CoRRuptIon, Global SECuRIty phần 8 ppt

This is especially so forcorporations that are headquartered in the developed world, which must rely,increasingly, on revenue growth and profitability in the developing world.For purpose

loan guarantees—all from a housing developer who could benefit from ernment contracts Lee sacked him, but in this case the evidence was strongenough for the courts to hear his case and sentence him to more than fouryears in jail.

gov-In 1979, Phey Yew Kok, president of the National Trade Union Congressand a member of parliament for Lee’s ruling party, was accused of takingfunds from the Congress and investing them for himself Phey jumped bailand vanished to Thailand before Lee could press charges

Teh Cheang Wan was minister for national development in 1986 when heaccepted two large cash payments, the first from a development company thatwanted to retain land that had been earmarked for compulsory acquisitionand the second from a developer who wished to purchase state land for pri-vate purposes After his bribe-taking was discovered, Teh committed suiciderather than face disgrace

Because these instances of Singaporean high-level corruption were treated

in an exemplary fashion, similar breaches of trust became remarkably rare.Singaporeans quickly appreciated that the governing elite were not routinely(as elsewhere) taking advantage of their official positions to enrich them-selves and that Lee and his associates meant what they said when ensuring a

“clean administration.” That Lee punished his colleagues for stepping out ofline was remarkable in Asia and in the developing world That robust messagehad its impact on lesser officials as well as on the ruling cadre

It also helped that in 1995, Prime Minister Goh Chok Tong ordered aninvestigation of properties that were purchased at a discount by Lee’s wifeand son (subsequently the prime minister) The developer (Lee’s brother was

a non-executive director of the publicly listed company) had apparentlyoffered the same discount to others When property values rose, the propertythat Lee (through his wife) and Lee’s son had purchased appreciated, castingsuspicion on the transaction Parliament, investigating, and the SingaporeMonetary Authority, doing the same, exonerated the Lees, presumablydemonstrating that the country’s top leadership (Lee was then senior minis-ter) continued to be incorruptible

In earlier British times, Singaporean police were renowned for scandal Aslate as 1971, 250 mobile squad police took money regularly from lorry driv-ers to overlook infractions Hawker license inspectors and land bailiffs werealso on the take But once Lee’s administration jailed them, and demonstratedthat their superiors were not themselves on the take, incidents of corruption

at middle and low levels in Singapore receded

Lee’s government refused to rely on example alone It tightened regulationsand also loosened evidentiary restrictions It published very clear guidelines,

so those tempted to take advantage of their official positions (and the public)would have no illusions regarding the exact consequences of improper behav-ior Continuing to use the British-created Corrupt Practices InvestigationBureau as the instrument of enforcement, Lee had it report directly to him inthe prime ministerial office In order to ease the possibility of convictions inquestionable cases, Lee persuaded Singapore’s Parliament to tighten variouslaws in stages The definition of gratuity was widened to include “anything ofvalue.” Investigators, under the amended laws, could arrest and search suspectsand family members, scrutinize bank accounts, and obtain income taxreturns Judges could fully accept the evidence of accomplices Indeed, otherlegal changes compelled any and all witnesses who were summoned by theCorrupt Practices Bureau to give testimony

Along the way, Lee’s government greatly increased the fines for corruptionand for misleading testimony Later, the courts were permitted to confiscateall benefits that were derived from corruption

Lee was particularly pleased that he enabled the courts to consider ascorroborating evidence of corruption that a suspect was living “beyond hismeans” or owned property that could not be afforded on his or her nomi-nal salary The government thus gave increasing powers to the Corrupt Prac-tices Bureau; it was the watchdog, and in a society as tiny and tight as Sin-gapore, persons with ostentatious life styles were quickly suspect Even before

he strengthened the Corrupt Practices Bureau, Lee sacked a governmentchief fire officer when, at a reception, the officer’s “stunningly attractivewife” appeared “bedecked with expensive jewelry.” Unfortunately for the fireofficer, “her scintillating adornments caught the practiced eye of the primeminister .”11

All of these legal shifts, together with the immense leadership tion effect, greatly helped Lee to keep Singapore “clean.” But many Singa-poreans would argue that it was more the pegging of official salaries to cor-porate earnings that enabled policemen on the beat, accountants ingovernment service, and even cabinet ministers to avoid accepting bribes orother inducements After the 1970s, when Singapore had begun to growrobustly and Lee was sure that he and his associates had brought prosperity tothe emerging city-state, he spearheaded a drive to create for Singaporeans per-haps the highest civil service salaries in the world In 1995, ministerial and sen-ior public officer salaries were set at two-thirds the level of comparable private

demonstra-Leadership Alters Corrupt Behavior 349

sector earnings, with automatic annual increases without parliamentaryapproval Senior officers in the police force, for example, were soon earning farmore than commissioners and chiefs in large American municipal systems.Excellent emoluments obviously helped to keep Singaporean officials on thestraight and narrow.

It is possible to argue, as many have, that institutions combat corruption,not leaders The experience of Singapore and Botswana, and the emerging case

of Rwanda (plus almost all of the positive American, European, and otherAsian cases), supports that proposition But leadership actions greatly deter-mine the kinds of political cultures that emerge in newly emergent or post-conflict nation-states, and it is only from the establishment of political cul-tures that enshrine values antithetical to corruption that effective institutions

of accountability and oversight emerge Additionally, leaders beget good ernance, and the practice of good governance nurtures and enables robustinstitutions and strengthens rules of law The latter do not emerge in a vac-uum but only as a result of early and careful leadership attention or core val-ues Leaders create a positive ethos by force of will or example, as Lee did,sometimes drawing on pre-existing mores or distilling traditional values (asKhama did) Only then can institutions and a workable institutional frame-work emerge.12

gov-Lee and Khama had to mandate and then ensure rule of law regimes thatwere fair and perceived to be fair They had to equip these regimes with judi-ciaries that were even-handed and not controlled by state house Their actions,and the signals that they sent to their close associates, were carefully moni-tored by emerging publics If those signals had been found wanting, rule oflaw would have been as compromised as it has been in most developing-worldcountries Likewise, real power had to be transferred to legislatures Rubber-stamping would have compromised the nation-building endeavor and under-cut the national attack on corrupt practice Efficient allocation of resourceshad to occur as well Otherwise corruption would have been a necessary force

to fulfill goals—as in Thailand and other nations

But was and is Singapore really free from the taint of corruption—thanks

to Lee’s vision, tutelage, leadership, legal shifts, and salary improvements? Thecity-state has always ranked high on TI’s lists Even skeptics and critics, includ-ing early pundits, accept that Singapore has been “virtually free of corrup-tion.”13Compared to African countries other than Botswana and Mauritius,and other Asian nations and the Oceanic island-states, Singapore has, sincethe 1970s, if not before, been in a class of its own because of its early focus

on the dangers to the state posed by corruption and because of its success in

creating a conformist society that has long favored stability and prosperityover open political participation and the enjoyment of broad civil rights andliberties.

