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The effect of corruption on business

By : Leigh Hartman.

 

In business, corruption can affect everything from licenses to contracts to lawsuits.

Corruption means that business deals often contain hidden prices, competition is not what it seems, and partnerships are chosen for the sake of expediency rather than quality. And, ultimately, if corruption is rampant there is no sure way to get a fair trial or other legal redress for abuse or cheating.

That’s why it’s important to have a strong, independent judicial system that roots out corruption, respects the rule of law and holds all parties equally accountable.

The world’s two largest economies, the United States and China, take radically different approaches to corruption.

Consider a ranking of 125 countries’ legal and political environments that affect business: The United States is 14th, while China is 52nd. The ranking is from the Property Rights Alliance, a Washington group.

 (State Dept./S. Wilkinson)

 

Predetermined outcomes

In the United States, the judiciary is independent. That means that it is not controlled by the executive branch (mayors, governors or the president), and court cases are not determined by politics.

By contrast, the 2017 United States Human Rights Reports found that in China, judges do not “exercise judicial power independently.” In fact, the report found, “judges regularly received political guidance on pending cases, including instructions on how to rule, from both the government and the CCP [Chinese Communist Party].”

In a country where the government owns many of the businesses, and high-ranking members of the Chinese Communist Party manage or direct large companies, this lack of judicial independence hurts investors who are not politically connected. The Human Rights Reports found that even where people won rulings against powerful entities, “court judgments often could not be enforced against powerful special entities, including government departments, state-owned enterprises, military personnel, and some members of the CCP.”

In the United States, inspectors general and special prosecutors fight against government corruption. But in China, the Human Rights Reports found, “corruption often influenced court decisions since safeguards against judicial corruption were vague and poorly enforced.”

Judicial independence and strong government safeguards against corruption matter because deals go bad, contracts get disputed, businesses go bankrupt. How the world’s largest economies address these conflicts is at the very heart of doing business.

 

© IENA-NEWS de 2018

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