as “diagnostics”. The targets of these freely available reports are public authorities, development agencies, other NGOs and trade organisations that adopt TI’s analyses or utilise the expertise of national chapters.
Companies can begin by using the Corruption Perceptions Index (CPI) to identify the countries where corruption is most prevalent.
The National Integrity System Study also helps in this regard, and is considered more scientifically rigorous. Based on the findings of key anticorruption agents in government, civil society and the business community, this tool evaluates the foundations in a country’s governance system, in terms of both internal corruption risks and the fight against corruption in society at large.
Still another option for assessing country risk comes in the form of the Global Corruption Barometer (GCB), which takes the responses of 1,000 average citizens in a country to ascertain a sense of the corruption climate, in contrast to the hard ranking of perceptions found in the CPI.
To combat the complaint from developing countries that their corruption is the result of unscrupulous foreign bribe-payers, TI developed the Briber Payers Index (BPI). Not nearly as popular as the CPI, the BPI identifies the propensity of companies from leading export countries to pay bribes to senior public officials, and the business sectors where bribery and corruption are most prevalent. Public works and construction, arms and defence, and oil and gas continually score at the top as those sectors where bribery is most common.
Compliance regimes and their effectiveness
Overall, companies have shown improvement in reporting on their commitments to anticorruption programmes, according to studies conducted by Transparency International looking at corporate practices from 2008 to 2012.
Anti-bribery laws in the US and UK have given rise to a whole set of compliance tools for the business community, among them TI’s Business Integrity Framework – a set of guidelines that starts with a top-level commitment from the head of the company.
The assessment phase involves guidelines on what constitutes good practice in areas such as payments to political parties, gift policies and whistleblower systems. Then it progresses to the design of compliance systems, followed by execution, training and reporting.
No doubt, strong anticorruption programmes can help a company avoid prosecution. But instead of instilling a culture of ethics, Professor Steven Sampson of Lund University says the laws have bred a culture of compliance focused on avoidance and obfuscation.
Under the UK bribery law, for example, companies are required to put “adequate procedures” in place to combat bribery in their firm. The law does not specify what these would be and, consequently, says Sampson, compliance is turned over to consultants, becoming a kind of “academic’s paradise”.
Transparency International: timeline
1977 – The US becomes the first nation to outlaw bribery of foreign officials with the passage of the US Foreign Corrupt Practices Act following the Lockheed Aircraft scandal in Japan. US companies that break the law are liable to fines of up to $2m per violation and individuals up to $100,000 plus imprisonment for up to five years.
1993 – After years working for the World Bank in East Africa, Peter Eigen founds Transparency International along with several colleagues experienced in international law, commerce and development.
1994 – First national TI chapters open in Denmark, Ecuador, Germany, the UK and the US.
1995 – The first Corruption Perceptions Index is launched. Picked up by the media, corruption moves out of the shadows and onto the front pages, triggering competition among governments to improve their scores.
1997 – Major economies come together to back the OECD Anti-Bribery Convention – an agreement to criminalise overseas bribery. As more countries sign up, TI begins monitoring enforcement.
2002 – The Business Principles for Countering Bribery are created and the Extractive Industries Transparency Initiative (EITI) is announced, the latter ushering in a new global standard on resource transparency. Four years later Peter Eigen is elected chair of the EITI board.
2003 – TI’s first legal advice centres open and the results of the first Global Corruption Barometer are released. An international milestone, the UN Convention against Corruption, is passed into law, committing more than 140 countries to enforce criminal sanctions for a range of corrupt acts and increased cross-border collaboration. Over the next decade, 27 additional countries sign up, including Brazil, China and Russia.
2005 – Peter Eigen retires as chair and is replaced by Huguette Labelle, a chancellor of the University of Ottowa and former head of the Canadian aid office CIDA.
2008 – TI ranks the world's largest oil and gas companies in their payments to host countries. The findings help lay the path for legislation in the US and EU requiring such disclosure.
2010 – The long-awaited UK Bribery Act is passed, promising to change the landscape of anticorruption enforcement.
2011 – TI issues its first Global Corruption Report on climate change, mapping the risks globally, nationally and locally to ensure they are addressed.
2013 – TI turns 20.Anti corruption corruption transparency transparency international
June 2014, London
The world’s leading meeting place for senior executives looking to put sustainability at the heart of their business operations. Learn how to mitigate human rights impacts,optimise social risk management, eliminate water risk, integrating operations and sustainabity...