corruption in judiciary essay

Lessons From the Most Corrupt Judge in U.S. History

W e tend to think of our judges as black-robed monastics cloistered in their temples of justice, hermetically sealed off from worldly temptations. History teaches us this is not always so. Long before recent news reports about current U.S. Supreme Court Justices accepting gifts from private parties, a sordid and shocking case of judicial corruption–the worst in our nation’s history–unspooled in a downtown courtroom in Depression-era Manhattan. Though largely forgotten today, it serves as an enduring reminder that judges, too, are human.

Martin T. Manton was not just any judge. From 1918 to 1939, Manton served on the U.S. Court of Appeals for the Second Circuit, based in New York City. Even more so than today, New York then was the beating heart of the country’s commercial, financial, cultural, religious, and political life. This meant that the Second Circuit decided a disproportionate share of the country’s most consequential lawsuits. And it earned Manton, the court’s senior judge beginning in 1927, the informal title of “the tenth-ranking judge in the United States,” below only the nine Justices of the Supreme Court. A Columbia law graduate and the recipient of honorary degrees from five other universities, Manton came within a whisker of being appointed to the Supreme Court himself.

As if his day job weren’t enough, the prodigiously energetic jurist engaged in an impressive array of extrajudicial activities. Knighted by the Pope in 1924, he ranked as one of the top Catholic laymen in the United States. He was a leading proponent of international peace organizations such as the World Court. Unusually active for a judge in partisan politics, he is said to have played a key role in the behind-the-scenes maneuvering that led to Franklin Roosevelt’s first presidential nomination at the 1932 Democratic convention. On top of all this, he managed a small business empire out of his chambers, with extensive real estate holdings and interests in a variety of operating companies.

Less visibly, Manton operated a side business with a more unwholesome objective: cashing in on his status and power as a judge.

In literally dozens of cases, Manton solicited payments and “loans” (many never repaid) from litigants, or the lawyers representing them, in cases in the Second Circuit.  Invariably, he would then write the decision for the court finding in favor of the party that fattened his bank account.  In all, Manton raked in some $17 million (in today’s dollars) from his schemes.  His prosecutor fittingly dubbed him a “merchant of justice,” who systematically abused his judicial office for private gain on a scale unmatched by any federal judge before or since.

All sorts of legal controversies proved grist for Manton’s corruption mill: high-stakes patent infringement battles between business rivals, internecine corporate disputes between stockholders and corporate officers, a constitutional challenge mounted by railroad interests to New York’s longstanding nickel subway fare, federal criminal prosecutions. Manton deployed a network of fixers, bagmen, and front men who helped to identify sources of bribes, negotiate the terms, and conceal the proceeds inside a maze of opaque financial arrangements. He even enlisted the help of another federal judge to deliver promised judicial benefits in some cases.

Sometimes the bribe money was paid in cash, which Manton stuck in a safe he kept in his chambers in the federal courthouse. Sometimes the benefits flowed to Manton’s family members, as when an insurance broker hired by receivers appointed by Manton agreed to funnel kickbacks to the judge’s sister and niece. On one occasion a litigant financed the cost of a transatlantic voyage for Manton’s summer vacation.

Manton’s machinations in some ways merely reflected the Tammany Hall credo of “honest graft,” in George Washington Plunkitt’s famous phrase: the idea that public servants were expected and entitled to profit off their positions. In such a culture, there was no shortage of private actors willing to feed the judge’s greed, even at the highest echelons of the business and legal elite. Among the many litigants who stuffed Manton’s pockets were the nation’s largest cigarette manufacturer, its second largest maker of electric razors, the head of the Warner Brothers movie studio, and the biggest baby chick hatchery on the East Coast. Prominent Wall Street lawyers orchestrated, facilitated, or closed their eyes to these illicit payments, including a Columbia law school classmate of Manton who was disbarred for his actions, and Thomas Chadbourne, founder of the venerable Chadbourne Parke law firm and one of the most influential lawyers of the era.

Read More: Sachems And Sinners, An Informal History of Tammany Hall

Even more disturbingly, Manton’s confederates included the underworld forces who, in tandem with the Tammany Hall political machine, ruled much of New York in the 1930s. As revealed in previously undisclosed FBI files, Manton fraternized with racketeers and accepted large loans and gifts from such unsavory sources. Compelling evidence shows that the two most notorious gangsters of the era, Louis “Lepke” Buchalter and Jacob “Gurrah” Shapiro, arranged a payoff to Manton to secure their release on bail – whereupon they promptly began assassinating the witnesses against them. “He’s the only federal judge left in New York we can use to get people out of jail,” Tammany Hall boss and underworld ally Jimmy Hines reportedly said of Manton.

Today the risk of “another Manton” has been lessened by stringent financial disclosure requirements and ethical standards governing federal judges (though those standards are not binding on Supreme Court Justices). But criminal laws and canons of judicial ethics existed in Manton’s day too, and he nearly escaped accountability. Reports of his corruptibility had made their way to the FBI years earlier and were dutifully passed on by FBI Director J. Edgar Hoover to senior officials in FDR’s Justice Department, where they inexplicably languished. It took an enterprising reporter for the anti-Tammany New York World-Telegram to bring Manton’s misdeeds to light, aided by Manhattan District Attorney Thomas E. Dewey, who publicly released the findings of a probe by his office into Manton’s activities. At that point the Justice Department had no choice but to open its own investigation. In June 1939, after a trial in the very federal courthouse where he had once reigned supreme, a jury found Manton guilty. He was sentenced to two years in prison.

To the end, Manton insisted he’d done nothing wrong, because he would have ruled the same way regardless of the lucre bestowed by litigants. The appeals court that upheld his conviction emphatically disagreed, declaring that “judicial action, whether just or unjust, is not for sale” and warning that if Manton’s argument were sustained, “the event will mark the first step toward the abandonment of that imperative requisite of even-handed justice”: that “the judge must be perfectly and completely independent.” Words worth heeding in any era.

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Events, news & press, judicial corruption in developing countries: its causes and economic consequences.

Many scholars have provided path-breaking contributions to the institutional analysis of systemic and systematic corruption. Descriptive studies focusing on corrupt practices and on the impact of corruption on economic development are abundant. Yet the literature has not yet isolated the main legal, organizational, and market-related causes of systemic corruption within the public sector in general and within the judiciary in particular.

This essay proposes a framework within which the institutional analysis of corrupt activities within the judiciary can be further understood in developing countries. First, an approach to the study of public sector corruption based on science, not on guesswork or intuition, must be verifiable if we are to develop reliable anticorruption policy prescriptions. Therefore, legal, economic, and organizational factors are proposed here to explain corruption within the judicial sectors of developing countries. Second, the economic theory of corruption should recognize that official corruption is a significant source of institutional inertia in public sector reforms. An account of the private costs and benefits of judicial reforms as perceived by public officials is also considered in this study.

The law and economics of development focuses its attention on the effects that well-functioning legal and judicial systems have on economic efficiency and development. Adam Smith states in his Lectures on Jurisprudence that a factor that "greatly retarded commerce was the imperfection of the law and the uncertainty in its application" (Smith, 528). Entrenched corrupt practices within the public sector (i.e., official systemic corruption) hamper the clear definition and enforcement of laws, and therefore, as Smith (1978) stated, commerce is impeded.

Systemic corruption within the public sector can be defined as the systematic use of public office for private benefit that results in a reduction in the quality or availability of public goods and services (Buscaglia 1997a). In these cases, corruption is systemic when a government agency only supplies a public good or service if an otherwise unwilling transfer of wealth takes place from an individual or firm to the public sector through bribery, extortion, fraud, or embezzlement.

Rose-Ackerman (1997, 5) states that "widespread corruption is a symptom that the state is functioning poorly." In fact, the entrenched characteristic of official corrupt practices is rooted in the abuse of market or organizational power by public sector officials (Buscaglia 1997a, 277). Many studies have already shown that the presence of perceived corruption retards economic growth, lowers investment, decreases private savings, and hampers political stability (Maoro 1995; Schleifer and Vishny 1993). Moreover, foreign direct investment has demonstrated a special negative reaction to the presence of corruption within the public sectors in developing countries (Leiken 1996); Lambsdorff (1998) shows that the degree of corruption in importing developing countries also affects the trade structure of exporting countries.

Many scholars have provided path-breaking contributions to the economic analysis of corruption. Studies focusing on describing corrupt practices and on analyzing the impact of corruption on economic development are abundant. Low compensation and weak monitoring systems are traditionally considered to be the main causes of corruption. In Becker-Stigler (1974) and Klitgaard (1991), official corruption through bribery of public officials reduces the expected punishment faced by potential criminals and thus hampers deterrence. In this context, increasing the salaries of public enforcers or paying private enforcement agencies for performance or both would tend to improve the quality of enforcement.

Rose-Ackerman (1978), Macrae (1982), Shleifer and Vishny (1993), and Maoro (1995) provide alternative approaches to the economic analysis of corruption. In those studies, corruption is considered to be a behavioral phenomena occurring between the state and the market domains. In all cases, they assume that people and firms respond to incentives by taking into account the probability of apprehension and conviction and the severity of punishment (Becker 1993). Of course, in all those studies, ethical attitudes matter. The economic analysis of corruption stresses, however, that, to a lesser or greater degree, people respond to incentives.