Despite Singapore’s high anti-corruption reputation and its appropriaterankings near the top of all such listings, nepotism—a form of corruption—seems to be rife in a small country where Lee remained in charge or nearly incharge until he could safely pass the prime ministership on to his son andmain heir His wife also held important nonpolitical positions Lee’s defense,naturally, is merit His wife and son gained their roles because of their talent,not through Lee In that sense, Lee enabled family members to enrich them-selves At the same time, there have never been accusations that either Lee orhis family otherwise used their positions for profit And, like Lee, his son andwife are inordinately competent

Critics such as Francis T Seow, however, argue that Lee used his position

to abuse power and to punish critics Seow, then solicitor general, instances(among others) a case where he agreed to hefty bail for a legal advisor to thethen Malaysian Singapore Airlines—someone who was suspected of a minorcriminal breach of trust and indiscreet political interference Lee—with whomSeow anyway had a testy relationship—strongly objected and hastened Seow’sdeparture from government service.14

Lee’s harsh handling of the international and local media largely confirmsthese criticisms He and his government have won innumerable libel andslander cases against publications and individuals They have bankruptedlocal critics and forced many media operations to shut down Lee, in otherwords, is hardly a paragon of virtue But he (and the institutions that he hasbuilt) has kept modern Singapore free from the taint of corruption as it iscommonly understood That is a unique achievement in Asia and the devel-oping world

There are no comparable examples of effective attempts to battle thescourge of corruption in the post-Soviet space of Central Asia, in China, inIndia, or in much of modern Africa (I know of no cases of leaders who gen-uinely sought to squelch corruption, using Lee-like methods, and failed.)

In one corner of mainland Africa, however, Botswana is a beacon of ness, largely because of the leadership of Seretse Khama However, Khamadied young, after fourteen critical years (1966–1980) as president; he left nomemoirs and was far less explicit regarding his leadership vision than wasLee Nor do Khama’s biographers say much about his attentiveness to thecorruption problem.15Nevertheless, it is evident from those who resided in orvisited Botswana during Khama’s presidency that he was conscious of the

bright-Leadership Alters Corrupt Behavior 351

need to prevent corrupt practices from taking root Even though the naland Protectorate (now Botswana) under British rule was never a corrupt

Bechua-or cBechua-orrupted polity, Khama knew well the temptations of Africa—both thenew black-ruled Africa and the next door white-ruled land of apartheid Heknew how destructive such loose practices were to a new country, as in 1960sGhana, Nigeria, Senegal, and so on He was determined from the very firstdays of his incumbency to follow Lee and deter corruption by setting a per-sonal example and ensuring that his vice-president and his cabinet ministersjoined him in fostering a proper tone for the embryonic nation He was veryclear that politicians and civil servants were not to view independence as aroute to personal enrichment

As Quett Ketumile Masire, Khama’s vice-president and successor as ident, later wrote, corruption wrecks “whole economies” and benefits the few

pres-at the expense of the majority “We worked hard to avoid” corruption, hewrote, and then to punish it severely if discovered “In the beginning we were

a poor country with a very simple administration and few resources.” It wastherefore very easy, he reported, to operate transparently From the British,Botswana inherited a legacy of “properly accounting for things.” From tradi-tional society, it inherited a tradition of open discussion in the community

khotla, so citizens could complain easily about abuses.16

Khama lived modestly, without motorcades or other ostentation, and thatapproach—rare in Africa—helped to strengthen and make effective the over-all anti-corruption message No cabinet minister traveled by first class air,unlike their peers in the remainder of independent Africa During the initialyears after independence, cabinet ministers drove themselves in their ownautomobiles There were few of the usual perquisites that came with office inthe developing world Masire, as vice-president, traveled in the rear of an air-craft to an important meeting in Ethiopia By the time he exited the aircraftthe red carpet had been removed and the welcoming party had decamped.What Khama and his administration, and successive presidents inBotswana, communicated so well to their constituents throughout the vastcountry was that he and they were not in politics to gain wealth or power.They were in office to build a new nation somewhat more singular than mostother contemporaneous African nations For him, being the first president ofBotswana provided an opportunity to implant alternative African values, tocreate an open society, and to develop a political culture of democracy Forhim, leadership meant guardianship, on behalf of the people He was in office

to provide a strong moral and practical compass for the nation, and thatmeant the elimination of any germs of corrupt practice

Of even more practical importance for anti-corruption than his vision ofdemocratic leadership and his personal modesty was Khama’s canny deci-sion to refrain from giving too much power to any individual Ministers couldmake no major decisions on their own They had to involve other depart-ments For example, when Botswana decided to grant a mining lease for dia-monds or coal, a number of ministries had to be consulted and the final deci-sion was taken collectively by the country’s cabinet Khama specifically told anearly minister of mines who wanted to exercise the authority invested in him

by the Mines and Minerals Act that he could not “No, this is not somethingfor one man on his own; it is too important Even if you think it is right, if any-thing goes wrong, you must share the responsibility with your colleagues .And if the people later think it is wrong, then you will have others to help youdefend why it was thought to be the right thing to do.”17Khama insisted thatministers had to reveal all implications of any decision, whether administra-tive or financial Full transparency was necessary at all levels

Khama also created a professional civil service using the British model,which by its very nature, and by the model Khama inspired, had explicit checksand balances Civil servants were protected by a Public Service Commission

and, initially, by the esprit de corps of local and expatriate leaders within the

civil service Politicians complained that their civil servants were too tial “But if we had not received such complaints,” Masire indicated, “I think

influen-we would have been in trouble, since it would have indicated that politicianswere exercising unreasonable discretion.”18That discretion could easily haveled to special favors, under-the-table deals, and abundant corruption.Khama and Masire also saw to the prosecution of the few prominentTswana ministers and officials who misappropriated funds or benefited illic-itly from their position One of those miscreants was President Khama’scousin, a senior civil servant Another was a senior officer of the ruling polit-ical party Allegedly, a third was President Masire’s younger brother In thatcase the report of a high-level commission that looked into the accusationswas published for all to examine In a fourth case, Masire terminated an assis-tant minister in and the permanent secretary of the Ministry of Local Gov-ernment and Lands even though the assistant minister’s criminal convictionwas later overturned on appeal

