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The Conundrum of Corruption

GW-CIBER Director Jennifer W. Spencer

Researchers studying corruption in business and government face some big challenges. For starters, there’s the definition of corruption. And then there’s the even tougher question: How do you measure it?

“Most commonly it is defined as a bureaucrat or elected official breaking the rules for private gain,” said Meghana Ayyagari, associate professor of international business. “That includes monetary bribes and nepotism.”

But Ayyagari and two colleagues on a GW School of Business panel titled “Corruption in Emerging Markets and Developing Countries: Latest Research Trends and Conundrums” said what passes for corruption in one country may be perfectly legal in another.

Furthermore, although much research has been done on government corruption, less has focused on business corruption.

The panelists discussed some of the best-known corruption indices, including those developed by the World Bank, an anti-corruption organizationTransparency International and the Economist Intelligencer Unit. “But its unclear what a particular rank may mean,” said Associate Professor Jennifer Spencer, also on the panel.

The corruption panel joined more than two dozen other presentations during a June 7-11 faculty-training conference on international business in developing markets. The conference was organized by the Center for International Business Education and Research (GW-CIBER), housed at the School of Business.

Spencer, who is also the director of GW-CIBER, said research indicates that corruption weakens formal institutions such as credit bureaus; erodes public trust in government and, in turn, hurts the economy; dilutes the effectiveness of corporate governance; and imposes additional and unnecessary costs on businesses. She said it can even lower stock market valuation in countries where it is widespread.

Rob Weiner, professor of international business, public administration and public policy, and international affairs, discussed his research on corruption in the oil industry in Iraq.

Unlike most corruption studies, which look at perceptions related to fraud, Weiner’s study used detailed bribery data—amounts and their origins—collected from an audit of the United Nations Food for Oil Program, which ran from 1995 to 2003 and allowed Iraq to sell oil on the world market in exchange for food and medicine.

The program was created in response to criticism that international economic sanctions were causing hardship for Iraqi civilians. Ultimately, it was discredited because of kickbacks paid by international companies to the government of Saddam Hussein.

Posted by gwsb on June 21, 2011 | Filed under: GWSB News,Presentations.

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