The existence of official corruption distorts market systems by introducing uncertainty in social and economic interactions (Andvig 1991). Moreover, official corruption is an essential input for the growth of organized criminal groups with the capacity to pose a significant international security threat through the illicit traffic of, among other things, narcotics, nuclear, chemical, and biological materials, alien smuggling, and international money-laundering operations (Leiken 1996).

The literature mentioned above provides an outstanding overview of the social situations associated with entrenched corruption within the public sectors. But an economic theory of corruption must contain more than just an account of the general situations enhancing corrupt practices. Therefore, in order to develop reliable anticorruption policies, it is necessary to go beyond the simply descriptive and symptomatic studies of official corruption by focusing on the search for scientifically tested causes of corrupt practices in specific institutions within the public sector. Although all the above studies have made path-breaking contributions to the economic analysis of corruption, the literature has not yet isolated or empirically tested the main legal, organizational, and economic causes of corruption within specific public sector institutions.

This essay advances a review of the causes of corruption within the judiciary in developing countries. First, corruption within the judiciary (e.g., paying a bribe to win a case) has a profound impact on the average citizen's perception of social equity and on economic efficiency (Buscaglia 1997b). The individual's judgment of how equitable the social environment is must be incorporated into the long-term impact of corruption on efficiency. Second, a scientific approach to the study of corruption must be empirically verifiable if we are to develop reliable public policy prescriptions in the fight against official corruption (a review of the latest findings in this area follows). Third, the economic theory of corruption should recognize that official corruption is a significant source of foot-dragging or institutional inertia in public sector and market reforms in developing countries. An account of the private costs and benefits of state reforms as perceived by public officials must also be considered in those cases.

T HE M AIN C AUSES OF C ORRUPTION WITHIN THE J UDICIARIES IN D EVELOPING C OUNTRIES

A scientific approach to the analysis of corruption is a necessary requirement in the fight against any social ill. Corruption is no exception. Systemic corruption deals with the use of public office for private benefit that is entrenched in such a way that, without it, an organization or institution cannot function as a supplier of a good or service. The probability of detecting corruption decreases as corruption becomes more systemic. Therefore, as corruption becomes more systemic, enforcement measures of the traditional kind affecting the expected punishment of committing illicit acts become less effective and other preventive measures, such as organizational changes (e.g., reducing procedural complexities in the provision of public services), salary increases, and other measures, become much more effective. The growth and decline of systemic corruption is also subject to laws of human behavior. We must better define those laws before implementing public policy. For this purpose we must

• Formulate a policy claim (e.g., administrations with high concentrations of organizational power in the hands of few public officials with no external auditing systems are prone to corrupt behavior)
• Formulate a logical explanation of a policy claim (e.g., why higher concentrations of organizational power and corrupt behavior go hand in hand)
• Gather information to support or disprove the claim
• Design public policies based on the findings

In this context, in order to design public policies in the fight against corruption, it is necessary to build a data base with quantitative and qualitative information related to all the factors thought to be related to certain types of systemic corrupt behavior (embezzlement, bribery, extortion, fraud, etc.). For example, the World Bank is currently assembling a data base of judicial systems worldwide (Buscaglia and Dakolias 1999) that covers those factors associated to relative successes in the fight for an efficient judiciary.

International experience shows that specific macropolicy actions are associated with the reduction in the perceived corruption in countries ranging from Uganda to Singapore, from Hong Kong to Chile (Kaufmann 1994). These actions include lowering tariffs and other trade barriers; unifying market exchange and interest rates; eliminating enterprise subsidies; minimizing enterprise regulation, licensing requirements, and other barriers to market entry; privatizing while demonopolizing government assets; enhancing transparency in the enforcement of banking, auditing, and accounting standards; and improving tax and budget administration. Other institutional reforms that hamper corrupt practices include civil service reform, legal and judicial reforms, and the strengthening and expansion of civil and political liberties. Finally, there are the microorganizational reforms, such as improving administrative procedures to avoid discretionary decision making and the duplication of functions, while introducing performance standards for all employees (related to time and production); determining salaries on the basis of performance standards; reducing the degree of organizational power of each individual in an organization; reducing procedural complexity; and making norms, internal rules, and laws well known among officials and users (Buscaglia and Gonzalez Asis 1999).

Sequencing the Design of Anticorruption Policies

The following steps are recommended in the design of anticorruption policies:

• Perform a diagnostic analysis within a country identifying, within a priority list, the main institutional areas where sys[chtemic corruption arises. This identification must be conducted through surveys of users of government services, businesses, or taxpayers. The survey should be applied to each government institution (e.g., customs, judiciary, tax agencies, and others).
• Once a priority list of areas subject to systemic corruption is derived, develop a data base for each of these institutions containing objective and subjective measures of corruption (e.g., reports of corruption, indictments related to fraud, embezzlement, extortion, or bribery in that agency, prices charged by the agency) and other variables that are thought to explain corruption. Gather information on procedural times in the provision of government services; users' perceptions of efficiency, effectiveness, corruption, and access related to that agency; procedural complexity in the provision of services; and so on.
• Conduct a statistical analysis clearly identifying the factors causing corruption in a specific government agency. Identify whether any of the economic, institutional, and organizational factors mentioned above are related to corruption.
• Once the diagnostic and identification stages are complete, civil society should become involved in implementating and monitoring the anticorruption policies. The action plan should be developed through consensus between civil society and government and contain problems, solutions, deadlines for implementation of solutions, and expected results.

This approach has been applied at the judicial and municipal levels in many countries with significant results (Buscaglia and Dakolias 1999). Those cases used the following steps: First, a survey was conducted of those users applying for specific permits from their local government (county office, in Venezuela). Those users were interviewed just after finishing the application procedure and were asked to rank the efficiency, effectiveness, level of access, quality of information received, and corruption in the administrative procedure used to obtain construction and industrial license permits. Next, numerical and qualitative data were gathered to identify those variables affecting the public's responses to the survey by applying statistical analyses. The results of this diagnostic study were then shared with representatives of civil society and local government at a workshop. In this workshop, representatives of civil society and local government could agree or disagree with the results.

Once the civil society and the government agreed on the nature of the problems, a technical empirical study conducted by the interdisciplinary team focused on how to reduce corruption and increase efficiency in those areas (e.g., issue of permits) covered by the diagnostic study. This technical study, which identified the mechanisms to reduce corruption and increase efficiency/effectiveness, was later discussed, understood, and accepted by members of the civil society and local government. Civil society was able to devise mechanisms for monitoring the implementation of reforms with deadlines included. The results of implementing these reforms must be measured months after the implementation stage has been completed through another survey of users applying for those same type of permits. The actual results were then compared with the expected results, previously defined as goals by civil society groups. Those experiences show that the implementation of any anticorruption campaign must be based on sound multidisciplinary scientific principles applied by researchers, practitioners, and civil society. Only a multidisciplinary approach specifying methodology, data, a scientific analysis of what works and what does not work, and, finally, a well-specified sequencing of policy steps as mentioned above can establish a solid policy consensus in the fight against systemic corruption.

Scholars have already recognized the advantages of going beyond the analysis of the impacts of corruption on economic growth and investment, and some have stated the urgent need to isolate the structural features that create corrupt incentives (Rose-Ackerman 1997). But only general situations within which corruption may arise have been identified in the literature. These situations are neither overlapping nor exhaustive. A rigorous analysis, however, of the corruption-enhancing factors within the courts has been unexplored in the literature. The need to develop an empirically testable anticorruption policy in the courts is necessary to incorporate the study of corruption into the mainstream of social science.

The empirical frameworks first introduced by Buscaglia (1997a) to Ecuador and Venezuela and by Buscaglia and Dakolias (1999) to Ecuador and Chile explain the yearly changes in the reports of corruption within first-instance courts dealing with commercial cases. That work shows that specific organizational structures and behavioral patterns within the courts in developing countries make them prone to the uncontrollable spread of systemic corrupt practices. For example, their work finds that the typical Latin American court provides internal organizational incentives toward corruption. A legal and economic analysis of corruption should be able to detect why the use of public office for private benefit becomes the norm. In theory, most developing countries possess a criminal code punishing corrupt practices and external auditing systems within the courts for monitoring case and cash flows. Even if they function properly, however, those two mechanisms would not be enough to counter the presence of systemic corruption in the application of the law. Other dimensions need to be addressed.

Specific and identifiable patterns in the administrative organization of the courts, coupled with a tremendous degree of legal discretion and procedural complexities, allow judges and court personnel to extract additional illicit fees for services rendered. Buscaglia (1997a) also finds that those characteristics fostering corrupt practices are compounded by the lack of alternative mechanisms to resolve disputes, thus giving the official court system a virtual monopoly. More specifically, according to Buscaglia (1998) and Buscaglia and Dakolias (1999), corrupt practices are enhanced by (1) internal organizational roles concentrated in the hands of a few decision makers within the court (e.g., judges concentrating a larger number of administrative and jurisdictional roles within their domain); (2) the number and complexity of the procedural steps coupled with a lack of procedural transparency followed within the courts; (3) great uncertainty related to the prevailing doctrines, laws, and regulations (e.g., increasing inconsistencies in the application of jurisprudence by the courts due to, among other factors, the lack of a legal data base and defective information systems within the courts); (4) few alternative sources of dispute resolution; and, finally, (5) the presence of organized crime groups (e.g., drug cartels), that, according to Gambetta (1993), demand corrupt practices from government officials.