When Masire was president and governing, Botswana became more plex as wealth flowed from diamonds, tourism, and beef Petty thieveryquickly escalated into a few major cases of corruption, especially in the 1990s.Masire’s answer was to create tough new legislation and to create an anti-corruption unit that was based on the successes of the Hong Kong Colony

com-Leadership Alters Corrupt Behavior 353

model He also believed that the fact that his administration pursued all ous allegations “and did not try to hide the fact [that] they occurred” was crit-ical to strengthening Botswana’s democracy, and also to the new nation’s eco-nomic growth trajectory.19

seri-Masire recalls that he was often offered access to secret bank accounts inSwitzerland Locally, businessmen tried to entangle him in conflicts of inter-est by offering him shares in their motor dealerships or other businesses Atministerial, vice-presidential, or presidential levels, Masire makes clear that

“justice must not only be done but must be seen to be done.”20Many otherdeveloping world presidents and prime ministers have uttered similar pieties

In Khama and Masire’s cases, the heads of state were determined to avoid theshame and the inefficiency of corruption at all costs They knew, too, that ifthe leaders stayed clean, the country (mostly) would

There is a third case that conceivably demonstrates the conclusive tance of leadership for corruption’s reduction, but the evidence is not yetfully arrayed “Corruption,” President Paul Kagame of Rwanda says, “ isclearly, very largely, behind the problems [that] African countries face It isvery bad in African or Third World countries .” It is hard to change because,continues Kagame, “ it has become a way of life in some places.” In Rwanda,the president of a state-owned bank was prosecuted for giving friends unse-cured loans Policemen were known to take small sums to overlook minorstreet offences

impor-Kagame, like Khama and Lee, believes that “You can’t fight corruptionfrom the bottom You have to fight it from the top.” He has prohibited theemployment, in his government, of his relatives or any relatives of ministers

He has shamed and prosecuted cabinet ministers and friends for slipping offthe ethical high road “Nor,” reports Kagame’s biographer, “are the guilty qui-etly rehabilitated as happens in nearby countries They can never return

to public life, because they are considered guilty of something even worsethan dishonesty.”21

According to the Economist, the Rwandan government has, in recent years,

cracked down hard on corruption and imprisoned ruling-party officials forpilfering public funds “The police are professional, even enforcing laws on lit-

ter to make Rwanda the cleanest country in Africa.” As the Economist also

implies, tough leadership, not pre-existing institutions, is helping to transformRwanda from dirty to clean, from free-wheeling to conformist, and from dis-tracted to single-mindedly efficient In the 2008 Index of African Governance,Rwanda ranked 18th; a slightly higher score and a lower rank by one placethan the year before That high ranking (of forty-eight sub-Saharan African

nations) testifies to improving scores in corruption, among other variables.For corruption, Rwanda moved upward in the year from 22nd to 16th amongthe forty-eight—a substantial improvement.22

Kagame’s administration has hung the streets and offices of Kigali, thenational capital, with posters opposing corruption: “He Who Practices Cor-ruption Destroys His Country.”23All public officials—more than 4,000—arerequired to file annual statements of their net worth, echoing one of Lee’smethods In many countries such statements would pile up in an obscureoffice In Rwanda, the government ombudsman assiduously examines themfor signs of ill-gotten profits and the misuse of public office

These three cases of leadership antagonism toward corruption are gestive but hardly conclusive This tentativeness is not to suggest that other,more important, factors were at work that mattered more to Botswana’s andSingapore’s clear success, and the seeming embryonic success of Rwanda, indampening corrupt tendencies among cabinet ministers, middle-rankingoperatives, and petty officials Rather, without a good method to test theenduring impact of a leader’s actions on the daily behavioral choices made bybureaucrats, it is difficult to be sure that what appears to have resulted fromthe actions and determination of Lee, Khama, and Kagame, respectively,actually happened and happened in the manner that has been suggested inthis chapter

sug-Equally, it seems likely that Mobutu and Ne Win’s thefts of state resourcesand the depredations, defalcations, and peculations of the likes of Abacha,Mugabe, Omar Bashir in the Sudan, Daniel arap Moi in Kenya, Siaka Stevens

in Sierra Leone, Charles Taylor in Liberia, and many others across all oping countries gave implicit unholy license to middle- and low-ranking offi-cials Indeed, Mugabe and Mobutu and many others permitted (even encour-aged) their underlings to steal from the state in order to control them moreeasily Mugabe’s Central Intelligence Organization was charged with keeping

devel-“tabs” on the corrupt dealings of Mugabe’s subordinates, the better to mail or intimidate them into submission The silken web of deceit envelopedeveryone who wanted to do what others were doing, and the tentacles of cor-ruption thus encompassed all parts of society in Zimbabwe, as in the numer-ous other wildly corrupt countries of the developing world

black-Once a pattern develops—once (as Lee says) leaders develop patrimonialfollowings that have to be buttressed with cash, jobs, and other perquisites—and once leaders have mistresses and concubines, corruption becomesaccepted at all levels of a developing society Nigerians have long been accus-tomed to the norm of corruption The issue is not whether or not a parent

Leadership Alters Corrupt Behavior 355

greases the headmaster’s palm to enroll a son or daughter in school, the tion is how much?24It becomes easier to pay off a policeman at a roadblock

ques-in Thailand or Mozambique than it is to object and to battle for rights It iseasier in Liberia to rig a bidding process for access to vast iron ore depositsthan laboriously to hold external players to account.25But can we be surethat, after a certain chronological point, new leaders can begin to alter thepattern of corruption? Or is it likely that only when nations are being builtfrom the ground up that leaders can make a positive difference? That is, oncethe rot of corruption has spread widely, can it be reduced and then largelyeliminated?

