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This is the World Bank's blog on governance and anti-corruption. It aims at providing a space for debate and knowledge sharing on this critical field of development. | Learn more...

bribery

Satyam vs. Siemens Corruption: The Difference is in Ponzinomics

Submitted by Kaufmann on Wed, 2009-01-14 19:50

The financial crisis exposes emperors with no clothes.  Witness Madoff.  But naked truths are not only emerging for those dealings with obscure financial instruments.  Dramatic exposure in the corporate business sector is also taking place. 

Last month we discussed the corruption scandal surrounding Siemens, the multinational giant, which has agreed to pay billions in fines and fees.  With the holiday came a short truce.  New Year had not even taken place and we are hit by the enormity of the Satyam’s corporate fraud, labelled as India's Enron.

Bribery and fraud by business corporations is not new, of course.  And in fact the Siemens bribery case is a longstanding one, preceding the financial crisis.  Corporate fraud and corruption are not unique to developing or to industrialized countries, obviously.  They can take place anywhere.  They do.

The magnitude and timing proximity between the Siemens and Satyam corporate scandals may tempt some to rush and generalize, lumping such corporate scandals together as belonging to the same kilt.  That would be unfortunate.  There is a fundamental difference between those two cases.  It relates to “Ponzinomics.”  While Satyam shows clear features of a Ponzi scheme, the Siemens case doesn’t.  This difference matters.

Siemens and the illusion of CSR and codes of business integrity

Submitted by Kaufmann on Tue, 2008-12-16 12:36

Siemens just settled on a major international corruption case.  It turns out that over the past decade Siemens and some of its subsidiaries made at least 4,283 payments either to public officials or “agents” to secure or retain contracts.  The estimated amount of the payments made in more than ten countries surpassed $1.4 billion.  During the current case, the criminal damages from Siemens were calculated to amount for up to $2.7 billion.  Now fines totaling $1.6 billion have been charged; Siemens cooperation with the authorities is cited as reason for the somewhat reduced fine...

The most useless procedure: cutting red tape and corruption in Mexico

Submitted by Alfredo on Tue, 2008-11-11 16:15

It’s been recognized that civic engagement is fundamental to hold governments accountable and to improve the quality of governance.  This bottom-up approach was recently put into practice in Mexico, where the president decided to reward citizens who denounce the most absurd bureaucratic procedure that they have faced, and who propose the best solutions to cut red tape and bribery.

“The most useless procedure” is the name of the temporary campaign launched by the Mexican government to get citizens’ inputs about how it can improve its effectiveness to deliver public services and goods as well as to combat bribery. The citizen with the most original proposal at the federal level will win about $30,000, while more than $9,000 will be awarded to the best case and solution proposed at the state and local level of government.

So far, procedures related to health and social security , tax administration, education, civil registration and property rights protection are among the most denounce by citizens.

As innovative and attractive as this approach looks, in order to be effective it must be appropriately linked to major plans of modernization and reform of the public sector.  Moreover, even though more than 20 thousand citizens participated in this campaign, there needs to be more massive and permanent, rather than temporary, options to empower citizens in the fight against corruption and red tape.