These five factors associated with corrupt practices provide a clear guideline for public policy making. Developing countries such as Chile and Uganda that have enacted a simple procedural code while introducing alternative dispute resolutions have witnessed a reduction in the reports of court-related corruption. Moreover, the success stories of Singapore and Costa Rica show that corruption has been reduced by creating specialized administrative offices supporting the courts in matters related to court notifications, budget and personnel management, cash and case flows. These administrative support offices that were shared by many courts have decentralized administrative decision making while reducing the previously high and unmonitored concentration of organizational tasks in the hands of judges (Buscaglia 1997a).

C ORRUPTION AND I TS L ONG- T ERM I MPACT ON E FFICIENCY AND E QUITY

Some scholars have observed that official corruption generates immediate positive results for the individual citizen or organization who is willing and able to pay the bribe (Rosenn 1984). For example, Rose-Ackerman (1997) accepts that "payoffs to those who manage queues can be efficient since they give officials incentives both to work quickly and favor those who value their time highly." She further states that, in some restricted cases, widely accepted illegal payoffs need to be legalized (Rose-Ackerman 1997). This statement, however, disregards the effects that present entrenched corruption has on people's perception of social equity and on long-term efficiency. The widespread effects of corruption on the overall social system have a pernicious effect on efficiency in the long run. To understand this effect, an economic theory of ethics needs to be applied to the understanding of the long-term effects of corruption on efficiency.

The average individual's perception of how equitable a social system is has a pronounced effect on that individual's incentives to engage in productive activities (Buscaglia 1997a). The literature has delved into many of the negative impacts that corruption has on the efficient allocation of resources. Yet previous work does not pay attention to the effects that corruption has on the individual's perception of how equitable a social system is. First, in all developing countries, a vast majority of the population is not able to offer illicit payoffs to government officials, even when they are willing to do so (Buscaglia 1997a), and, second, legalizing illicit payoffs may have no impact on social behavior in societies where most social interactions are ruled not by modern laws but by multiple layers of customary and religious codes of behavior.

A significant impact of corruption on future efficiency is the effect that official corrupt practices have on the average citizen's perception of social equity. Homans (1974) shows that, in any human group, the relative status given to any member is determined by the "group's perception" of the member's contribution to the relevant social domain. Homans further states that changes in the relative wealth-related status of an individual member without a perceived change in his social contribution will face open hostility by the other members of society (e.g., envy may generate retaliation and destruction of social wealth). Therefore, within Homans's view, in cases of corrupt practices, a "socially unjustified" increase in the wealth-related status of those who offer and accept bribes represents a violation of the average citizen's notion of what constitutes an "equitable hierarchy" of status within society.

Homans's theory of ethics can be applied to the understanding of the effects of official systemic corruption on efficiency over time. Those members of society who are neither able nor willing to supply illicit incentives will be excluded from the provision of any "public good" (e.g., court services). In this case, even though corruption may remove red tape for those who are able and willing to pay the bribe, the provision of public services becomes inequitable in the perception of all of those who are excluded from the system due to their inability or unwillingness to become part of a corrupt transaction. This sense of inequity has a long-term effect on social interaction. Systemic official corruption promotes an inequitable social system where the allocation of resources is perceived to be weakly correlated to generally accepted rights and obligations. Buscaglia (1997a) shows that a "perceived" inequitable allocation of resources hampers the incentives to generate wealth by those who are excluded from the provision of basic public goods. The average citizen, who cannot receive a public service due to his inability to pay the illegal fee, ceases to demand the public good from the official system (Buscaglia 1997a). On many occasions, the higher price imposed by corrupt activities within the public sector forces citizens to seek alternative community-based mechanisms to obtain the public service (e.g., alternative dispute resolution mechanisms such as neighborhood councils). These community-based alternative private mechanisms, however, do not have the capacity to generate precedents in certain legal disputes affecting all society (e.g., human rights violations or constitutional issues) like the state's court system does. Hernando de Soto's account of these community-based institutions in Peru attests to the loss in a country's production capabilities owing to the high transaction costs of access to public services (de Soto 1989).

One may initially think that, by eliminating bureaucratic red tape, the payment of a bribe can also enhance economic efficiency. This is a fallacy, however, because corruption may benefit the individual who is able and willing to supply the bribe. As described above, however, the social environment is negatively affected by diminishing economic productivity over time becaue of the general perception that the allocation of resources is determined more by corrupt practices and less by productivity and, therefore, is inherently inequitable. This creates an environment where individuals, in order to obtain public services, may need to start seeking illicit transfers of wealth to the increasing exclusion of productive activities. In this respect, present corruption decreases future productivity, thereby reducing efficiency over time.

C ORRUPTION AND I NSTITUTIONAL I NERTIA

When designing anticorruption policies within the legal and judicial domains, we must take into account not only the costs and benefits to society of eradicating corruption in general but also the changes in present and future individual benefits and costs as perceived by public officials whose illicit rents will tend to diminish due to anticorruption public policies. Previous studies argue that institutional inertia in enacting reforms stems from the long-term nature of the benefits of reform in the reformers' mind, such as enhanced job opportunities and professional prestige (Buscaglia, Dakolias, and Ratliff 1995). These benefits cannot be directly captured in the short term by potential reformers within the government. Contrast the long-term nature of these benefits with the short-term nature of the main costs of reform, notably, a perceived decrease in state officials' illicit income. This asymmetry between short-term costs and long-term benefits tends to block policy initiatives related to public sector reforms. Reform sequencing, then, must ensure that short-term benefits compensate for the loss of rents faced by public officers responsible for implementing the changes. In turn, reform proposals generating longer-term benefits to the members of the court systems need to be implemented in later stages of the reform process (Buscaglia, Ratliff, and Dakolias 1996).

For example, previous studies of judicial reforms in Latin America argue that the institutional inertia in enacting reform stems from the long-term nature of the benefits of reform, such as increasing job stability, judicial independence, and professional prestige. Contrast the long-term nature of those benefits with the short-term nature of the main costs of judicial reform to reformers (e.g., explicit payoffs and other informal inducements provided to court officers). This contrast between short-term costs and long-term benefits has proven to block judicial reforms and explains why court reforms, which eventually would benefit most segments of society, are often resisted and delayed (Buscaglia, Dakolias, and Ratliff 1995). In this context, court reforms promoting uniformity, transparency, and accountability in the process of enforcing laws would necessarily diminish the court personnel's capacity to seek extra income through bribes. Reform sequencing, then, must ensure that short-term benefits to reformers compensate for the loss of illicit rents previously received by court officers responsible for implementing the changes. That is, initial reforms should focus on the public officials' short-term benefits. In turn, court reform proposals generating longer-term benefits need to be implemented in the later stages of the reform process.

Additional forces also enhance the anticorruption initiative. We usually observe that periods of institutional crisis come hand in hand with a general consensus among public officials to reform the public sector. For example, within the judiciary, a public sector crisis begins at the point where backlogs, delays, and payoffs increase the public's cost of accessing the system. When costs become too high, people restrict their demand for court services to the point where the capacity of judges and court personnel to justify their positions and to extract illicit payments from the public will diminish. At that point court officials increasingly embrace reforms in order to keep their jobs in the midst of public outcry (Buscaglia, Dakolias, and Ratliff 1996, 35). At this point, the public agency would likely be willing to conduct deeper reforms during a crisis as long as reform proposals contain sources of short-term benefits, such as higher salaries, institutional independence, and increased budgets.

It comes as no surprise, then, that those developing countries undertaking judicial reforms have all experienced a deep crisis in their court system, including Costa Rica, Chile, Ecuador, Hungary, and Singapore (Buscaglia and Dakolias 1999). In each of these five countries, additional short-term benefits guaranteed the political support of key magistrates who were willing to discuss judicial reform proposals only after a deep crisis threatened their jobs (Buscaglia and Ratliff 1997). Those benefits included generous early retirement packages, promotions for judges and support staff, new buildings, and expanded budgets.

Nevertheless, to ensure lasting anticorruption reforms, short-term benefits must be channeled through permanent institutional mechanisms capable of sustaining reform. The best institutional scenario is one in which public sector reforms are the by-product of a consensus involving the legislatures, the judiciary, bar associations, and civil society. Keep in mind, however, that legislatures are sometimes opposed to restructuring the courts in particular and other public institutions in general from which many of the members of the legislature also extract illicit rents.

This essay has provided a review of the most recent literature related to the economic causes of entrenched corruption within the public sector in general and particularly within the court systems in developing countries. This study stresses the need to develop scientific explanations of corruption containing objective and well-defined indicators of corrupt activities. Along these lines, this essay proposes that the joint effects of organizational, procedural, legal, and economic variables are able to explain the occurrence of corruption within the courts in developing countries.

Additionally, this essay describes how equity considerations by individuals affect long-term efficiency. Social psychologists could shed more light in future studies linking the impact of corruption on equity and efficiency. Finally, in order to understand and neutralize institutional inertia during anticorruption reforms, all future studies must incorporate the identification of those costs and benefits that are relevant to those who reform public sector institutions and are responsible for implementing new anticorruption policies.

The main question to be asked in the development of any anticorruption public policy approach is how to generate public policies based on sound and scientific principles that at the same time can be accepted and adopted by civil society and the public sector alike? The answer to this question is a necessary condition to developing a still absent international public policy consensus in the fight against corruption.

Andvig, Jens Christopher. 1989. "Korrupsjon i Utviklingsland" (Corruption in developing countries). Nordisk Tidsskrift for Politisk Ekonomi (Northern journal in political economy) 23: 51-70.