Impressionistically, again, there are a number of cases that indicate that anew leader can shift the prevailing ethos sufficiently to make corrupt practicesmore unthinkable than they had been under previous regimes But thoseleadership demonstrations of a novel probity must also be accompanied byswift and certain accountability, discovery, prosecution, and punishment Fur-thermore, the Lee and Kagame examples suggest that tough, even draconian,methods (with or without due process) are helpful in coercing officials toavoid temptation and eschew ostentation Khama, however, proceeded toreduce corruption more by example and by exhortation That approach wassufficient for Botswana where it might well not have been for the much morevibrant and criminalized Singapore

Countries such as South Africa, Zambia, Cambodia, Afghanistan, andTimor Leste, to cite a sample, are capable even today of reducing (as inRwanda) or accepting the stain of corruption It depends on their leaders andtheir leaders’ willingness to motivate the apparatus of the state to act sternly.Ordinary citizens, and middle- and low-level officials, are still receptive tosignaling in a way that is hard to imagine in a nation such as Nigeria or Burma,where corrupt expectations are widespread Zimbabwe is another interestingcase; when Mugabe goes, a successor will be able to set a tone almost fromscratch Zimbabwe would then become a nation-state where the propositionsset out in this chapter could be tested and, perhaps, validated

Notes

1 Joseph S Nye points out that in addition to the common vertical chain of ruption model, horizontal chains exist—as in China—which largely consist of lead- ers punishing groups or persons considered non-loyal (personal communication, 17 February 2009).

cor-2 See Sarah Dix and Emmanuel Pok, “Combating Corruption in Traditional Societies: Papua New Guinea,” chapter 9 in this volume.

3 Southern Africa Report (6 March 2009), 5.

4 James C Scott, Comparative Political Corruption (Englewood Cliffs, 1972), 19.

The importance of leadership action in combating corruption has also been noted by

Peter John Perry, Political Corruption and Political Geography (Brookfield, VT, 1997), 121.

5 Scott, Corruption, 61–62.

6 Ibid., 65.

7 Transparency International, “Corruption Perceptions Index” (2008), available

at www.transparency.org/policy_research/surveys_indices/cpi/2007 (accessed 29 ber 2008).

Octo-8 Lee Kuan Yew, From Third World to First; The Singapore Story: 1965–2000 (New

13 Michael D Barr, Lee Kuan Yew: The Beliefs Behind the Man (Richmond, UK, 2000), 126; T J S George, Lee Kuan Yew’s Singapore (London, 1973), 97; James Minchin, No Man Is an Island: A Study of Singapore’s Lee Kuan Yew (London, 1986),

253 All three authors are otherwise extremely critical of Lee, his legal shortcuts, and his autocratic leadership.

14 Seow, To Catch a Tartar, 46–52 Subsequently, in 1988 when he was in private

legal practice, Seow was arrested and held for seventy-two days in a detention center and subjected to harsh interrogation procedures that amounted to torture He had allegedly contravened a provision of the Internal Security Act, but Seow suggests that Lee had taken affront because of his legal defense of political protestors For the details and a sharp commentary, see Seow, 106 ff and the thirty-page foreword by C V Devan Nair to Seow’s book Nair had been a close associate of Lee’s and a freedom campaigner who had been imprisoned by the British colonial authorities In the fore- word, Nair calls Lee’s behavior “loutish” and treacherous.

15 See Thomas Tlou, Neil Parsons, and Willie Henderson, Seretse Khama,

1921–1980 (Gaborone, 1995).

16 Quett Ketumile Joni Masire, “Economic Opportunities and Disparities,” in

Stephen R Lewis, Jr (ed.), Very Brave or Very Foolish? Memoirs of an African Democrat

20 Ibid., 242.

21 Stephen Kinzer, A Thousand Hills: Rwanda’s Rebirth and the Man Who Dreamed

It (New York, 2008), 236.

22 “A Pioneer With a Mountain to Climb,” Economist (27 September 2008); Robert

I Rotberg and Rachel M Gisselquist, Strengthening African Governance: Ibrahim Index

of African Governance, Results and Rankings, 2008 [and 2007] (Cambridge, MA, 2008),

available at http://belfercenter.ksg.harvard.edu/project/52/intrastate_conflict_program html?page_id=223 (accessed 21 April 2009).

23 All quoted in Kinzer, A Thousand Hills, 235–236.

24 See Daniel Jordan Smith, “The Paradoxes of Popular Participation in tion in Nigeria,” chapter 11 in this volume.

Corrup-25 President Ellen Johnson-Sirleaf ’s government attempted to right the wrong after the fact, but without managing to plumb the full depths of the new nation’s cor- rupt dealings See James Butty, “Liberian Government Moves to Curb Corruption in

Awarding Foreign Investment Contracts,” Voice of America Online (15 September

2008), available at www.voanews.com (accessed 13 February 2009).

Multi-national corporations (MNCs) play a significant role in nomic globalization The annual revenues of the largest companies—such asExxon-Mobil’s $405 billion in 2007—put them among the largest twenty-five nations if these total revenues were equated to GDP The top 200 MNCsaccount for over 50 percent of the world’s industrial output.1MNCs under-take a wide variety of commercial activities: they export from their homecountry and manufacture and assemble in foreign countries They havemoved “off-shore” activities that were previously conducted in their homecountries.2They have then “outsourced” to third parties some of those “off-shored” activities, creating complex global supply chains They are engaged inevery form of commerce from production of heavy equipment to the distri-bution of consumer goods and the provision of financial services They bid onmajor projects across the world They employ tens, if not hundreds, of thou-sands of foreign nationals And, increasingly, their share of revenues and prof-its from activities outside their home country is approaching—or exceed-ing—50 percent, with an increasing proportion of those foreign revenues andprofits coming from emerging markets

eco-Because of their size, reach, and visibility, MNCs also have—or shouldhave—a significant role in attacking global corruption This is especially so forcorporations that are headquartered in the developed world, which must rely,increasingly, on revenue growth and profitability in the developing world.For purposes of this chapter, corruption is defined as bribery, extortion, andmisappropriation.3 For analytic convenience, this chapter also focuses onMNCs that are headquartered in the developed world, while recognizing thatMNCs headquartered in markets such as China and India are rivaling theirdeveloped world counterparts in size, strength, and reach.4

14

The Role of the Multi-National Corporation in the Long War against Corruption

ben w heineman, jr.

