Report on the Workshop "Corruption. How, and why, to avoid it"

TABLE OF CONTENTS

I. The Workshop

II. Summary - Overview of Speakers' Comments

III. Summary - Overview of Discussions

IV. Conclusions

V. Acknowledgements

VI. Annex (with Table of Contents)

Workshop organised by, or in cooperation with:

- CERGE-EI, Centre for Economic Research and Graduate Education, Charles University - Economics Institute, Academy of Sciences, Prague
- CPA, Centre for Political Analysis, Prague
- CSEE, Czech Society for Ethics in Economy, Prague
- ESCE/WSMO, Economic Forum Switzerland - Central/Eastern Europe / Wirtschaftsforum Schweiz - Mittel-/Osteuropa, Zürich and Prague
- HST, Chamber of Commerce Switzerland - Czech Republic / Handels- kammer Schweiz - Tschechische Republik, Prague and Zürich
- TI-C, Transparency International Czech Republic, Prague
- TI-CH, Transparency Switzerland, Rüti ZH and Geneva

I. THE WORKSHOP

A workshop entitled "Corruption - How, and Why, to Avoid It" took place in Prague on the premises of the CERGE-EI economics institute on 11 November 1998. The workshop was hosted and arranged by various groups from the NGO, academic and private sector (see this reports cover page for acknowled- gements).

Opening

The workshop opened in the morning with two key-note speeches by

- JUDr. Pavel Rychetsky, Vice-Chairman of the Czech Government and Chairman of the Governmet's Legislative Council and

- HE Dr. Walter Fetscherin, Swiss Ambassador to the Czech Republic.

Morning

The opening addresses were followed by a breakfast for all workshop participants prior to beginning a morning session of presentations moderated by

- Petr Grégr, Legal Advisor to the Delegation of the European Commission in Prague. Workshop speakers included

- Dr. Marie Bohatá, Director of the Czech Society for Ethics in Economics and Chairwoman of the TI-Czech Republic Executive Board

- Werner Schiesser, Lic. iur. HSG CPA; Member of Transparency Switzerland Executive Board and Consultant at PriceWaterhouseCoopers, Zürich

- Tomas Poledna, PD Dr. iur. Attorney at Law - Badertscher Dörig Poledna Zürich; Chairman ESCE/WSMO CH

- Mirko Ros, Dr.iur. LL.M. Attorney at Law, Stiffler & Nater Zürich; Board ESCE/WSMO CH

- Vladimir Rott, MIM ETH, Eur Ing, V J ROTT Zürich, Board ESCE/WSMO CH

- Michal Burian, Executive Director of Transparency International - Czech Republic

Lunch

Guests were invited to a special lunch sponsored by Zurich Insurance where they were addressed by the company's country manager

- Miroslav Bocek, CEO. Mr. Bocek gave a brief commentary on the need of the private sec- tor to actively take part in curbing corruption in their business dealings and to begin setting examples for new market players.

Afternoon

The workshop continued in the afternoon with a discussion plenary moderated by

- Brady Clough, Director of the Centre for Political Analysis.

THIS REPORT

A summary of workshop speeches and discussions follows in the text section of this report with speakers contributions in the report annex. Some material on the international framework and on the media role is included in the last appendices.

WORKSHOP PARTICIPANTS AND SPEAKERS

Abbildung in dieser Leseprobe nicht enthalten

II. SUMMARY - OVERVIEW OF SPEAKERS' COMMENTS

COMMENTS OF HE PAVEL RYCHETSKY (Annex A)

Recent discussions among members of the Tripartite (Cabinet-Employers-Trade Unions) have shown a shift in partners' concerns. It was entrepreneurs who expressed concern, not over the balan- cing of the State Budget or the allocation of public funds, but rather local conditions for businesses in the Czech Republic. They reported significant distortions in economic competition, corruption, disorder in the administration of public tenders, or in awarding public licences. They lack assurance that the same terms of doing business apply for everyone. They demanded the Government to take steps to minimise corruption. Thus the Government has embarked on its "Clean Hands" campaign.

An aim of this programme is to create a situation where businesses obeying the law will not be in disadvantage and where there will be room for fair economic competition. While these measures might seem revolutionary in the Czech Republic, they are considered commonplace in developed countries.

