The costs to business of overseas corruption

Governments sometimes struggle to take a firm line on corruption overseas.  On the one hand governments recognize the damage that corruption does, particularly in developing countries where the proceeds from corrupt payments can sustain unaccountable governments and divert resources that are desperately needed for public services.  On the other hand, governments do not want to penalize British businesses who are responding to the business environment that they sometimes find, especially if that means sacrificing large export orders and jobs.

The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions forbids signatories (of which the UK is one) from putting commercial interests ahead of the need to fight corruption.  Even so, governments inevitably face pressure not to put jobs and export orders at risk.  For example, on Any Questions in December, both Charles Moore and Edward Leigh appear to say that it is not worth putting jobs at risk to fight corruption.

So this letter sent just before Christmas from Hermes Pension Fund, one of the UK's largest investors, makes interesting reading.  It says, in effect, that the market distortions and uncertainty caused by corruption cost British business more than the short-term costs to business of taking a tough position against corrupt payments.

In other words, according to Hermes, there is no trade-off between the interests of business and the desire to be tough on corruption.  According to Hermes, Governments that want to be business friendly should stand firm in the fight against corruption.

1 thought on “The costs to business of overseas corruption”

Leave a Reply

Your email address will not be published. Required fields are marked *