Becker, Gary. 1993. "Nobel Lecture: The Economic Way of Thinking about Behavior." Journal of Political Economy 108: 234-67

Becker, Gary, and George Stigler. 1974. "Law Enforcement, Malfeasance, and Compensation of Employees." Journal of Legal Studies 3: 1-18

Buscaglia, Edgardo. 1997a. "Corruption and Judicial Reform in Latin America." Policy Studies Journal 17, no 4: 273-95.

------. 1997b. "An Economic Analysis of Corrupt Practices within the Judiciary in Latin America." In Claus Ott and Georg Von Waggenheim, eds., Essays in Law and Economics V. Amsterdam: Kluwer Press.

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Buscaglia, Edgardo, and Maria Dakolias. 1999. "Comparative International Study of Court Performance Indicators: A Descriptive and Analytical Account." Legal and Judicial Reform Unit Technical Paper. The World Bank.

------. 1996. A Quantitative Analysis of the Judicial Sector: The Cases of Argentina and Ecuador . World Bank Technical Paper No 353. Washington D.C.: World Bank.

Buscaglia, Edgardo, Maria Dakolias, and William Ratliff. 1995. Judicial Reform in Latin America: A Framework for National Development . Essays in Public Policy. Stanford: Hoover Institution.

Buscaglia, Edgardo, and Thomas Ulen. 1997. "A Quantitative Assessment of the Efficiency of the Judicial Sector in Latin America." International Review of Law and Economics 17, no 2.

Bussani, Mauro, and Ugo Mattei. 1997. "Making the Other Path Efficient: Economic Analysis and Tort Law in Less Developed Countries." In Law and Economics of Development , ed. Edgardo Buscaglia, William Ratliff, and Robert Cooter. Greenwich, Conn.: JAI Press.

Cooter, Robert. 1996. "The Rule of State Law and the Rule-of-Law State: Economic Analysis of the Legal Foundations of Development." In Law and Economics of Development , ed. Buscaglia, Ratliff, and Cooter.

de Soto, Hernando. 1989. The Other Path . New York: Harper and Row.

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Klitgaard, Robert. 1991. Adjusting to Reality: Beyond State versus Market in Economic Development . San Francisco: ICS Press.

Lambsdorff, Johann Graf. 1998. "An Empirical Investigation of Bribery in International Trade." European Journal of Development Research 10, no. 1 (June): 18-34.

Leiken, Robert S. 1996, "Controlling the Global Corruption Epidemic." Foreign Policy 5: 55-73.

Macrae, J. 1982. "Underdevelopment and the Economics of Corruption: A Game Theory Approach." World Development 10, no. 8: 677-87.

Mauro, Paolo. 1995. "Corruption and Growth." Quarterly Journal of Economics 110: 681-711

Ratliff, William, and Edgardo Buscaglia. 1997. "Judicial Reform: The Neglected Priority in Latin America." Annals of the National Academy of Social and Political Science 550: 59-71.

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Corruption in Our Courts: What It Looks Like and Where It Is Hidden

Volume 133’s emerging scholar of the year: robyn powell, announcing the eighth annual student essay competition, announcing the ylj academic summer grants program.

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A Handful of Unlawful Behaviors, Led by Fraud and Bribery, Account for Nearly All Public Corruption Convictions Since 1985

A comprehensive analysis of nearly 57,000 corruption cases in federal courts spanning 30 years revealed that fraud and bribery dominated the types of conduct underlying criminal cases, accounting for 76% of the lead charges in cases resulting in convictions. Those two unlawful behavior types, combined with extortion and conspiracy, broadly informed the lead charges in virtually all examined corruption convictions in federal courts from 1985 to 2015.

That was a key finding of a case records study by a research team led by Jay S. Albanese of Virginia Commonwealth University. The purpose of the study, sponsored by the National Institute of Justice (NIJ), was to fill a literature gap with empirically based knowledge of prosecution practices, corruption-fighting statutes, and types of behavior underlying prosecutions. New insights on corrupt behavior could inform new policies to prevent some corrupt conduct and discover some corrupt acts earlier. [1] The findings may also help the justice system focus crime prevention and enforcement strategies on those behaviors most often associated with criminal prosecution, and distinguish among types of corruption more likely to occur at the federal, state, or local level, the researchers said. [2]

All of the corruption case records examined came from federal courts, accessed in court and prosecutor databases, and the researchers compared cases in three different tiers: federal-level, state-level, and local-level corruption.

Corruption Crime Types Vary Among Government Levels 

Fraud was the focus of corruption charges in 40.6% of all analyzed cases, with bribery accounting for the lead charge in 35.6% of cases. [3] But the prevalence of charged conduct categories varied somewhat depending on the level of government activity addressed in the prosecution. In federal-level corruption litigation, the first-charged conduct was fraud in 5,579 of 12,663 cases (44.1%) and bribery in 5,129 cases (41%). Similarly, in state-level cases, lead fraud charges outnumbered lead bribery charges, 1,112 cases (29.3%) to 1,070 (28%), out of a total of 3,792 state-level convictions. But in local-government corruption matters, lead bribery charges exceeded lead fraud charges, 2,421 cases (34%) to 2,051 (29%), out of 7,090 total convictions.

Extortion charges were a distant third among lead charges in federal- and local-level corruption cases in federal court, but extortion led all crime types charged in state-level matters. In those cases, extortion led fraud by 1,156 to 1,112 charge types (30% to 29%), with bribery trailing slightly at 1,070 (28%), out of the total of 3,792 state-level corruption charge types.  

Together, the four prevalent categories of corrupt behavior — fraud, bribery, and extortion, along with conspiracy — “form the operational meaning of corruption in practice,” the researchers concluded. [4]

Drilling down, the team identified eight discrete corrupt activities, covering all public corruption, through a closer analysis of about 2,400 cases from 2013 to 2015. Those eight activities are: [5]

• Receipt of a bribe
• Solicitation of a bribe
• Contract fraud
• Embezzlement
• Official misconduct
• Obstruction of justice
• Violation of regulatory laws

The researchers noted a nexus between heightened corruption risk and public service at the state and, especially, local levels. They pointed out that public officials serving on government boards and councils, as well as in elected office and law enforcement positions, were often employed part time, undertrained, and undersupervised. The report on corrupt behavior types said that the “lack of professionalism” in the public officials’ roles and expectations “provided the space to exploit opportunities to enrich themselves.” [6]

Remedies for Corruption

The researchers propose several corruption remedies, including: [7]

• Transparency in contract award processes and government spending practices.
• Dual training of individuals on public duties to avoid having a single person authorizing and reviewing payments.
• Introducing mandatory ethics training for government entities.
• Better protections for whistleblowers.
• A focus on fairness in prosecutions.
• Mandatory ethics training for federal programs and state and local entities.

What Motivated Corruption?

A separate aspect of the research by Albanese and his colleagues was an empirical analysis of corruption defendants’ criminal motivation broken down into four categories: [8]

Positive — motivated by external factors, usually social or economic, that push the individual toward crime. An assumption underlying this explanation is that changing the influences on individuals will prevent crime.

Classical — an individual decision to maximize personal benefit through corrupt conduct; it can be deterred by increasing the threat of apprehension and punishment.

Structural — driven by systemic political and economic conditions; it can be deterred by legal and structural changes to election processes, balance of power, enforcement of laws, and due process. 

Ethical — guided by individual decisions to act ethically or wrongfully; it can be deterred by education and reinforcement of ethical decisions.

For the corruption motivation analysis, researchers interviewed 72 individuals who have direct experience, in different capacities, with a variety of public corruption matters, [9] The themes that were discussed informed the coding of the interviews, and qualitative analysis software completed the evaluation.

Of the four corruption cause categories, ethical explanations led, at 38% of total explanations gleaned from the interviews and analysis; 28% offered a structural explanation; 19% offered a classical explanation; and 15% offered a positivist explanation.

About This Article

The research described in this article was funded by NIJ grant 2015-IJ-CX-0007, awarded to Virginia Commonwealth University. This article is based on three reports: the grantee Final Summary Overview on the project, “ Developing Empirically-Driven Public Corruption Prevention Strategies ” (2018), Jay S. Albanese, principal investigator; and two published articles, also written by members of the research team:

• Jay S. Albanese, Kristine Artello, and Linh Thi Nguyen, “ Distinguishing Corruption in Law and Practice: Empirically Separating Conviction Charges from Underlying Behaviors ,” Public Integrity 21 no. 1 (2019): 22-37.
• Jay Albanese and Kristine Artello, “Focusing Anti-Corruption Efforts More Effectively: An Empirical Look at Offender Motivation—Positive, Classical, Structural and Ethical Approaches,” Advances in Applied Sociology 8 no. 6 (2018): 471-485.

[note 1] , [note 2] , [note 3] , [note 6] , [note 7] Jay S. Albanese, Kristine Artello, and Linh Thi Nguyen, “Distinguishing Corruption in Law and Practice: Empirically Separating Conviction Charges from Underlying Behaviors,” Public Integrity 21 no. 1 (2019): 25.  

[note 4] , [note 5] Jay Albanese, “Final Summary Overview: Developing Empirically-Driven Public Corruption Prevention Strategies,” Final Report to the National Institute of Justice, grant number 2015-IJ-CX-0007, 2018, 4.

[note 8] , [note 9] Jay Albanese and Kristine Artello, “Focusing Anti-Corruption Efforts More Effectively: An Empirical Look at Offender Motivation—Positive, Classical, Structural and Ethical Approaches,” Advances in Applied Sociology 8 no. 6 (2018): 471-485, at 478. 