This chapter is prescriptive because there is still a tremendous gap betweenMNC anti-corruption rhetoric and action This chapter seeks to address insti-tutional and political constraints realistically but also to suggest courses ofaction that can improve anti-corruption performance In so doing, this chap-ter looks at the role of MNCs in four settings:

—With respect to the corporation itself, focusing on the actions needed to

create a “high performance with high integrity” global culture;

—With respect to the developed world’s efforts to stop foreign bribery by its own MNCs, focusing on the mixed record of the Organization for Economic

Cooperation and Development (OECD) Convention on Combating Bribery

of Foreign Public Officials since its effective date in 1999;

—With respect to the efforts of international organizations to combat corruption in the developing world, focusing on the World Bank Group; and,

This chapter emphasizes the first issue Motivating private entities to ate truly effective internal anti-corruption cultures and anti-corruption pro-grams must be the ultimate purpose of governmental action, which shouldseek not only to punish wrong-doers but to drive corporations toward durableand sustainable anti-corruption behavior.5

cre-Since the mid-1990s, corruption in the developing world has been a nent item on the global agenda.6Few people today repeat the old argumentthat corruption is an efficient corrective for overregulated economies Thetrue impact of corruption is now widely acknowledged: corruption distortsmarkets and competition, breeds cynicism among citizens, undermines therule of law, damages governmental legitimacy, and corrodes the integrity ofthe private sector It is also a major barrier to development: diversion of funds

promi-to corrupt parties and systematic misappropriation by kleppromi-tocratic ments harm the poor But there are few signs that the range and extent of cor-ruption has diminished.7

govern-The forces that will start and sustain the building of truly transparent,accountable, and durable institutional infrastructures in the developing worldare complex Such forces are likely to vary by nation because each has its ownunique history and culture and each is at its own phase in the developmentprocess, from failed and failing to fragile and rising But most experts would

agree that one important factor is an MNC community that is committed toanti-corruption The pressures for corruption inside corporations—and inglobal capitalism—make such commitments an elusive ideal.

Fusing High Performance with High Integrity

in the Multi-National Corporation

The twin goals of the contemporary multi-national corporations, and indeedglobal capitalism, should be high performance with high integrity High per-formance is strong sustained economic growth that is based on provision ofsuperior products and services; that provides durable benefits to sharehold-ers and other stakeholders (such as employees, pensioners, creditors, cus-tomers, suppliers, and communities); and that balances risk-taking with riskmanagement High integrity has three elements: a tenacious adherence to thespirit and letter of formal rules, legal and financial; voluntary adoption ofglobal ethical standards that bind the company and its employees to act in itsenlightened self-interest; and employee commitment to the core values ofhonesty, candor, fairness, reliability, and trustworthiness These values, whichavoid the back-biting and turf-fighting that cripple organizations, should per-meate internal and external relationships and guide the creation and delivery

of products and services

The fusion of high performance with high integrity is necessary because atthe heart of performance lie fundamental forces that, if left unconstrained,cause corporate corruption Top performing companies apply relentless inter-nal pressure on their employees to hit basic financial goals for net income, cashflow, stock price, and other numerical targets.8 Pressure begets more pres-sure “Stretch targets” may put numbers on steroids and the “nice to hit” tar-gets may become implicit “must dos.” Making these numbers is key to com-pensation, bonuses, promotion, and even job security, and creates ubiquitoustemptations to falsify accounts, cut corners, or worse Far-flung global enter-prises face external pressures that also create ever present and illicit tempta-tions.9 The mix of these external pressures with a firm’s internal pressurescan be an especially toxic brew

In my book, High Performance with High Integrity, I outline eight key

prin-ciples and associated practices that explain how these corrupting pressures can

be countered and how an affirmative culture of integrity can be created intransnational companies.10Below, I briefly apply that analysis to the briberyand extortion that MNCs face across the globe, discussing those principles andpractices with greatest importance for combating corruption

The Role of the Multi-National Corporation 361

The Policy and the Problem

An MNC needs to adopt a broad rule that its employees will not tender thing of value to obtain an improper advantage when representing the com-pany’s interests to governmental or political authorities, when selling goods

any-or services in public any-or private settings, any-or when conducting financial actions This rule should be observed for major discretionary decisions andfor the more routine decisions as well

trans-This rule should apply not only to all employees, regardless of nationalityand regardless of a weaker national law, but also to third parties who are rep-resenting the MNC: consultants, agents, sales representatives, distributors,and contractors It also should apply to “controlled affiliates,” those commer-cial entities in which the MNC owns a majority of voting stock or controls byother means.11

This rule will apply in many different contexts Direct cash payments topublic or private actors are forbidden But improper payments can occur inother, more clandestine ways: through requests for, or use of, third parties; byproviding gifts and entertainment; through provision of travel and livingbeyond clear business purposes; through “charitable” and “political” contri-butions; and through use of partners, suppliers, and investors connected topublic decision-makers (e.g the prime minister’s daughter who owns thesupply of coal for the power station) Except for direct payments to govern-ment officials, these forms of improper payments may, however, also beproper.12Thus, decisions by the MNC about what is an improper or properpayment are often fact-bound A strong anti-corruption program requires arobust integrity culture; clear guidelines; and a strong, centralized, high-levelprocess to make sure hard cases are decided on the right side of the line

The Solution: Creating a Uniform, Global Integrity Culture

Culture constitutes the shared principles (values, policies, and attitudes) andthe shared practices (norms, systems, and processes) that influence how peo-ple feel, think, and behave In a large organization, adherence to legal and eth-ical rules is critical, and a deterrence culture that is based on a fear of beingcaught and punished must be real But for strong corporations that culture ofdeterrence must be supplemented—even supplanted—by an affirmative cul-ture where employees want to do “the right thing.” But such an affirmative cul-

ture turns on CEO leadership that forcefully articulates values and aspirations and on CEO management that deals with the complexity of bribery by driving

systems, processes, and resources deep into business operations and that holds

employees accountable Without these operational realities, the aspirations areonly that, and the corporate cliché of “tone at the top” is just window dressing.The performance-with-integrity culture must be uniform across the globe.

To be sure, MNCs must be sensitive to cultural variation as they do business

in many different nations But the core rules, systems, and processes that duce high performance and high integrity must never be compromised due

pro-to variation in local practices This fundamental point is discussed more fullybelow But a cautionary word is appropriate here Siemens, the powerful Ger-man industrial conglomerate, has been wracked with a significant overseasbribery scandal in recent years The company has identified more than $2 bil-lion in questionable payments; has had its board chair, CEO, and key staff andoperational leaders removed; has had to pay $850 million to internal investi-gators; has had to adjust its tax returns at a cost of more than $500 million(because expenses taken as legitimate turned out to be illegitimate); will likelypay fines of more than $1.6 billion in enforcement actions and is still facinginvestigation and possible prosecution in multiple jurisdictions around theglobe.13One source of this towering problem was the “decentralization” ofcompany values, which allowed local and regional officers to disregard thepaper policy against improper payments and “adapt” improperly to corruptlocal practices

Principles and Practices

A first principle for “how” to create an effective anti-corruption program isthat the CEO, and other business leaders, must provide consistent and com-mitted leadership They must put integrity first and not pass off responsibil-ity for this complex set of issues to staff functions (finance, law, humanresources), which have a vital, but supporting, role The message must beunequivocal When I was at General Electric (GE), the CEOs (Jack Welch andthen Jeff Immelt) would, at the annual meeting of senior leaders, consistentlystate the following:

