How do you define corruption?

How do you define corruption?

Generally speaking as “the abuse of entrusted power for private gain”. Corruption can be classified as grand, petty and political, depending on the amounts of money lost and the sector where it occurs.


Grand corruption consists of acts committed at a high level of government that distort policies or the central functioning of the state, enabling leaders to benefit at the expense of the public good. Petty corruption refers to everyday abuse of entrusted power by low- and mid-level public officials in their interactions with ordinary citizens, who often are trying to access basic goods or services in places like hospitals, schools, police departments and other agencies.

Political corruption is a manipulation of policies, institutions and rules of procedure in the allocation of resources and financing by political decision makers, who abuse their position to sustain their power, status and wealth. See animated definitions of many corruption terms in our Anti-corruption Glossary.

WHAT IS TRANSPARENCY?

Transparency is about shedding light on rules, plans, processes and actions. It is knowing why, how, what, and how much. Transparency ensures that public officials, civil servants, managers, board members and businesspeople act visibly and understandably, and report on their activities. And it means that the general public can hold them to account. It is the surest way of guarding against corruption, and helps increase trust in the people and institutions on which our futures depend. See how transparency can defeat corruption in a range of areas. 

WHAT ARE THE COSTS OF CORRUPTION?

Corruption impacts societies in a multitude of ways. In the worst cases, it costs lives. Short of this, it costs people their freedom, health or money. The cost of corruption can be divided into four main categories: political, economic, social and environmental.

On the political front, corruption is a major obstacle to democracy and the rule of law. In a democratic system, offices and institutions lose their legitimacy when they’re misused for private advantage. This is harmful in established democracies, but even more so in newly emerging ones. It is extremely challenging to develop accountable political leadership in a corrupt climate.

Economically, corruption depletes national wealth. Corrupt politicians invest scarce public resources in projects that will line their pockets rather than benefit communities, and prioritise high-profile projects such as dams, power plants, pipelines and refineries over less spectacular but more urgent infrastructure projects such as schools, hospitals and roads. Corruption also hinders the development of fair market structures and distorts competition, which in turn deters investment.

Corruption corrodes the social fabric of society. It undermines people's trust in the political system, in its institutions and its leadership. A distrustful or apathetic public can then become yet another hurdle to challenging corruption.

Environmental degradation is another consequence of corrupt systems. The lack of, or non-enforcement of, environmental regulations and legislation means that precious natural resources are carelessly exploited, and entire ecological systems are ravaged. From mining, to logging, to carbon offsets, companies across the globe continue to pay bribes in return for unrestricted destruction.


What do you do to fight Corruption?

Our three guiding principles are: build partnerships, proceed step-by-step and stay non-confrontational. We have learned from experience that corruption can only be kept in check if representatives from government, business and civil society work together to develop standards and procedures they all support. We also know that corruption can’t be rooted out in one big sweep. Rather, fighting it is a step-by-step, project-by-project process. Our non-confrontational approach is necessary to get all relevant parties around the negotiating table.


Bribery

The offering, promising, giving, accepting or soliciting of an advantage as an inducement for an action which is illegal, unethical or a breach of trust. Inducements can take the form of gifts, loans, fees, rewards or other advantages (taxes, services, donations, favours etc.).

Why it matters

Governments need to take effective action in the fight against international bribery both at the national level and through international groups including the G20, European Union, UN and the OECD. All national legislation should outlaw bribery between firms in the private sector. Governments should fully implement and enforce laws criminalising foreign bribery and prohibiting off book accounts, in accordance with the OECD Anti-Bribery Convention and the UNCAC, and report regularly on the enforcement of these laws. The OECD’s peer review process and TI’s OECD Convention Progress Report have demonstrated that most OECD Convention member states do not sufficiently prosecute foreign bribery cases.

Civil society

The arena, outside of the family, state and market where people associate to advance a common set of interests. Voluntary and community groups, non-governmental organisations (NGOs), trade unions and faith-based organisations commonly are included in this sphere, making the term broader than an NGO.

Clientelism

An unequal system of exchanging resources and favours based on an exploitative relationship between a wealthier and/or more powerful ‘patron’ and a less wealthy and weaker ‘client’.

Code of conduct

Statement of principles and values that establishes a set of expectations and standards for how an organisation, government body, company, affiliated group or individual will behave, including minimal levels of compliance and disciplinary actions for the organisation, its staff and volunteers.


Collusion

A secret agreement between parties, in the public and/or private sector, to conspire to commit actions aimed to deceive or commit fraud with the objective of illicit financial gain. The parties involved often are referred to as ‘cartels’.

Why it matters

Companies and governments must strengthen compliance and adopt a zero-tolerance policy towards cartels. Price-fixing and collusion must be unequivocally condemned by business. To be sustainable, internal compliance measures to stop cartels must be established.



Compliance

Refers to the procedures, systems or departments within public agencies or companies that ensure all legal, operational and financial activities are in conformity with current laws, rules, norms, regulations, standards and public expectations.

Why it matters

Corporations must be held responsible for actions of their employees, agents, foreign subsidiaries and for lack of adequate supervision of compliance programmes.



Conflict of interests

Situation where an individual or the entity for which they work, whether a government, business, media outlet or civil society organisation, is confronted with choosing between the duties and demands of their position and their own private interests.

Why it matters

Companies should establish policies and procedures to identify, monitor and manage conflicts of interest which may give rise to a risk of bribery – actual, potential or perceived.



Conventions

International and regional agreements signed or formally adopted through ratification by multiple states that establish rules, laws and standards on issues which are typically cross-border in nature and require a common approach for effective, multilateral cooperation.

