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Article Excerpt
Corruption is now a popular topic in the social sciences. This expansion of interest is evident in economics and elsewhere, where a large number of articles on this theme have been published in leading journals. Some organizations publish indicative data on corruption. For example, Transparency International publishes a widely cited "Corruption Perceptions Index" for most countries, and these data are frequently used in statistical analyses of economic performance.
Transparency International data for 2005 suggest that corruption is "rampant" in more than 70 countries. (1) These include populous and fast-growing economies such as China and India, which account for a large and rapidly increasing share of the global economy. Recent empirical studies indicate that corruption has a negative effect on economic performance (Shleifer and Vishny 1993; Mauro 1995; Aidt 2003; Jain 2001; Pelligrini and Gerlagh 2004). The World Bank (1997) has identified corruption as "the single greatest obstacle to economic and social development." (2)
However, much less attention so far, has been devoted to the concept of corruption, its meaning and its definition. This means much more than the lack of tidy terminology. As Arvind Jain (2001, 73) observes: "While it may appear to be a semantic issue, how corruption is defined actually ends up determining what gets modelled and measured." Similarly, Toke Aidt (2003, F623) remarks that "the definition of the concept determines what gets modelled and what empiricists look for in the data." It is argued here that this conceptual lacuna in the literature has led some authors--particularly economists--to adopt a narrow and inadequate definition of corruption that has led to skewed empirical measures and biased policy recommendations. (3)
It is shown below that prevailing definitions of corruption unwarrantedly and misleadingly confine the phenomenon to the public sector, despite the fact that private sector corruption is often acknowledged. In addition, the rare but real phenomenon of "noble cause corruption" suggests that corruption is not strictly and universally for private gain, despite selfish motives often being involved. Another distorting factor that pervades the literature on corruption is the utilitarian reduction of morality to matters of utility or satisfaction. Consequently, the moral dimension of corruption has been dissolved into the hedonic calculus of individual gain or loss. Ideological and theoretical biases, prevalent in mainstream economics and elsewhere, have corrupted the concept of corruption.
With the exception of the rhetorical allusion to the "corruption of economics," this article is concerned with organizational corruption, rather than corruption in a broader sense, such as the corruption of language or a single individual. The following section criticizes the idea that organizational corruption is confined to the public sector only. A much shorter subsequent section briefly establishes that corruption need not always be for private gain. Another section criticizes utilitarian treatments of corruption and establishes its immoral character, leading to a specific definition of organizational corruption involving the violation of established, normative rules. From this perspective it is argued in the penultimate section that organizational corruption incurs social costs that cannot fully be internalized.
Is Corruption Confined to the Public Sector?
The root of the word "corruption" is in the Latin adjective corruptus, meaning spoiled, broken or destroyed. According to the Concise Oxford English Dictionary, a meaning of to corrupt in the social context is to bribe, and corruption amounts to "moral deterioration." Neither of these definitions nor the Latin etymology of the word, confines the notion of corruption to the public sector. Accordingly, corruption can occur in the private sphere as well.
Prominent international organizations adopt a similarly inclusive definition of corruption. The United Nations Office on Drugs and Crime emphasizes that corruption "can occur in both the public and private domains." Its Global Programme Against Corruption (GPAC) defines corruption as the "abuse of power for private gain" and includes thereby both the public and private sector. (4) Similarly, the World Bank does not regard corruption as confined to the public sector and has identified several cases of corruption among private corporations. For Transparency International, corruption is operationally defined as "the misuse of entrusted power for private gain." (5) This too covers individuals in both the private and public sectors.
Among economists, however, a different consensus prevails. (6) In his overview article, Jain (2001, 73, emphasis added) declares "there is a consensus that corruption refers to acts in which the power of public office is used for personal gain in a manner that contravenes the rules of the game." In another major survey article in a journal of economics, Aidt (2003, F623, emphasis added) writes: "Corruption is an act in which the power of public office is used for personal gain in a manner that contravenes the rules of the game." (7)
The survey articles by Jain (2001) and Aidt (2003) accurately report and endorse the tendency of most economists to confine their definition of corruption to the public sphere. For example, in a widely cited article simply titled "Corruption," Andrei Shleifer and Robert Vishny (1993, 599) confine their attention to government corruption only, defining it as "the sale by government officials of government property for personal gain." The influential study of the negative effects of corruption on economic growth by Paolo Mauro (1995) has the unqualified word "corruption" in its title but in the text mentions government corruption only. Likewise, Daron Acemoglu and Thierry Verdier (2000) also have the unqualified word "corruption" in their title but in their analysis they confine themselves entirely to the corruption of government officials. Like many others, Daniel Treisman (2000, 399) defines corruption as "the misuse of public office for private gain." A. Mitchell Polinsky and Steven Shavell (2001) confine their study to corruption in law enforcement. By definition or default, many economists confine their attention to corruption in the public sector. There are exceptions, and there is some discussion of private sector corruption in the literature, but a pronounced and questionable bias remains.
A search for the phrase "corporate corruption" in the text of all the journals of economics in the large JSTOR (The Scholarly Journal Archive) electronic database of leading journals found only three articles in which the phrase was used, and none later than 1977. By contrast, a search in the same journals in the same database found 25 articles using the phrase "government corruption" and 9 using "public corruption." The search was then widened to all items on the ISI Web of Knowledge (http://isiwebofknowledge.com/), in all available disciplines. In the accessible text of 35.9 million items, 13 mentioned "corporate corruption," 22 mentioned "government corruption" and 8 mentioned "public corruption." This shows that the frequency of the phrase "corporate corruption," relative to the phrases concerning corruption in the public sector, is much less when the search is narrowed to leading journals in economics. Mainstream economists are much more likely to consider public sector rather than corporate corruption.
However, this dubious bias is not confined to journals in economics. An early and influential article by the political scientist Joseph Nye (1967, 419) defined corruption as the deviation from the formal duties of a public role for private gain. Subsequently, in one of the few articles devoted entirely to the definition of corruption in the literature, John Gardiner (1993, 112) proclaims approvingly without much reflection: "All probably would agree with Nye's emphasis on public roles." Similarly, Daniel Kaufmann (1997, 114) is also among the many social scientists who define corruption as "the misuse of public office for private gain." He is followed by Wayne Sandholtz and William Koetzle (2000, 31) and numerous others. Mark Warren (2004, 328-9) asks the question "what does corruption mean in a democracy?" and then immediately confines himself to political corruption and "the misuse of public office for private gain." The analysis in Susan Rose-Ackerman's (1999, 9) important and influential book is deliberately confined to government corruption, which is defined as payments "illegally made to public agents with the goal of obtaining a benefit or avoiding a cost."
Two logical bases of this questionable bias are possible. One is to define corruption in terms that confine it explicitly to the public sector. Another is to admit a broader definition, but for some reason to bias research toward corruption in the public sphere. Examples of both stances can be found in the literature. We also need to explain what motivates either form of this bias.
There is, of course, a huge and rapidly growing literature on business ethics, and moral issues are salient in the corporate governance literature and elsewhere. Often, other ethically loaded words are used instead of the term "corruption" in these literatures. Partly this is because of a concern with the ethical...
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