—The corporation is built on reputation and performance with integrity

as its foundation

—Each leader in this room will be held personally accountable

—There will be no cutting of corners for commercial reasons; integritymust never be compromised to “make” the numbers

—One strike and you are out You can miss the numbers and survive Youcannot miss on integrity

CEOs must then give this core message meaning through tough discipline

of their generals, not just their troops For example, a seasoned GE business

The Role of the Multi-National Corporation 363

leader in an emerging market willfully sidestepped the company’s due gence procedures when shifting distribution from GE employees to a thirdparty When an internal audit uncovered improper payments by the distrib-utor, the leader was terminated without equivocation or weighing the pro’s ofpast success The executive had crossed a line that leaders should defend, notbend The tough message at senior leadership meetings—one strike and youare out—was driven home by tough action.

dili-An even more thunderous message is delivered when a senior executive isremoved for a failure of omission, not commission A salient example of thisoccurred when an Israeli general in charge of procurement for the Israeli AirForce and a GE aircraft engines marketing manager fraudulently misappro-priated millions of dollars provided by the U.S government to the Israeli gov-ernment to purchase U.S fighter planes For this to occur, there was wrong-doing by many in GE; many others knew about the fraud but failed to takeaction to stop it The matter was investigated; a settlement was reached withthe government; individuals were disciplined; and systems repaired The ulti-mate question was what to do with GE’s military engines leader, who was notinvolved in the corrupt acts but had failed to create a culture of integritybecause too many in the organization were indifferent to intolerable acts fortoo long After much debate, the executive was asked to leave the company.The message was clear: there was no favoritism Generals would be held tohigher standards than troops and failure to create a performance-with-integrity culture was an offense requiring separation

A second principle is to manage performance with integrity as a businessprocess The essence of management is dealing with complexity through sys-tems and processes And, with respect to implementing an anti-bribery pol-icy involving many different kinds of improper acts across many differentcultures, such complexity is daunting Such a policy involves building an

“integrity infrastructure” into relevant but discrete business processes: keting, sales, manufacturing, sourcing, and governmental relations This pol-icy has three essential components, expressed by GE in the following way:

mar-—Prevent ethics and compliance misses and when prevention fails;

—detect misses as soon as possible and once detected;

—respond quickly and effectively to investigate the facts, discipline viduals, and remedy systems both in the particular business unit and acrossthe corporation (Again, to quote a GE mantra, it involves everyone, everyday,everywhere.)

indi-The key to this integrity infrastructure is to “risk assess” business processesthat pose corruption problems and then to develop systems and processes

for “risk abatement.” At GE, business leaders were made responsible for thisfundamental activity and were paired with “domain experts”: individuals withspecial expertise in anti-corruption (financial experts, auditors, lawyers) Overtime, GE developed detailed implementing guidelines used across the globeand across its different business divisions to provide direction on some of themost difficult problems Several salient examples follow.

third parties Third parties constitute one of the most dangerous lems: agents, consultants, sales representatives, and distributors, who standbetween the company and the customer, can be conduits for improper pay-ments The risk abatement process requires written specifications at the out-set defining the commercial context and the specific need Before any engage-ment can occur this specification has to be expressly approved by seniormanagement so accountability is clearly fixed The next phase involves duediligence One subject of this diligence is the third parties’ resources andexpertise (what do their financials look like; who are their personnel; whatknowledge of and experience in the industry do they have; what is their for-mal business entity documentation) A second dimension of due diligence isassessing reputation This assessment involves both interviews and publicrecord checks (for example, cross matches with terrorist lists; assessment ofconflicts of interest; views of others in the business, diplomatic, and mediacommunities; and a review of police records)

prob-The written contract with third parties should contain critical terms: ifications of the work; a fee within a reasonable range for the work done (1 or

spec-2 percent, not 10 or 15 percent); a structure for payments in phases tied todeliverables or other concrete steps where possible; the exclusion of unknownsub-contractors (who could be conduits); payments in-country (not inSwitzerland); training in GE anti-corruption policies and practices; auditrights; right to terminate unilaterally; and a certification that the third partyunderstands the company’s anti-corruption policy and will adhere to it GEemployees on the front lines were given special training on third parties toidentify red flags that would be reported up the “integrity infrastructure line”(e.g., requests for cash, inflated invoices, requests for partners or suppliersthat were not in the original contract; in general an “eyes wide open” require-ment to identify suspicious circumstances)

Because third parties pose such a risk for corruption, GE also held mits” in difficult regions, such as the Middle East and Asia, to cut across itslines of business and to make sure that there was consistency in the terms andconditions for retaining third parties, in the use of best practices that emergedfrom experience in the region, and in the techniques used for reducing the

“sum-The Role of the Multi-National Corporation 365

absolute number of third parties to the greatest extent possible.14One lem in reducing third parties is that in many nations, governments requestthat agents or consultants be used Could GE be certain that there were notimproper payments? No, but it took extraordinary steps and care in prevent-ing them.

prob-gifts, entertainment, travel, and living expenses Gifts, tainment, travel, and living expenses collectively constitute another seriousproblem area For public officials, governments may have strict written limi-tations that are not implemented or enforced Or governments may have onlyvague rules Again, for GE, a systematic process that was applied across theglobe was vital to reduce risk Governmental policies had to be clearlyresearched, understood, and communicated to GE employees and followedeven if government enforcement was, at best, erratic With respect to traveland living expenses, a legitimate business purpose had to be defined in writ-ing and, as with third parties, approved in writing by a senior manager Withrespect to gifts, both giving and receiving gifts of more than nominal amountswere prohibited.15Strict record-keeping and auditing, to ensure a clear history,were also required And employees that were responsible for reviewing expen-ditures in these areas—like employees that deal with third parties—weretrained to spot red flags such as vague statements of purpose; missing receiptsand documents for reimbursement; missing lists of attendees; improper ven-ues; and unauthorized expenses for spouses.16

enter-regular management reviews Regular management reviews, directed

by business leaders, demonstrate to employees the foundational importance

of implementing performance with integrity as a business process Thesemanagement reviews build on controllership, other preventive actions, and onfollow-up auditing The place or form may vary, but deep leadership engage-ment is essential.17

