Preventing corruption in state-owned enterprises

Preventing corruption in state-owned enterprises

In many countries crucial public services such as energy, water, transportation and health care to communities are provided by enterprises either controlled or partly-owned by governments. Known as state-owned enterprises (SOEs), they make up a significant proportion of many countries’ GDPs, especially in emerging markets, and are often a country’s largest employer.

It is the most vulnerable in communities that suffer most when public services are poorly delivered or are tainted by corruption. This makes it crucial that these enterprises operate with integrity, transparency and accountability.

Compared to other companies, SOEs have specific corruption risks because of their closeness to governments and public officials, and the scale of the assets and services they control. There are problems with conflicts of interest if governments give contracts to cronies; there can be problems with corruption if politicians believe they can use the money generated by SOEs for their own ends.

Some of the biggest recent corruption scandals across the world have involved SOEs.

For example, the Brazilian state oil company used public money to illegally fund political parties and accepted bribes from a cartel of construction companies. This led to economic, political and social damage. The Nordic telecoms giant was recently caught bribing for business in Uzbekistan, which resulted in fines of US$965 million.

Transparency International undertook research to highlight the most important ways SOEs can combat corruption. We involved SOEs, Transparency International chapters around the globe, academics and governance experts in a broad consultation process. 

The result is 10 Anti-Corruption Principles for State-Owned Enterprises, a guide to encourage and help enterprises controlled by governments to implement anti-corruption programmes based on the highest standards of integrity and transparency.

The most effective way for SOEs to combat corruption is through transparency. This is at the heart of the SOE principles. Because SOEs are owned by the public, they should be beacons of integrity. Unfortunately, this does not always seem to be the case.

Delia Ferreira Rubio Chair Transparency International

Transparency International will be working with SOEs and governments around the world to ensure that the principles are widely adopted. They are aligned to the Business Principles for Countering Bribery, which were launched by Transparency International in 2003 and have contributed significantly to shaping corporate anti-bribery practice.

The SOE principles also are designed to complement the work of the Organisation for Economic Co-operation and Development (OECD) on providing corporate governance and anti-corruption guidance to governments. 

Download a copy of 10 Anti-Corruption Principles for State-Owned Enterprises

Image: Copyright, iStockphoto

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