Requiring Public Contractors To Have Anticorruption Compliance Programs May Sound Like a Good Idea—But Not When Government Capacity Is Lacking

Five years ago, in a thought-provoking post, Rick Messick proposed that developing states should demand that firms doing business with them have an anticorruption compliance program. At the time Rick wrote his post, he wasn’t aware of any developing state that had imposed any such requirement. A couple of years later, some Brazilian subnational jurisdictions, such as the state of Rio de Janeiro and the Federal District, adopted legislation in this spirit, requiring that companies awarded a public contract, or participating in a public-private partnership, above a certain value must establish an anticorruption compliance program. These initiatives seem to be of a piece with a broader trend in Brazilian anticorruption law, which has sought in various ways to create stronger incentives for companies to adopt effective compliance programs. (For example, Brazil’s 2013 Clean Company Act holds companies strictly liable for corrupt conduct, but companies that have a so-called “integrity program” may get a penalty reduction.)

Nonetheless, despite the importance of corporate compliance policies as a component of any effective anticorruption strategy (see here and here), demanding that contractors to establish such programs as a condition of doing business with Brazilian government entities is unlikely to achieve the intended goals.

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On the Political Subtext of Definition Debates, Part 1: Public vs. Private Sector Corruption

Since I started working in the anticorruption field a few years back, I’ve noticed that a substantial amount of the discussion in this field—at conferences, in journals, on blogs like this one, etc.—is given over to debates about definition and measurement. This is something I’ve discussed, and complained about, before (see here, here, and here)—though I concede that every time I bring this up, I’m contributing to the very problem I’m complaining about.

Now, one of the reasons there’s so much debate about definition and measurement in this field is because corruption is, relative to other concepts, particularly difficult to define and measure. Another reason—in my mind the main one—is that while “corruption” is sometimes used as a purely descriptive term (that is, to describe certain conduct, which we can try to measure empirically), it is also an evaluative/normative term—one that connotes “bad” behavior of a certain sort. So any attempt to define corruption (for purposes of positive analysis or empirical research) will often, perhaps inevitably, suggest a normative position on the sorts of conduct, people, or institutions that ought to be condemned.

That’s not an original point, nor even a terribly interesting one. But the more of these “what is corruption” conversations I’ve been a part of, the more I get the sense that there’s a more specific political/ideological subtext to some of the arguments about how corruption should be defined. Nobody ever articulates these ideas in so many words, and so I may be way off base, but I’m going to offer up some conjectures, in this post and in the next one, about what I sense is the ideological subtext of some of these definitional debates.

Here I’ll focus on a fairly narrow issue: Should those organizations that focus on (and sometimes try to measure) “corruption” emphasize forms of corruption that involve the public sector (government, or entities with a sufficiently close connection with government to be considered essentially public instrumentalities), or should the “anticorruption agenda”—as well as the definition and measurement of corruption—also include purely private sector corruption? Continue reading

Developing States Should Demand that Firms Doing Business with Them Have an Anticorruption Compliance Program

In December 2008 the U.S. federal government instituted its Contractor Code of Business Ethics and Conduct program.  Since then, any firm awarded a contract of $5 million or more requiring at least 120 days to perform must establish within 90 days of the award an anticorruption compliance program that i) contains a written code of business ethics and conduct, ii) trains employees on ethics and compliance periodically, and iii) has an internal control system able to discover improper conduct.  The rules also require that the program be overseen by someone of “sufficiently high level [with] adequate resources to ensure [its] effectiveness.”  When a review found government agencies were not systematically checking their contractors for compliance, the regulations were amended to require the government employee responsible for contract execution to verify that the contractor had an anticorruption compliance program in place.

No developing state now imposes any similar requirement on those with which it contracts — at least according to interviews with development agency procurement staff and internet searches.  But there is no good reason why developing countries should not mandate such a program and good reasons why they should. Continue reading