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Corruption in the Judiciary: Balancing Accountability and Judicial Independence

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Susan Rose-Ackerman

Scott Stafne

A non-corrupt judiciary is a fundamental condition for the endorsement of rule of law and the ability to guarantee basic human rights in society. The judiciary must therefore be an independent and fair body that fights corruption, not the other way around. This essay systematizes different binding and non-binding international, and to some extent regional, norms and standards regarding corruption in the judiciary and judicial independence, and presents potential factors and effects of judicial corruption, through an inventory of documents recognized by organizations such as the United Nations and the Council of Europe. Further, the essay presents different anti-corruption strategies and the dilemma of implementing such strategies with regard to judicial independence. The advantages and disadvantages of different anti-corruption strategies are reviewed through the study of some successful and unsuccessful examples. There are several definitions of corruption, this essay emanates from the definition of ‘abuse of office for personal or private gain’, a definition that is wide but yet well recognized. The factors of judicial corruption are many and often overlapping, but they vary from state to state and must hence be analyzed individually to find the factual reasons for what generates corruption. The effects are detrimental and break down the very core of rule of law and corrupt judges neglect fundamental principles such as equality, impartiality, propriety and integrity. With regard to the different factors and effects, the norms and standards, and the anti-corruption strategies, a discussion follows about how to rid the judiciary from corruption with preservation of the respect of judicial independence. The discussion also raises the predicament that malpractice of various fundamental principles e.g. judicial independence can occur and further distort unhealthy judiciaries. The main conclusion regarding anti-corruption strategies is that they must be carefully weighed against the principle of independence.

Dr. Marcos Iglesias , Andrew Banfield

When it comes to corruption, our first thoughts fly towards high level politicians that accept great amounts of money for favours that can go from millionaire building contracts, to simply sign a paper that can transform a natural space into a multi apartment building. In these cases, voters, those who initially trusted these politicians trust that the judicial system we be able to fight against corruption in any way necessary. Judicial independence becomes crucial when talking about corruption, court efficiency turns into a matter of great importance because of the need of judicial fairness when it comes to resolve corruption cases. Clerks can be bribed to slow down cases, but judges may also be tempted to accept a bribe to dismiss a case, or even pressure by the politician whom positioned him where he is in order to avoid being sentenced for an illegal act. The study of judicial corruption is to this extent of great importance, as is the way to have a totally independent judicial system to guarantee no possibility of legal unfairness. In order to do so, to completely different legal systems have been compared as to see how they deal with judicial independence and which is the perception citizens have of this independence when it comes to ask justice to protect their rights. How is judicial independence guaranteed? How is judicial corruption eradicated when encountered? This study sees in to different legal systems such as the Australian legal system, based on Common Law, and other European systems that base their existence on Roman law. It will compare the actual mechanisms that exist in order to prevent, detect and eradicate any possible case of corruption between those chosen, or selected, to dispense justice, to then compare the actual number of cases of judicial corruption in each country studied. The conclusions of the study will see which legal system has been most effective when it comes to deal with judicial corruption, which have been the most effective mechanisms implemented to fight against judicial corruption and if these are improvable in any way. The study will be done be comparing judicial sentences related to high level corruption in order to how being n power can affect the outcome. This would be related to inequality as to judicial independence due to the importance of the judicial system.

Christabella Judith Aceng

Corruption is not a novel phenomenon. It is gravely despised by society and is conceived as a social vice that needs to be tackled with great concern. This is because, corruption tendencies hinder peace, stability, sustainable development, democracy, and human rights around the globe. Corruption tendencies continue to consume various levels of society while leaving ruin. The judiciary has not been spared this sentiment. The Judiciary, the temple of justice is the peak for conflict resolution where citizens hope for redress through a fair, accessible efficient and effective justice process. Therefore, case of judicial corruption undermines the justice process and disregards the rule of law. The paper therefore seeks to address the component of judicial corruption. The structure of the discussion includes: the definition of judicial corruption while identifying which actors the concept refers to; the forms, causes, impact, instigating factors, legal framework strategies to cub judicial corruption, conclusion and recommendation.

Andre Thomashausen

Preventing and combating corruption in the judiciary Paper presented at the "Activism Against Corruption in Africa" Conference organised by Konrad Adenauer Foundation on 22-25 November 2016, Johannesburg South Africa. A reflection on 1. Judicial Corruption Perception in South Africa 2. National Legal Instruments 3. International Obligations 4. Extra-Judicial Watchdogs or Guardians 5. Anti-Corruption Watchdog Accountability 6. Causes of Judicial Corruption and their Remedies

International Review of Law and Economics

Stefan Voigt

Beijing Law Review

Felix Okiri

This study sought to underscore the central role of morals and ethics in reducing judicial corruption. The paper proceeded to study the concepts of integrity and corruption. Subsequently, the paper studied Kenya’s development and current law on integrity, public service and corruption and possible areas for reform. The study found out that despite near-adequate legislations , Kenya’s jurisprudence depicts a state of despair, lack of good will and numerous constraints in the anti-corruption process: many of the cases prosecuted in court have either been terminated by the courts or have not succeeded as a result of lack of political good will and political interference. The paper concluded that corruption is not only a legal issue but also a moral one—that is why major solutions to taming judicial corruption have flopped as a result of the linear approach to offering solutions. The paper found out that in order to offer formidable solutions to corruption in the judiciary, the legislative and policy approaches ought to be structured and conceptualized in a more realistic and feasible manner to that of ordinary obligations and offences. As a central point of interest, premium must be attached to integrity, as a moral concern, in order to offer sustainable solution to corruption in the judiciary.

This thesis presents an overview of the susceptibility of the Common Law system and the Civil Law system on corruption and their respective contribution to a judiciary possessing optimal degrees of internal and external independence. A judiciary with such independence is, on the one hand, a significant factor in the battle against corruption; on the other hand such a judiciary has the greatest likelihood of being immune from corruption itself. Since the Common and the Civil Law systems differ in the appointment system of judges and their mechanisms of checks and balances, each legal system has its advantages and disadvantages in terms of securing the judiciary an optimal degree of independence. Various existing, as well as a number of prospective features will be presented, which combine the advantages of the Common and Civil Law systems. These features would guarantee optimal levels of judicial independence, making the judiciary a strong player in the fight against corruption.

Columbia University Colloquium

This paper examines the correlation between judicial independence, and its historical consolidation in constitutional democracies, and corruption incidence in a comparative-historical approach between the countries of India, Brazil and the United States. Its goal is to assert whether increasing judicial independence has had a positive correlation with corruption control, and if so, how different institutional judicial structures alter this relationship.

Corruption, Grabbing and Development

Siri Gloppen

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Corruption, Human Rights, and Judicial Independence

By Special Rapporteur Diego García-Sayán

The Honourable Diego Garcia-Sayán acts as the United Nations Special Rapporteur on the Independence of Judges and Lawyers. He was a judge of the Inter-American Court of Human Rights and was elected Vice-President of the Court from 2008 to 2009 and President of the Court for two consecutive terms. He previously served as Peru's Minister of Justice and Minister of Foreign Affairs. Garcia-Sayán recently shared his views on corruption and judicial independence with UNODC as part of the Organization's on-going work on promoting judicial integrity. All opinions expressed in this piece are solely those of the author as an external expert and do not necessarily reflect the official position of UNODC.

______________________________

"Corruption has a direct impact on the validity of human rights, largely because of two reasons.

On one side, corruption deprives societies of important resources that could be used for basic needs, such as public health, education, infrastructure, or security. The OECD has indicated that the cost of corruption, in its different modalities, constitutes more than 5% of the global GDP.

On another side, corruption has direct damaging consequences in general on the functioning of state institutions, and in particular on the administration of justice. Corruption decreases public trust in justice and weakens the capacity of judicial systems to guarantee the protection of human rights, and it affects the tasks and duties of the judges, prosecutors, lawyers, and other legal professionals.

By seeking impunity, corruption has a devastating effect on the judicial system as a whole. One of the goals of human rights is to fight corruption and its implications on the administration of justice, as is to act against corruption through an independent and strong administration of justice. For this, the United Nations Convention against Corruption is a fundamental instrument for the protection of human rights.

In my report presented last year at the General Assembly, I established that "as a key tool to fight against corruption, the Convention should also be considered as a fundamental international instrument for the protection of human rights, and that it should merit, consequently, the permanent attention of the bodies competent in this matter". [1]

Corruption in the Judicial System

Corruption undermines the core of the administration of justice, generating a substantial obstacle to the right to an impartial trial, and severely undermining the population's trust in the judiciary.

Corruption has a variety of faces, bribery being only one of them, another being political corruption, much more unattainable and imprecise. Its broad range of action enables it not only to influence the judicial system, but all the sectors of state administration as well.

Illicit interferences with justice can also be violent, particularly when perpetrated directly by members of organised crime. These forays are intended to secure specific objectives, such as the closing of a particular case, or the acquittal of a given individual.  

Corruption and the Historical Responsibility of Justice

Internal norms in different states and several relevant international instruments establish different ranges of obligations to confront corruption. However, while judicial systems are themselves the target of corruption and organised crime, it is precisely within judicial systems that societies have their main instrument to prevent and fight corruption. 