A third principle is to adopt global standards beyond the requirementsthat are imposed by formal rules that bind the company and its employees.With respect to improper payments, GE had a broad policy that its employ-ees and third parties should not bribe or give in to extortion whatever theirnationality; whatever the local law; and whether in a public or a private set-ting.18This broad approach was born from the company’s belief that “what islegal” is an initial question, but “what is right” is the ultimate question GEagreed with all the reasons, noted above, why corruption was harmful But onereason was of signal importance Bribes corrupt the internal culture of thecorporation They are unlawful; they are improper; they are secret; and theyrequire falsification of the books If, as I believe, a great corporation—indeed

any great organization—is built on the honesty, candor, fairness, thiness, and reliability of its employees, then bribes are inimical to those val-ues, are inimical to other elements of integrity (adherence to rules and ethi-cal behavior), and cannot be tolerated It was for these reasons that GEadopted the broad anti-bribery policy that went beyond the technicalities ofvarying rules in varying jurisdictions As discussed below, GE recognized thatthere would be a cost to this position, but believed deeply that the benefitswere much greater than the risks.

trustwor-A fourth principle—fostering employee awareness, knowledge, and mitment—and a fifth principle—giving employees voices—are closely related.Especially in the complex area of improper payments, employees need tounderstand their obligations, to do things right when the rules are clear, to dothe right thing by seeking advice when the situation is not clear—and whencompany learning and judgment must be applied Corporations must notonly articulate “the word,” they must explain to their employees why theseprinciples are important for a global company and deliver this message ener-getically in combination with business training This commitment to training

com-is especially important in emerging markets with employees who have comefrom companies and cultures that have different values than a performance-with-integrity MNC and where ingrained attitudes (“it does not matter”; “wewill not be caught”; “the company tacitly approves”) must be overcome.19Especially with respect to improper payments, corporations need to ensurethat employees have “voice” to report concerns about potentially illicit activ-ities Such voice is in contrast to the “culture of silence” that plagues many cor-porations and that causes improper acts to go unreported and unaddressed.The key mechanism for such a voice is an ombuds system that encouragesemployees to report such concerns, anonymously if necessary, to theombudspersons in the businesses or at corporate headquarters; that can takereports in many different languages; that follows up on concerns promptlyand professionally wherever the facts lead; and that has real consequences interms of discipline At GE, employees had a duty to report possible improperpayments (and could be disciplined for failure to do so) and had a related dutynever to retaliate (a firing offense) Such a system not only detects, it detersbecause people know that their peers will report improprieties When pro-fessionally handled, such a system does not cause false reports and back-bit-ing because cheap shots won’t work.20

A sixth principle is to compensate the CEO and other top business leadersnot just for performance but for performance with integrity, especially in thetough area of anti-corruption in emerging markets On this principle, the

The Role of the Multi-National Corporation 367

board of directors has the lead role It must define new specification and agement development processes for the CEO and top business leaders so thatthe CEO is not just one with a commercial vision and personal integrity but

man-a leman-ader who hman-as the experience, skill, man-and intensity to fuse high performman-ancewith high integrity deep within the organization And, because measurementsdrive so much of the behavior in corporations, this ultimately means that theboard must establish certain performance-with-integrity metrics that relate tosome percentage of cash compensation (salary and bonuses) and equityawards (such as stock options) both for the CEO and for top profit and lossleaders.21

Benefits and Costs

The benefits of a strong, uniform, global anti-corruption policy, which has areal impact at the operational level, occur in three dimensions Inside thecompany, bribery is, as noted, antithetical to the core values of honesty, can-dor, fairness, reliability, and trustworthiness It is contrary to an employmentsystem that is based on merit, not cronyism and corruption Strong anti-cor-ruption measures can create pride in a company and create a potent envi-ronment for hiring, retaining, and motivating employees

In the marketplace, a strong anti-corruption policy avoids the catastrophiclegal risk of a towering bribery scandal that periodically affects emerging mar-kets and companies doing business there, as the Siemens case demonstrates

As the political pendulum swings, companies involved with corrupt ments may be exposed On the positive side, a strong policy against bribesenhances a corporation’s reputation as a “clean” company It can, thus, be a dif-ferentiating factor with corrupt competitors by appealing to technocrats, who,even in difficult markets, want to do the right thing and protect their own rep-utations And, in some cases, such a policy requires that the company exit amarket when the corruption is so pervasive that it is impossible for the com-pany to operate without being tainted.22

govern-In the broader global society, an anti-corruption policy generates ity for corporations with regulators and in public debates Such a policyincreases the opportunities for positive media coverage, which gives a com-pany a positive reputation in the public eye And, most important, such apolicy can contribute to the development of the legitimate and durablegrowth of transparent and accountable institutional infrastructures in devel-oping countries

credibil-Fusing high performance with high integrity ultimately creates trust withall stakeholders—shareholders, creditors, employees, customers, suppliers,

governments, and the media—which allows corporations to have dous freedom, notwithstanding the regulations of a mixed economy, to allo-cate capital, find new markets, invest in technology, and create innovationsthat drive societal growth It is the strongest possible argument for the spread

tremen-of global capitalism

A “no bribes” policy, taken seriously, has the cost of lost business in certaincircumstances This loss is hard to measure But GE, for one, felt that the ben-efits, briefly described above, far outweighed these costs At the end of the day,this was not about balancing dollars and cents Such a policy was a matter ofjudgment and common sense This policy went to the fundamental question

of what does the company stand for, which requires values, vision, and ership, not only a calculator and a spreadsheet

lead-Rhetoric and Reality

A fundamental question is how many MNCs actually fuse high performancewith high integrity Unfortunately, it is not an easy question to answer MostMNCs have an anti-corruption policy on paper But, many still believe thatdoing business in societies with bribery, extortion, and misappropriationrequires use of illicit means and abandonment of their own stated principles.Hypocrisy exists; some would say it is widespread or even rampant.23Thus, the basic question remains: how to create a pervasive integrity cul-ture that is so critical to ensuring a robust global anti-corruption program.While this culture ultimately should be based on an affirmative desire to “dothe right thing,” it may start as a deterrence culture to avoid legal or reputa-tional risks That requires the developed world to enforce anti-bribery lawsagainst MNCs headquartered there But, as is argued in the next section, therecord of the developed world on this vital subject is mixed, at best

Efforts to Stop Developed World MNCs

from Bribing in the Developing World

The OECD Convention on Combating Bribery of Foreign Public Officialswas adopted in 1997 and entered into force in 1999 The convention commitsthe ratifying parties to enact and enforce national laws that make foreignbribery by their corporations a crime These member states include theworld’s leading industrialized nations, which are home to most of the majormulti-national companies The goal of the convention is to address the “sup-ply side” of global corruption and create a level, bribe-free playing field fordeveloped world corporations Such a playing field is achieved through the

The Role of the Multi-National Corporation 369

implementation of serious sanctions by member states when foreign bribesare paid to procure business overseas, especially in the developing world Anadditional goal of the convention is to deter multi-national corporations’wrongdoing and thus ultimately to encourage them to build robust anti-cor-ruption programs and sustainable performance-with-integrity cultures.For those corporations committed to global anti-corruption agendas, mak-ing the convention work is an important test Of the many initiatives on thebroad anti-corruption agenda, the effort to stop foreign bribery by corpora-tions headquartered in the OECD states is the most clear-cut and straight-forward And, serious enforcement of this convention in the all the memberstates—the creation of a truly level playing field—is a matter of high impor-tance for all MNCs that are sincerely dedicated to high performance withhigh integrity.

