When the World Economic Forum recently surveyed leaders to identify the greatest impediments to conducting business in developing countries, they cited corruption as the biggest hurdle in Russia, the second biggest in India, and the fifth biggest in both China and South Africa. Governments in some emerging markets have taken action. Legislators and courts in Brazil, China, India, and other countries are starting to take on vote buying, contract rigging, election fixing, and other types of illegal activities. However, the problems stubbornly persist.
When the Crowd Fights Corruption
Reprint: R1301K
Corruption is the greatest impediment to conducting business in Russia, according to leaders recently surveyed by the World Economic Forum. Indeed, it’s a problem in many emerging markets, and businesses have a role to play in combating it, according to Healy and Ramanna.
The authors focus on RosPil—an anticorruption entity in Russia set up by Alexey Navalny, a crusader against public and private malfeasance in that country. As of December 2011, RosPil claimed to have prevented the granting of dubious contracts worth US$1.3 billion. The organization holds corrupt politicians’ and bureaucrats’ feet to the fire largely through internet-based crowdsourcing, whereby often-anonymous people identify requests for government-issued tenders that are designed to generate kickbacks.
Should entities like RosPil be supported, and should companies fashion their own responses to corruption? On the one hand, there are obvious public-relations and political risks; on the other hand, corruption can erode a firm’s competitiveness, the trust of customers and employees, and even the very legitimacy of capitalism.
The authors argue that heads of many multinational companies are well positioned to combat corruption in emerging markets. Those leaders have the power to enforce policies in their organizations and networks, and they enjoy the ability to organize others in the industry against this pernicious threat.