Article 11 of the United Nations Convention against Corruption - a fundamental international treaty - emphasizes the decisive role of the judicial branch in the fight against corruption, and establishes that in order to carry out this role effectively, the judicial branch itself must be free of corruption, and that its members must act with integrity. Substantive guidelines on matters of internal organization, which are fundamental to prevent and confront corruption, have been included in the Convention. 

There are core obligations in the Treaty on international cooperation between judicial and prosecutorial bodies of sovereign States (Chapter IV) which are unprecedented in a multilateral treaty. For example, it contains substantive and operational obligations in extradition matters, the transfer of convicted persons and judicial assistance, referral of criminal proceedings from one country to another, joint investigations, and, in general, clear substantive obligations in matters of cooperation for compliance with the law.

Judicial Integrity and the Fight against Corruption

In 2016, the United Nations Office on Drugs and Crime launched a global programme to promote a culture of lawfulness. It includes the creation of a Global Judicial Integrity Network to share best practices and lessons learned on the fundamental challenges and new questions relating to judicial integrity and the prevention of corruption.

This is an important step for the creation of a common language and a common perspective amongst different domains of the United Nations. In my capacity as Special Rapporteur, I have already expressed my full disposal to collaborate in the implementation of this programme."

[1] United Nations, A/72/140. 35 July 2017

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Why the Supreme Court Is Blind to Its Own Corruption

By Randall D. Eliason

Mr. Eliason is the former chief of the fraud and public corruption section at the U.S. Attorney’s Office for the District of Columbia.

The scandal surrounding Justice Clarence Thomas has further eroded the already record-low public confidence in the Supreme Court. If Chief Justice John Roberts wonders how such a thing could have happened, he might start looking for answers within the cloistered walls of his own courtroom.

Over more than two decades, the Supreme Court has gutted laws aimed at fighting corruption and at limiting the ability of the powerful to enrich public officials in a position to advance their interests. As a result, today wealthy individuals and corporations may buy political access and influence with little fear of legal consequences, either for them or for the beneficiaries of their largess.

No wonder Justice Thomas apparently thought his behavior was no big deal.

He has been under fire for secretly accepting , from the Republican megadonor Harlan Crow, luxury vacations worth hundreds of thousands of dollars, a real estate deal (involving the home where his mother was living) and the payment of private school tuition for a grandnephew the justice was raising. Meanwhile, over the years, conservative groups with which Mr. Crow was affiliated filed amicus briefs in several matters before the Supreme Court .

That sounds like the very definition of corruption. But over the years, many justices — and not just conservatives — have championed a different definition.

The landmark case is the court’s 2010 decision in Citizens United v. Federal Election Commission . A five-justice majority — including Justice Thomas — struck down decades-old restrictions on independent campaign expenditures by corporations, holding that they violated the companies’ free speech rights. It rejected the argument that such laws were necessary to prevent the damage to democracy that results from unbridled corporate spending and the undue influence it can create.

The government’s legitimate interest in fighting corruption, the court held, is limited to direct quid pro quo deals, in which a public official makes a specific commitment to act in exchange for something of value. The appearance of potentially improper influence or access is not enough.

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Insights into Editorial: India’s judiciary and the slackening cog of trust

Introduction:

Centrality of justice in human lives is summed up in a few words by the Greek philosopher, Aristotle: “ It is in justice that the ordering of society is centred .” Yet, a vast majority of countries have highly corrupt judiciaries.

Forms of Corruption in Judiciary:

Judicial corruption is inimical to judicial independence and to the constitutionally desired social order.

Judicial corruption takes two forms : political interference in the judicial process by the legislative or executive branch, and bribery.

Despite accumulation of evidence on corrupt practices, the pressure to rule in favor of political interests remains intense.

For judges who refuse to comply, political retaliation can be swift and harsh .

Bribery can occur throughout the chain of the judicial process: judges may accept bribes to delay or accelerate verdicts, accept or deny appeals, or simply to decide a case in a certain way.

Court officials coax bribes for free services; and lawyers charge additional “fees” to expedite or delay cases.

Why there is an erosion of trust in the lower judiciary:

• Our focus here is on the functioning of and erosion of trust in the lower judiciary comprising high courts, and district and sessions courts.

A distinction between substantive and procedural justice is helpful.

• Substantive justice is associated with whether the statutes, case law and unwritten legal principles are morally justified (e.g., freedom to pursue any religion).
• Procedural justice is associated with fair and impartial decision procedures.
• Many outdated/dysfunctional laws or statutes have not been repealed because of the tardiness of legal reform both at the Union and State government levels.
• Examples: The Citizenship (Amendment) Act (December 2019) provides citizenship to — except Muslims — Hindus, Buddhists, Sikhs, Jains, Parsis and Christians who came to India from Pakistan, Bangladesh and Afghanistan on or before December 31, 2014.
• But this flies in the face of secularism and is thus a violation of substantive justice.
• A striking example of tortuous delay in the delivery of justice is the case of Lal Bihari. He was officially declared dead in 1975, struggled to prove that he was alive (though deceased in the records) and was finally declared alive in 1994 (Debroy, 2021).

Thus, both departures from substantive and procedural justice need deep scrutiny.

Alongside procedural delays, endemic corruption and mounting shares of under-trial inmates with durations of three to five years point to stark failures of procedural justice and to some extent of substantive justice.

Case pendency’s in Judiciary:

• According to the National Judicial Data Grid , as of April 12, 2017, there are 24,186,566 pending cases in India’s district courts, of which 2,317,448 (9.58%) have been pending for over 10 years, and 3,975,717 (16.44%) have been pending for between five and 10 years.
• As of December 31, 2015, there were 4,432 vacancies in the posts of [subordinate court] judicial officers, representing about 22% of the sanctioned strength.
• In the case of the High Courts, 458 of the 1,079 posts, representing 42% of the sanctioned strength , were vacant as of June 2016.
• Thus, severe backlogging and understaffing persisted, as also archaic and complex procedures of delivery of justice.
• Extreme centralization of power in the Centre and a blatant violation of democratic values under the NDA have had disastrous consequences in terms of violent clashes, loss of lives, religious discord, assaults on academic freedom, and suppression and manipulation of mass media.

Prevailing issues in field of Judiciary:

• Exercise of extra-constitutional authority by the central and State governments,
• Weakening of accountability mechanisms,
• Widespread corruption in the lower judiciary and the police, with likely collusion between them,
• The perverted beliefs of the latter towards Muslims, other minorities and lower caste Hindus,
• A proclivity to deliver instant justice,
• Extra-judicial killings,
• Filing first information reports against innocent victims of mob lynching — specifically,
• Muslim cattle traders while the perpetrators of violence are allowed to get away — have left deep scars on the national psyche.

While trust in the judiciary is positively and significantly related to the share of undertrials for three to five years under total prisoners, i t is negatively and significantly related to the square of share of under-trials .

However, the negative effect nearly offsets the positive effect. So, while trust in the judiciary marginally rises with the proportion of undertrials until the threshold (0.267) is reached, it decreases beyond that point as the proportion of under-trial inmates rises.

Legal framework to curb corruption:

• Various sections of the Indian Penal Code (IPC) provide criminal punishment for public servants who disobey relevant laws or procedures, frame incorrect or improper documents, unlawfully engage in trade, or abuse their position or discretion.
• The Prevention of Money Laundering Act, 2002 seeks to prevent money laundering including laundering of property through corruption and provides for confiscation of such a property.
• It mainly targets banks, financial institutions and intermediaries such stock market intermediaries.
• The Right to Information (RTI), 2005 Act represents one of the country’s most critical achievements in the fight against corruption.
• Under the provisions of the Act, any citizen may request information from a public authority which is required to reply within 30 days.
• The Act also requires every public authority to computerize its records for wide dissemination and to proactively publish certain categories of information for easy citizen access.
• This act provides citizens with a mechanism to control public spending.
• There are various bodies in place for implementing anti-corruption policies and raising awareness on corruption issues.
• At the federal level, key institutions include the Supreme Court, the Central Vigilance Commission (CVC), the Central Bureau of Investigation (CBI), the Office of the Controller & Auditor General (C&AG), and the Chief Information Commission (CIC).
• At the State level, there are local anti-corruption bureaus such as the Anti-corruption Bureau of Maharashtra.

Conclusion:

In sum, erosion of trust in the judiciary could severely imperil governance.

Judicial corruption means the voice of the innocent goes unheard, while the guilty act with impunity.

A non-corrupt judiciary is a fundamental condition for the endorsement of rule of law and the ability to guarantee basic human rights in society .

The judiciary must therefore be an independent and fair body that fights corruption, not the other way around.

Equal treatment before the law is a pillar of democratic societies . When courts are corrupted by greed or political expediency, the scales of justice are tipped, and ordinary people suffer.

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Role of Judiciary in Fight Against Corruption

Role of Judiciary in Fight Against Corruption – Corruption is a pervasive problem that plagues societies across the globe, undermining governance, economic development, and public trust in institutions.

Introduction – Corruption is a pervasive problem that plagues societies across the globe, undermining governance, economic development, and public trust in institutions. In the battle against this malignant menace, the judiciary plays a pivotal role as one of the pillars of democracy. With its powers of judicial review and contempt of court, the judiciary can effectively hold corrupt officials accountable, thus acting as a potent weapon in the fight against corruption.

Ensuring Impartiality and Fairness

The judiciary is a critical component in maintaining the rule of law and upholding justice. In the fight against corruption, the judiciary is tasked with ensuring that those involved in corrupt practices are subjected to a fair trial, free from any external influence or pressure. By adjudicating cases impartially and without bias, the judiciary contributes to building public confidence in the legal system, which is essential for tackling corruption effectively.