The Record and the Problem to Date

Unfortunately, more than ten years after its adoption, the OECD convention’srecord of enforcement is mixed at best That record is a story of tensionbetween an important global commitment against corruption and parochialnational interests that ignore anti-bribery mandates in order to protectnational trade champions and domestic jobs It is a story of some progress butmany setbacks on the troubled convention road from words to deeds Con-sistent, sustained implementation of the convention will require a change inthe politics of the OECD, the signatory nations, and their corporations tocounter the entrenched and powerful politics of corruption MNCs that arecommitted to anti-corruption measures must work with like-minded gov-ernment officials in both legislative and executive branches, with politicalparties, with business associations, with NGOs (such as Transparency Inter-national), and with the media to help to remedy the convention’s failings.The adoption of the OECD convention was widely regarded as a majorbreakthrough, with thirty-four (as of early 2009, thirty-seven) leading indus-trial countries agreeing to make foreign bribery by their own corporations acrime under their national laws Previously, foreign bribery was a crime onlyunder U.S law (the Foreign Corrupt Practices Act [FCPA]) Everywhere else

it was not prohibited by domestic laws, and foreign bribes were treated astax-deductible business expenses in many nations.24

The convention charged the Working Group on Bribery to provide

follow-up monitoring of member state compliance The first phase of this ing involved the review of each member state’s national laws to determinewhether they met the requirements of the convention.25The second phase

monitor-monitored the actual enforcement of national laws, a much more complexundertaking requiring OECD teams to visit each country.26

The OECD has no legal power to compel signatories to take action Itsprincipal lever is peer pressure, exercised in the first instance through theWorking Group The OECD monitoring process produces detailed criticismsand recommendations and is impressive in its professionalism and thor-oughness However, the preparation of country reports is time consuming,and they are customarily long and highly technical Although the purpose ofthe reports is to bring peer and public pressure by exposing national weak-nesses, the OECD, as a consensual organization, does not customarily runmedia campaigns to “name and shame” its member states The OECD has alsorefused to issue comparative annual reports that cover prosecutions and inves-tigations brought by each member state and that evaluate the relative per-formance of each country’s anti-corruption program

To provide the comparisons that are lacking in the OECD monitoringeffort, Transparency International publishes an annual report on enforce-ment that covers thirty-four OECD countries.27The key findings of the 2008Transparency International report show that there is some enforcement insixteen of thirty-four countries, including five of the eight largest exporters:France, Germany, Italy, the Netherlands, and the United States (which has themost active enforcement program by far).28This enforcement includes mem-ber state prosecutions of major MNCs such as Siemens, Total, Baker Hughes,Statoil, Alstom, Enelpower, and Alcatel However, there is little or no enforce-ment of the convention in eighteen countries, including large exporters such

as Japan and Britain In addition, the independence of centralized torial authorities and the existence of necessary expertise and resources tohandle complex foreign bribery cases also vary widely among nations.29There is, as of 2009, a serious lack of political commitment by over half of theparties to the convention, ten years after it was adopted The symbols of theconvention’s mixed record are Germany and Britain After years of taxdeductibility of bribes and turning a blind eye to the practices of its power-ful exporting industry, German authorities are now actively engaged, alongwith other nations, in investigating the towering Siemens global bribery scan-dal For example, the Munich prosecutors announced in 2008 that they hadexpanded their corruption investigation to include four major divisions(power transmission, power generation, medical, and transportation) and

prosecu-270 individuals This announcement has led to many other complaints, topossible changes in Germany’s prosecutorial behavior, and to a heightenedawareness by Germany’s industries (although it is hard to evaluate yet

The Role of the Multi-National Corporation 371

whether there has been an actual alteration of German business practicesoverseas).30

By contrast, the British government has not rewritten its anti-corruptionlaws, as requested by the OECD Working Group, and it has prosecuted only

a single case of foreign bribery since it ratified the convention in 1999 over, in 2006, Prime Minister Tony Blair announced that, for national secu-rity reasons, the British Government had stopped dead in its tracks the long-running investigation of bribery allegations involving British AerospaceSystems’ (BAE) lucrative Al Yamamah contracts for the sale of British fighterplanes to Saudi Arabia According to news reports, payments totaling as much

More-as several billion dollars may have been paid by BAE, Britain’s largest defensecontractor, to members of the Saudi royal family to secure past and presentfighter orders, almost certainly with the knowledge of the British Govern-ment The Serious Fraud Office, a supposedly independent prosecutorialauthority, justified the termination of the Al Yamamah contracts on nationalsecurity grounds (the Saudis had threatened the Blair government that theywould cut off intelligence exchanges on terrorism if the investigation contin-ued) The unilateral use of an unauthorized and unconstrained “nationalsecurity” rationale raises the specter that other nations will halt sensitive inves-tigations, using national security as a pretext, when their real motives are topromote national commercial champions and avoid worldwide embarrass-ment (In mid-2008, the House of Lords reversed a lower court ruling that thetermination was unlawful under British law; the Lords held that it was anappropriate exercise of discretion and further held that the convention wasunenforceable in British courts because it had not yet been “incorporated”into British domestic law by legislation.31)

Assessing the convention ten years after its adoption, Fritz Heimann, theformer chairman of Transparency International—U.S.A., and I drew theseconclusions:

—There have been important achievements at the governmental level,including passage of laws by virtually all member states, professional moni-toring by the OECD Working Group, and significant enforcement in somenations But, on the negative side of the ledger, there has been little or noenforcement in many OECD states and, even in many of the “enforcing” states,there have been few successful prosecutions or settlements

—The success of the convention will remain uncertain until there is nificant enforcement in many more countries and until the threat presented

sig-by the British assertion of an unconstrained national security exception hasbeen overcome