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Corporate funding and buying of influence

Opportunities for purchasing influence in government are not confined to the electoral process.

Lobbyists

Lobbyists who stand between the public and private sectors are in an ideal position to broker corrupt transactions. It is perfectly legitimate for companies to expect access to politicians - as it is for NGOs or any other interest group. Where corruption comes into play is when an interest group or corporation gains privileged access or undue influence of policy makers, for example through offers of money or gifts.

While federal agencies regulate lobbying in many countries, regulations remain weak - even in Canada, where the recently reformed lobbying law is often cited as model legislation. Lobbyists have to register if they are paid specifically for the purpose of lobbying. In practice, paid corporate employees may gather the information needed to lobby without acting as lobbyists, whilst corporate directors and retired executives,

International bribery

Until recently, the process was fairly straightforward; it was not only legal for companies to pay bribes to foreign public officials in order to secure contracts, but they received tax breaks from their home governments for doing so. Since the entry into force of the OECD anti-bribery convention, the situation has changed on paper at least. It is now illegal for OECD-based companies to bribe foreign public officials (though, crucially, the prohibition has not been extended to party officials). The process involved in securing a prosecution is so cumbersome and costly, however, that few companies have been accused under the Convention, and companies continue to pay bribes to foreign politicians and governments in pursuit of deals, often covering them up by a smokescreen of intermediaries or layers of secret bank accounts in tax havens.

Corruption cuts across industries, but characteristics particular to certain sectors may render them more vulnerable to the temptations of corruption. Sanctioned secrecy and the lack of price transparency help perpetuate corruption in the arms trade. The result is that corruption in the sector exists on a scale entirely disproportionate to its share of world trade.

The energy sector is another breeding ground of political corruption. Time and again the pattern emerges of poor countries that discover immense oil or gas reserves and see the resulting proceeds seep into the pockets of government officials and deal-brokers rather than fund improved living standards for the majority. From Angola and Gabon to Azerbaijan and Kazakhstan, the absence of robust safeguards against corruption means that the net impact of the discovery of energy resources on development is sometimes negative.

Further reading

Transparency International's Business Principles for Countering Bribery
aims at providing a framework and practical tool for companies of all sizes in developing their systems to counter bribery and to manage the related financial and reputation risks. They complement recent international and domestic regulatory changes that have been laying the ground for a stricter legal framework for international business. The ultimate aim of this initiative is to achieve a level playing field in which businesses can operate in an honest and transparent manner.


TI Working Paper:
Accountability and Transparency in Political Finance