Judicial Review: Guarding against Abuse of Power

One of the judiciary’s most potent tools in the fight against corruption is its power of judicial review. This authority allows the judiciary to review the constitutionality and legality of laws, executive actions, and policies. When anti-corruption laws and measures are challenged in court, the judiciary can scrutinize them to ensure they align with the principles of justice and do not enable corruption or promote impunity.

Moreover, the judiciary can nullify legislation or executive decisions that weaken the fight against corruption or infringe on citizens’ rights. This power serves as a check on potential attempts by government officials to shield themselves or their allies from accountability, thereby reinforcing the fight against corruption.

Holding Corrupt Officials Accountable

The judiciary’s role becomes particularly crucial when dealing with corrupt officials who wield power and influence. It is not uncommon for corrupt individuals to attempt to escape accountability through manipulation, bribery, or intimidation. However, the judiciary’s independence and autonomy empower it to resist such pressures and hold corrupt officials accountable for their actions.

Through fair and transparent trials, the judiciary can deliver verdicts based on evidence and merit, ensuring that justice is served and wrongdoers face the consequences of their actions. This sends a powerful message that corruption will not be tolerated, regardless of one’s social status or position of authority.

Contempt of Court: Upholding the Dignity of Justice

Contempt of court is another instrument that the judiciary can use to maintain its authority and integrity. When individuals, including public officials, obstruct the judicial process, show disrespect towards the court, or disobey court orders, they can be held in contempt. This includes refusing to cooperate with corruption investigations or undermining the work of judicial bodies probing corruption cases.

By exercising contempt powers, the judiciary reinforces the notion that no one is above the law and that attempts to hinder the fight against corruption will not be tolerated. This, in turn, fortifies the judiciary’s ability to uphold justice and serve as a deterrent against corrupt practices.

In the relentless battle against corruption, the judiciary stands as a guardian of justice, wielding its powers of judicial review and contempt of court to hold corrupt officials accountable. By ensuring impartiality, conducting fair trials, and upholding the rule of law, the judiciary contributes significantly to the fight against corruption. Nevertheless, it is essential to support and strengthen the judiciary’s independence and integrity to ensure its effectiveness in combating corruption. Collaborative efforts between governments, civil society, and the judiciary are vital to building a more transparent, accountable, and corruption-free society for the greater good of all citizens.

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Corruption in India

• 06 Oct 2023
• 20 min read
• GS Paper - 4
• GS Paper - 2
• Transparency & Accountability
• Ethics and Human Interface
• Ethics in Human Actions
• Ethics in Private & Public Relationships

For Prelims: Corruption Perception Index , Transparency International , Democracy , Corruption

For Mains:  Transparency & Accountability in Governance,Common Causes of Corruption and its Prevention in India.

What is the Context?

The Prime Minister of India, in his 76 th Independence Day address, targeted the twin challenges of corruption and nepotism and raised the urgent need to curb them . Also, Corruption Perception Index (CPI) 2023 was released by Transparency International.

• Overall, the index shows that control of corruption has stagnated or worsened in most countries over the last decade. India Corruption Perceptions Index was 40 index points in 2023.

What is Corruption?

Corruption is dishonest behaviour by those in positions of power . It starts with the tendency of using public office for some personal benefit.

• Moreover, it is unfortunate that corruption has, for many, become a matter of habit. It is so deeply entrenched that corruption is now considered a social norm. Hence, corruption implies the failure of ethics.

What are the Reasons Behind Corruption in India?

• L ack of Transparency : A lack of transparency in government processes, decision-making, and public administration provides fertile ground for corrupt practices. When actions and decisions are shielded from public scrutiny, officials may engage in corrupt activities with reduced fear of exposure.
• A perception of impunity due to the inadequate punishment of corrupt individuals can encourage further corruption. When individuals believe they can get away with corrupt practices, they are more likely to engage in them.
• Low Salaries and Incentives: Public officials, especially those in lower-ranking positions, are sometimes paid low salaries. This can make them more susceptible to bribery and other corrupt practices, as they may see corruption as a means to supplement their income.
• India's complex economic environment, which involves various licences, permits, and approvals, can create opportunities for corruption. Businesses may resort to bribery to navigate this environment.
• Political Interference: Political interference in administrative matters can compromise the autonomy of government institutions. Political leaders may pressure officials to engage in corrupt activities for personal or party gain.
• Cultural Factors: There can be a cultural acceptance of corrupt behaviour in certain contexts, which perpetuates corruption. The notion that "everyone does it" can lead individuals to engage in corruption without feeling morally compromised.
• Lack of Whistleblower Protection: Inadequate protection for whistleblowers can deter individuals from reporting corruption. The fear of retaliation can silence potential whistleblowers and allow corruption to thrive.
• Social Inequality: Social and economic disparities can contribute to corruption, as individuals with wealth and power may use their influence to secure preferential treatment and engage in corrupt practices without repercussions.

What are the Reasons for the Prevalence of Corruption in Civil Services?

• Politicisation of Civil Services: When civil service positions are used as rewards for political support or swapped for bribes , the opportunities for high levels of corruption increase significantly.
• Lower Wages: Lowering wages for civil servants compared to those in the private sector. Certain employees may resort to taking bribes in order to compensate for the difference in wages.
• Administrative Delays: Delays in the clearance of files are the root cause of corruption as common citizens are coerced to grease the palm of erring officials and authorities for expedited clearance of the files.
• Colonial Legacy of Unchallenged Authority: In a society which worships power, it is easy for public officials to deviate from ethical conduct.
• Weak Enforcement of Law: Various laws have been made to curb the evil of corruption but their weak enforcement has acted as a hindrance in curbing corruption .

What can be the Impact of Corruption?

• To demand quality, one might need to pay for it. This is seen in many areas like municipality, electricity, distribution of relief funds, etc.
• A crime may be proved as a benefit of the doubt due to a lack of evidence or even the evidence erased.
• These low-quality services are all done to save money by the contractors and the officials who are involved.
• These people sanction the funds for research to those investigators who are ready to bribe them.
• Disregard for Officials: People start disregarding the officials involved in corruption and also the administrative set up which creates distrust in the system.
• Lack of Respect for Government: Top brass leaders of the nation like the President or Prime Ministers lose respect among the public. Respect is the main criteria in social life.
• Lack of Faith and Trust in Governments: People vote for a leader based on their faith in him/ her, but if leaders are found to be involved in corruption, people lose faith in them and may not vote next time.
• Aversion for Joining the Posts Linked to Corruption : Sincere, honest, and hardworking people develop an aversion for the particular posts deemed corrupt.
• A Decrease in Foreign Investment : Corruption in government bodies has led to many foreign investments going back from developing countries.
• This leads to delays in investments, the starting of industries, and also growth.
• Due to lack of proper roads, water, and electricity, the companies do not wish to start up there, which hinders the economic progress of that region.

Image: Changes in Levels of Corruption In India and Other Countries as per the Corruption Perceptions Index over the past decade.

What are the Legal and Regulatory Frameworks for Fighting Corruption in India?

• Amendment of 2018 criminalised both bribe-taking by public servants as well as bribe-giving by any person.
• Prevention of Money Laundering Act, 2002 aims to prevent instances of money laundering and prohibits use of the 'proceeds of crime' in India.
• The Companies Act, 2013 provides for corporate governance and prevention of corruption and fraud in the corporate sector. The term 'fraud' has been given a broad definition and is a criminal offence under the Companies Act.
• The Indian Penal Code, 1860 sets out provisions which can be interpreted to cover bribery and fraud matters, including offences relating to criminal breach of trust and cheating.
• The  Benami Transactions (Prohibition) Act, 1988 the Act precludes the person who acquired the property in the name of another person from claiming it as his own.
• They perform the function of an "ombudsman” and inquire into allegations of corruption against certain public functionaries and for related matters.
• Central Vigilance Commission: Its mandate is to oversee the vigilance administration and to advise and assist the executive in matters relating to corruption.
• Amendments in 1964: The definition of ‘Public Servant’ under the IPC was expanded. The definition of ‘criminal misconduct’ was expanded and possession of assets disproportionate to the known sources of income of a public servant was made an offence.

What is the Importance of Ethics in Preventing Corruption?

• Establishing Moral Boundaries: Ethical principles provide a framework for defining what is right and wrong. In the context of corruption, ethics set clear boundaries that distinguish acceptable behaviour from unethical or corrupt conduct.
• Promoting Accountability: Ethics demand that individuals take responsibility for their actions and decisions. When people are guided by ethical principles, they are more likely to be transparent and accountable for their actions, reducing the likelihood of engaging in corrupt behaviour that could harm others.
• Fostering Transparency: Transparency is a core ethical principle. Ethical organisations and individuals are more likely to operate openly and honestly, making it difficult for corruption to thrive in an environment where actions and decisions are subject to scrutiny.
• Building Trust: Trust is a cornerstone of ethical behaviour. When individuals and institutions are perceived as trustworthy, they are less likely to engage in or tolerate corruption. A high level of trust in society reduces the temptation for corruption.
• Encouraging Civic Virtue: Ethical values promote civic virtue, which encourages individuals to act in the best interest of society rather than pursuing personal gain at the expense of others. Civic virtue is a powerful deterrent to corruption.
• Supporting Rule of Law: Ethical behaviour upholds the rule of law and respect for legal and regulatory frameworks. Corrupt practices often involve circumventing or violating the law, and adherence to ethics reinforces respect for legal norms.
• Whistleblower Protection : Ethical organisations and governments prioritise protecting whistleblowers who report corruption. Ethical values encourage reporting unethical behaviour, which is vital for uncovering and addressing corruption.
• Global Reputation: On an international scale, ethical behaviour is essential for a nation's reputation. Countries known for ethical governance and low corruption levels are more attractive to foreign investment and collaboration.
• Long-Term Sustainability : Corrupt practices often provide short-term gains but can lead to long-term harm. Ethical behaviour is essential for the sustainable development and prosperity of societies.

