Global corruption: a problem for cooperatives?

The 2012 International Summit of Cooperatives is proud to welcome several prominent international organizations actively involved in current economic debates. Their presence at the Summit will be no doubt contribute to the development and revitalization of the cooperative movement around the world.

One of these organizations is Transparency International, and the Summit is pleased to welcome its representative, Huguette Labelle, Chair of the Board, who will take part in the opening session on Wednesday, October 10.

Ms. Labelle will also participate in the second round table called “The contribution of cooperative banks in making the world a better place” at the Global Cooperative Finance Summit on Monday, October 8, a complimentary Summit event presented by the International Co-operative Banking Association (ICBA).

We took advantage of Ms. Labelle’s participation in the Summit to ask her a few questions:

Why is global corruption a problem for cooperatives?

The cost of corruption has a global impact, but that does not mean companies that do business locally are exempt. This month, Transparency International published a survey in which it asked 3,000 businesspeople across 30 countries about the cost of corruption. A quarter said they had lost business because of a competitor paying bribes. A fifth said that the main barrier to fighting corruption is that businesses do not take the problem seriously enough.

Cooperatives are involved in many different industrial sectors and some are high-risk sectors for corruption. Cooperatives need to be mindful of that. Transparency International’s Bribe Payers Index warns us that public works, construction and mining are high-risk sectors. You might have guessed that, but real estate, property, utilities and legal services also have high risks for corruption.

Bribery penalizes smaller companies that cannot afford to compete on unethical terms. Our research also shows that bribery is not just about businesses bribing governments. It is just as common for one private company to bribe another. Small companies can feel the effects of this problem through the entire supply chain: distorted markets, unfair competition and increased costs.

In many countries, corrupt public administrations can also be a heavy burden for small organizations and, while corruption in justice systems means that avenues to seek redress and an equal footing with major organizations can be closed off.

Why did you decide to speak at the 2012 International Summit of Cooperatives? How important is the International Summit of Cooperatives for Transparency International?

I agreed to speak because the cooperative movement around the world touches an important part of the world population. It provides access to credit to families and businesses that would otherwise be deprived of this important aspect of economic development.

As there are many resources available within the cooperative movement and as its efforts are guided by good values, they can play a major leadership role in allowing people to make clean transactions and preventing unscrupulous private lenders from gouging poor people.

By setting the bar high in areas like fair trade or ethical supply chain standards, the cooperative model provides a good example that can then used by companies with other ownerships structures. It has not escaped my attention that many cooperatives steered well clear of the financial crisis, where a lot of the damage was done by a lack of transparency and accountability.

Do you think cooperatives will be called on to play an increasingly greater role internationally in the fight against the corruption perpetrated by the world’s governments and their agencies?

The cooperative movement is an alternative model of equal ownership and democratic governance that can provide some inspiration at a time when the capitalist model is under serious strain because of excess greed, lack of governance and transparency.

But in reality what is most useful and more important for the movement itself is to strive to improve standards of governance. You could draw a parallel with the NGO sector, where accountability and governance can sometimes be lacking because of an assumption that being “on the good side” excuses NGOs from such concerns.

Small organizations can do a lot to tackle corruption, but they should never underestimate the importance of having concrete measures that apply throughout an organization’s operations, from the leadership to the front line. Then you need political will behind those strong measures.

An organization will always take its lead from the tone set by its leaders. A top level commitment can begin with an anti-corruption statement and a public declaration of zero tolerance to corruption and fraud, signed by the CEO.

Compliance guidelines have become the norm in the business world. A recent Transparency International study of corporate transparency showed that two-thirds of the world’s biggest companies report on their anti-corruption programs, compared to half in 2009.

Smaller organizations like cooperatives can take part in this. Since their initial publication in 2003, the Business Principles for Countering Briberyhave been used by many leading companies around the world as a benchmark for their own anti-bribery policies and procedures. We have prepared an edition of these business principles specifically for SMEs.

At the end of the International Summit of Cooperatives, participants will be asked to adopt a Joint Declaration. What is the one essential component you think this declaration should include?

Adding transparency will help cooperatives maintain trust within their communities and will help them avoid corruption. We run offices that help citizens deal with corruption in fifty countries worldwide. We have seen cooperatives battle powerful interests who tried to take over their assets and we have seen companies pose as cooperatives to avoid taxes. Adding transparency as one of your principles would underpin your commitment to your other values.

Only a fifth of the businesspeople we surveyed did not think that they had an ethical duty to fight corruption, but we still need all the help we can get to change their minds!