Examples of such measures include mandatory non-cash payments (either for businesses or for all transactions above a certain threshold), or a system of property reporting (real estate assets), without becoming subject to taxation thereon, in order to monitor money-laundering. A portion of the media and political conservatives are against such measures, which comes off as paradoxical. The Government's ideas are on the contrary very liberal.

It's odd in these our efforts to know that in Germany bribes paid to public officials can be deduc- ted from taxes as business costs. In such cases international co-operation is necessary¹. As concerns criminal law the problem becomes more noticeable due to concepts founded on intentional blame or cause. It is possible to hand out punishments in specific areas even without proof of guilt (i.e. unmarked bills or bad checks). However there is no clear idea on how to bring a criminal complaint for something which does not yet have an international definition - indeed tunnelling is a phe- nomenon which developed as a result of the Czech Republic's particular form of privatisation (based on credits issued by reckless Czech banks) and attached to obviously disadvantageous business transacti- ons. Making progress in this area is very difficult. Nonetheless the Government is considering establis- hing intentional damages to one's own business by engaging in disadvantageous business transactions as a criminal offence.

COMMENTS OF HE WALTER FETSCHERIN (Annex B)

Public perception of corruption is constantly changing, despite the fact that corruption is an everyday reality. Tackling corruption as a societal ill implies placing guidelines or rules on nations, which hold differing values. This is a difficult task, as varying levels of economic and political development render some countries more capable than others of waging aggressive campaigns against corruption in business and public administrations.

Costs of Corruption

It is necessary to understand and remind the public of the detrimental effects that corruption has on societies (i.e. the costs of corruption). Corruption leads to the deterioration of economies and depri- ves citizens of public funding that misused moneys might have afforded. Thus it is necessary to put in place programmes to counter the uncontrolled growth of corruption and to reign it in to manageable levels.

Corruption and Switzerland

Fortunately, Switzerland has had minimal problems with corruption. The Swiss parliament has taken moves to incorporate strict punishment into national legislation (in both passive and active forms).

These laws will pass through the parliament prior to the end of 1999. Beyond legal initiatives the Swiss NGO Sector, and government support arms, are active in helping CEECs to address corruption-related issues. For example, the Swiss Agency for Development and Co-operation (SCD), has, since 1990, administered a series of projects in the Czech Republic, Hungary, Poland and Slovakia, with the aim of developing proper-functioning market economies and democracies.

A sampling of Swiss legislative measures and SDC initiatives include:

- SDC technical aid to develop small and medium enterprise in CEECs

- Establishment of a special Commission by the Swiss National Council to examine corruption in the State Administration as concerns the occupations of former State functionaries and current emp- loyees additional business activities (seeking to seek out and minimise conflicts of interest).

COMMENTS OF MARIE BOHATÁ (Annex C)

Corruption within Teaching on Ethics

Dr. Bohatá addressed the issue of fighting corruption from the point of view of academics teaching in the field of business ethics. There are three main origins of unethical business practice. They include the changes brought about by economic transition since 1989, the vast array of new opportunities calling for market regulation, and the establishment of market economies themselves.

Academics Setting Standards

Many standards which exist to prevent the spread of corruption in modern economies have come from academic circles. Indeed it is academics who teach standards for ethical business practice in undergraduate and graduate business study programmes. Cultivating ethics among new generations of business owners is a key responsibility of educators.

CEECs' desire to enter on to Western European markets and into EU political and economic structures has meant mixed results for these countries' economies as concerns corruption. Research shows that corruption decreases with the length of regional investment: that is, investors who are here for the long-term are less likely to participate in corrupt activities. Yet it still appears that corrupt habits are the norm rather than the exception.

Responsibilities of Businesses and NGOs

Thus there is a need to call upon business to cultivate integrity and accountability in their everyday dealings. This should also be complemented by increased co-operation with the Third (or NGO) sector. A high point in establishing dialogue on ethical codes for business came about with the discussions of the European Business Ethics Network (EBEN) Conference held in Prague in 1997. In subsequent years assessments of fair and honest business practices have concluded with critical, yet positive, evaluations. There is an increase in ethical awareness among business owners. And business has begun to follow best-practice methods and convene roundtables (or other special discussions) to address the establishment of a level playing-field.