Why it matters

Japan as well as other countries that have not yet ratified the UN Convention against Corruption (UNCAC) should do so without further delay. OECD should continue its efforts to secure adherence to its Anti-Bribery Convention by other important exporting states, such as China and India.



Corporate governance

Procedures and processes for how private sector organisations are directed, managed and controlled, including the relationships between, responsibilities of and legitimate expectations among different stakeholders (Board of Directors, management, shareholders, and other interested groups).

Why it matters

Key elements for strong corporate governance are board accountability, executive compensation, risk management and disclosure of financial products. The same good corporate governance standards should be applied across all units of a company and in all countries where it operates. Companies should publicly report on corporate governance structures and anti-corruption systems, including their overall operations and performance. Coverage of these issues may be alternatively included in corporate citizenship or sustainability reports that companies publish.


Corruption

The abuse of entrusted power for private gain. Corruption can be classified as grand, petty and political, depending on the amounts of money lost and the sector where it occurs. Also see ‘grand corruption’, ‘petty corruption’ and ‘political corruption’.

Grand corruption

The abuse of high-level power that benefits the few at the expense of the many, and causes serious and widespread harm to individuals and society. It often goes unpunished. See also ‘corruption’, ‘petty corruption’, and ‘political corruption’.

Petty corruption

Everyday abuse of entrusted power by public officials in their interactions with ordinary citizens, who often are trying to access basic goods or services in places like hospitals, schools, police departments and other agencies. See ‘corruption’ and ‘grand corruption’.

Political contribution

Any contribution, made in cash or in kind, to support a political cause. Examples include gifts of property or services, advertising or promotional activities endorsing a political party, and the purchase of tickets to fundraising events.

Political corruption

Manipulation of policies, institutions and rules of procedure in the allocation of resources and financing by political decision makers, who abuse their position to sustain their power, status and wealth.  See ‘corruption’, ‘grand corruption’, and ‘petty corruption’


Country by country reporting

Country by country reporting is a form of financial reporting in which multinational corporations produce certain financial data disaggregated by country and for each country in which they operate. This data includes sales and purchases within the corporation and externally, profits, losses, number of employees and staffing costs, taxes paid and tax obligations, summaries of assets and liabilities. Currently, consolidated financial statements are the norm.

Why it matters

Mandatory disclosure of payments and operations on a country-by country basis mitigates political, legal and reputational risks and generates timely, disaggregated and easily comparable data. Companies should ensure high levels of corporate transparency, since this also allows citizens to hold companies accountable for the impact they have on their communities.



Debarment

Procedure where companies and individuals are excluded from participating or tendering projects. Governments and multilateral agencies use this process to publicly punish businesses, NGOs, countries or individuals found guilty of unethical or unlawful behaviour.

Why it matters

All governments should maintain a list of companies for which there is sufficient evidence of their involvement in corrupt activities; alternatively, governments could adopt a list that has been prepared by an appropriate international institution. Companies listed should be allowed to tender government projects for a specified period of time.



Disclosure

Provision of information as required under law or in good faith, regarding activities of a private individual, public official, company or organisation. Information can include a political candidate’s assets, a company’s financial reports, an NGO’s donors or a whistleblower’s accusations.

Why it matters

The full details of companies’ fields of operations should be published as well as their profit and loss accounts, with transfers made to governments and local communities reported on a country-by-country basis.



Embezzlement

When a person holding office in an institution, organisation or company dishonestly and illegally appropriates, uses or traffics the funds and goods they have been entrusted with for personal enrichment or other activities.

Why it matters

Legal redress for corruption in education and other sectors is not limited to criminal prosecution. Civil society should support local civil actions to recover costs, as well as public-interest litigation to recover public resources lost to embezzlement and fraud.



Enhanced due diligence

Enhanced Due Diligence is the term used to refer to Know Your Customer money laundering measures that include validation and documentation by third parties and applies to situations where higher risk clients and politically exposed persons such as senior politicians, are concerned.

Why it matters

Governments must ensure banks are serious and effective in conducting enhanced anti-money laundering due diligence checks on politically exposed clients.


Ethics

Based on core values and norms, a set of standards for conduct in government, companies and society that guides decisions, choices and actions.


Extortion

Act of utilising, either directly or indirectly, one’s access to a position of power or knowledge to demand unmerited cooperation or compensation as a result of coercive threats.

Why it matters

Responsible business leaders know that bribe payments cannot be turned on and off. Once a company bribes it can no longer maintain the position that it does not pay bribes and sets itself up for continuing extortion. There should be independent reporting channels to allow companies that have been victims of extortion to report the crime.



Facilitation payments

A small bribe, also called a ‘facilitating’, ‘speed’ or ‘grease’ payment; made to secure or expedite the performance of a routine or necessary action to which the payer has legal or other entitlement.

Why it matters

All companies must cease making facilitation payments immediately. Companies must recognise these as bribes and prohibit them. All companies must report on their policy on facilitation payments as part of their transparent reporting on their anti-corruption programmes.



Fraud

To cheat. The offence of intentionally deceiving someone in order to gain an unfair or illegal advantage (financial, political or otherwise). Countries consider such offences to be criminal or a violation of civil law.

Why it matters

Governments, companies and civil society organisations must have efficient internal reporting channels and follow-up mechanisms to detect fraud, corruption and gross mismanagement inside an organisation.


Governance

A concept that goes beyond the traditional notion of government to focus on the relationships between leaders, public institutions and citizens, including the processes by which they make and implement decisions. The term can also be applied to companies and NGOs.  

‘Good’ governance is characterised as being participatory, accountable, transparent, efficient, responsive and inclusive, respecting the rule of law and minimising opportunities for corruption.