11th_iacc_workshop_Corporate_Governance_for_Countering_Bribery.doc - Corporate Governance for Countering Bribery Controlling the Supply Side of


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Corporate Governance for Countering Bribery: Controlling the Supply Side of Corruption By Charles D. Adwan The Lebanese Transparency Association
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Corporate Governance for Countering Bribery: Controlling the Supply Side of Corruption Charles D. Adwan Executive Director The Lebanese Transparency Association I. Abstract As markets become more open and global, and business more complex, societies around the world are placing greater reliance on the private sector as the engine of economic growth. In both developed and developing nations, a growing proportion of economic activity takes place in firms organized as corporations. This presentation will revolve around the role of corporate governance initiatives in developing economies, exemplified by the current Corporate Governance program of the Lebanese Transparency Association. It will shed the light on the dynamics of corruption in the Lebanese private sector, and discuss possible ways of dealing with it. The specific situation of Lebanon, that might be common with other transitional economies, leads to a reverse strategy in tackling corporate governance. The absence of shareholders and the predominance of family owned SMEs facilitates addressing the issue of corruption first then moving into the internal corporate governance of firms. Thus corporate governance stops being a means to fight corruption, reducing corruption rather becomes a means to promote corporate governance. II. Presentation Corporate Governance and Globalization Globalization trends are currently enhancing the strength of market forces relative to that of governments, and in both developed and developing nations a growing proportion of economic activity is taking place in firms organized as corporations. Societies around the world are thus placing greater reliance on the private sector as the engine of economic growth, with privatization and liberalization movements constantly adding to the power of these corporations. Research has shown that corruption hinders a county’s ability to absorb the beneficial side of globalization, and makes it more vulnerable to its risks such as the increasing likelihood of currency crises. This high cost is translated by FDI flight or reduction. 1 The growing importance of the private sector has also raised concerns with the direction and control of these corporations. Following the Asian financial crisis, corporate governance came to the forefront of the international financial, and development policy agenda; and crises, such as in Russia, have moreover highlighted this issue. At the core of both the Asian and Russian crises were corporations and governments that failed to create a system of transparent, market based principles of business practices. The collapse of companies like Enron and Andersen last year, have brought furthermore to the fore the significance of good corporate governance. In the Arab region last year’s 1 Wei, Shnag-Jin, Why is Corruption so Crucial for Embracing Globalisation; in the Global Corruption Report 2001. Transparency International. P. 289 .
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