Codes of Conduct?

Companies now adopt special codes of conduct. This tool has now been put in place in at least 40 per cent of all companies in the Czech Republic. This however has sparked questions on companies' motivation to set codes for ethical standards: are companies doing this to cultivate ethics as part of their corporate identity or has the adoption of ethical standards become a convenient PR tool? The latter relates to habits and trends in corporate giving and philanthropy.

Domestic and International Networks

The Czech Institute for the Members of Administrative Organs has put in place a country-wide code of conduct for members of its board of directors. It has also supported the increased teaching of ethics in academic institutions, not only as elective but also as requisite courses.

Further support of business' larger role in promoting transparent, ethical business practice is the growing role of international bodies addressing this issue. Several groups such as EBEN, Transparency International, and the Council for Ethics in Economics have seen their memberships grow considerably over the past couple of years. What's more, co-operation has increased at the regional level with CEE neighbours, Hungary, Poland and Slovakia, preparing a conference during 1999 on the topic: ethical problems of economic transformation.

Discussion - Law, Ethical Norms, Media and International Business

Discussion of Dr. Bohatá's remarks evoked the following thoughts:

- The enforcement of laws and their proper interpretation is not sufficient to combat corruption as a societal ill. Compliance with the law is a first step, but educators and business leaders must go an extra step in establishing norms - and not just at minimum levels. It is simply not enough just to get by.

- Mr. Miroslav Bocek, General Director of Zürich Insurance, followed with doubts on these values current existence and the means for establishing ethical norms. Mr. Bocek acknowledged that business ethics and values do exist, but they are too often bent or become flexible in critical situations. He commented the need for real, actual presentations of positive examples of ethical business. Mr. Bocek also proposed co-operating with the media on illustrating such examples.

- Mrs. Bettina Lobkowicz also raised the issue of international business having let down local partners by succumbing to corruption simply as being a local rule of the game. Mrs. Lobkowicz remarked that international business has an obligation to set and maintain ethical business stand- ards. The Corruption Perception Index (CPI) issued annually by Transparency International might be used as a yardstick: Why does international business' behaviour change from country to coun- try?

COMMENTS OF WERNER SCHIESSER (Annex D)

Strong Legal Structure in Switzerland

Mr. Schiesser commented Switzerland's fortunate position in ranking at second place on the

Transparency International Corruption Perception Index. He attributed Switzerland's high ranking to the country's strong and respected legal structures which have been effective in keep corruption levels low. These include functioning, effective norms in Switzerland's

- criminal law - persons found guilty of corrupt acts face fines or punishment

- private law - Switzerland's legal code features laws which proscribe the hand out of punish- ments or awarding of damages in instances of illegal competition (i.e. bribery of public offi- cials - these include instances where officials might be court administrators, judges, gover- nment-appointed administrators of State-owned business, and or the military administration)

What is Corruption?

Following his discussion of legal parameters set to curb corruption in Switzerland, Mr. Schiesser went on to address the difficulties associated with defining corruption. The Swiss approach has consi- sted largely of punishing "active bribery". This includes special gifts, promotions, support of election campaigns, product discounts, or any other special service or monetary gift offered for services that should, in general, be executed for free. What's more, Swiss Law has taken the definition a step further identifying instances where even the willingness to accept bribes might be punishable by law. At present, the largest obstacle for most persons / organisations wishing to fight or avoid corrupti-on, particularly all forms of bribery, is orienting themselves within their country's legislative structure. Switzerland is no exception. And thus priority has been given to developing more "user-friendly" legisla- tive structures. Mr. Schiesser noted the unenviable position of the Czechs, who still face the building up and completion of these structures.

COMMENTS OF TOMAS POLEDNA (Annex E)

Corruption - Out of the Hiding, and Handling It

Dr. Poledna opened his presentation with the observation that less than 10 years ago monitoring

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¹ In February 1999 the OECD has adopted a convention against the bribery of public officials, altering the status of tax write-offs for bribes in OECD countries, including Germany.