What are Nolan Committee Recommendations on Standards in Public Life and Prevention of Corruption?

Nolan Committee in 1995 in United Kingdom outlined Seven Ethical and Moral values to be incorporated by the Public functionaries, Officials, Civil Servants, Bureaucrats, Civil Society and Citizens in order to weed out corruption:

• Selflessness: Holders of public office should take decisions solely in terms of public interest.
• Integrity: Holders of public office should not place themselves under any financial or other obligation to outside individuals or organizations that might influence them in the performance of their official duties.
• Objectivity: In carrying out public business, including making public appointments, awarding contracts or recommending individuals for rewards and benefits, holders of public office should make choices on merit.
• Accountability: Holders of public office are accountable for their decisions and actions to the public and must submit themselves to whatever scrutiny is appropriate to their office.
• Openness: Holders of public office should be as open as possible about all the decisions and actions they take. They should give reasons for their decisions and restrict information only when the wider public interest clearly demands.
• Honesty: Holders of public office have a duty to declare any private interests relating to their public duties and to take steps to resolve any conflicts arising in a way that protects the public interest.
• Leadership: Holders of public office should promote and support these principles by leadership and example.

What are the Recommendations of the Second ARC to Tackle Corruption?

The Second Administrative Reforms Commission (2nd ARC), an advisory body in India, made several comprehensive recommendations to address the issue of corruption and improve the integrity and efficiency of the public administration. These recommendations aim to prevent corruption and enhance transparency and accountability in government operations. Here are some of the key recommendations made by the 2nd ARC:

• Whistleblower Protection Act, 2014: The 2nd ARC recommended amendments to the Whistleblowers Protection Act to enhance protection and incentives for whistleblowers. This includes safeguarding them from harassment and providing financial rewards.
• Central Vigilance Commission (CVC): The 2 nd ARC recommended strengthening the CVC's role in preventing and combating corruption by giving it more independence, resources, and authority.
• Central Bureau of Investigation (CBI): The commission suggested measures to ensure the CBI's autonomy and effectiveness in handling corruption cases.
• Standard Operating Procedures (SOPs): The 2 nd ARC recommended the development of clear SOPs for government processes and services to minimise the discretionary powers of officials. This reduces the scope for corruption and arbitrary decision-making.
• Use of Technology: Leveraging technology and e-governance can reduce human interface and discretion in government transactions. The commission encouraged the adoption of electronic methods to reduce corruption opportunities.
• Police Accountability: The commission highlighted the need for comprehensive police reforms to enhance the integrity and effectiveness of law enforcement agencies. This includes measures to increase transparency, accountability, and professionalism in the police force.
• Community Policing: Promoting community policing can build trust between the police and the public, reducing opportunities for corruption and abuse of power.
• Code of Ethics: The commission recommended the development of a code of ethics for public officials and employees to promote ethical behaviour.
• Citizen Charters: Encouraging government departments to adopt citizen charters can enhance accountability and improve public service delivery.
• Media and Education: The commission suggested using media and educational institutions to create awareness about the detrimental effects of corruption and the importance of ethical conduct.
• Parliamentary Committees: Strengthening the role of parliamentary committees in scrutinising government operations and expenditure can help detect and prevent corruption.
• Digital Transformation: The 2 nd ARC recommended a comprehensive digital transformation of government processes to reduce human intervention and opportunities for corruption.

UPSC Civil Services Examination, Previous Year Questions (PYQs)

Q1. With reference to the ‘Prohibition of Benami Property Transactions Act, 1988 (PBPT Act)’, consider the following statements: (2017)

• A property transaction is not treated as a benami transaction if the owner of the property is not aware of the transaction.
• Properties held benami are liable for confiscation by the Government.
• The Act provides for three authorities for investigations but does not provide for any appellate mechanism.

Which of the statements given above is/are correct?

(a) 1 only (b) 2 only (c) 1 and 3 only (d) 2 and 3 only

Q.2 Discuss how emerging technologies and globalisation contribute to money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels. (2021)

A Sneak Peek Into The Corrupted Indian Judiciary

Corruption in the indian judiciary, judicial accountability, appointment of judges, allocation of cases, contempt of court, contempt can be classified into two groups:.

• Civil: means wilful disobedience of any, judgment, decree, direction, order or any other processes of court
• Criminal: means publication of any matter or the doing of any other act whatsoever which scandalizes or tends to lower the authority of any court.

Given this allegation one is reminded of two important cases that took place:

Arundhati roy case:, mid-day journalists had published documentary evidences against justice sabharwal,, nexus between judges and politicians, history of judicial corruption and scandals in india, mr. justice sinha:, ajit sengupta:, a.m. ahmad:, cash-for-job:, three judges mysore sex scandal alleged:, justice karnan case:, justice a.k. ganguly:.

• Corruption in Indian Judiciary-Yashveer Singh, World Wide Journal of Multidisciplinary Research and Development
• Corruption Widespread in India, US report says available https://timesofindia.indiatimes.com/india/corruption-widespread-in-India-US-report-says/articleshow/31143604.cms
• Orebro University, Legal Science Programme with International Approach Spring 2010- Corruption in the Judiciary. www.diva-portal.org. Amelie Arvidsson, Emelie Folkesson.
• (Transparency and Accountability in the Indian Judicial System, 2019)
• (Corruption in Indian Judiciary-Time for action, 2017)

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Perception of corruption as a business obstacle, generalized trust and relation centrism in low- and middle-income nations: the moderating influence of governance

• Original Paper
• Open access
• Published: 28 August 2024

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• Tolu Olarewaju   ORCID: orcid.org/0000-0002-3770-2685 1 ,
• Jagannadha Pawan Tamvada   ORCID: orcid.org/0000-0002-1225-3174 2 ,
• Sharin McDowall-Emefiele   ORCID: orcid.org/0000-0002-0499-6189 3 &
• Raymond Swaray   ORCID: orcid.org/0000-0002-6687-4101 4  

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We examine regional differences in how generalized trust and relation centrism influence how 16,785 firms across 20 lower- and middle-income countries perceive corruption as a business obstacle. Using the machine learning method LASSO, our empirical findings indicate that higher out-group generalized trust is associated with increased perceptions of corruption hindering business operations. Conversely, higher in-group friend centrism aligns with reduced perceptions of corruption as an obstacle. Interestingly, regional disparities highlight that family centrism generally outweighs friend centrism in firms' perceptions of corruption obstacles. Furthermore, while legal institutional and regulatory quality partly mitigate this effect, political stability consistently plays the most significant role in weakening this association.

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1 Introduction

Corruption, often defined as the misuse of public or organizational resources for private benefits (Hatak et al. 2015 ; Rose-Ackerman and Palifka 2016 ), poses a global challenge to economic and social development (Harri et al. 2020 ; Wu et al. 2023 ). It is an obstacle to the operations of businesses and manifests itself in various forms. These forms range from high-level corruption involving substantial sums, major corporations, senior-level public or private sector workers, and significant kickbacks—sometimes crossing national borders—to petty corruption, encompassing smaller sums, lower-level workers, and localized practices (Correa et al. 2016 ; Jong and Ees 2014 ). Empirical evidence indicates that although the perception of corruption by firms is subjective, firms identifying corruption as a primary business obstacle in different lower- and middle-income regions experience significant negative impacts on business operations (Aidis and Mickiewicz 2006 ; Bukari and Anaman 2021 ; Galtung and Pope 1999 ; Hauser 2019 ).

In-group and out-group dynamics refer to how individuals perceive and interact with others who are either members of their own group (in-group) or not (out-group) (Brewer 1999 ; Granitz and Ward 2001 ; Marler and Stanley 2018 ). In-group members tend to have higher levels of trust, cooperation, and commitment to their group than they do to out-group members. This can lead to greater social cohesion and higher levels of in-group performance, but it can also lead to prejudice, discrimination, and exclusion of out-group members (Castano et al. 2002 ; Harrison et al. 1998 ). Furthermore, in-group members may be more likely to engage in unethical behaviors that benefit their in-group, such as favoritism and nepotism (Eckel et al. 2022 ; Raz et al. 2023 ). This can lead to negative consequences for the firm and society including reduced morale, efficiency and performance (Krueger et al. 2022 ; Treviño et al. 2006 ). Out-group members might encounter perceptions of being excluded, discriminated against, and distrusted, resulting in reduced motivation, involvement, and allegiance to the organization. Such outcomes can have adverse effects on the company's culture, reputation, and financial performance (Marler and Stanley 2018 ).

This study aims to explore the variations in the perception of corruption as a business obstacle, generalized trust, and relation centrism across diverse lower- and middle-income regions and the potential influence of governance quality on these relationships. It introduces novel insights by investigating corruption as a business obstacle using national-level generalized trust and relation centrism in family and friends. Additionally, it fills gaps in the literature by highlighting regional disparities in how generalized trust and relation centrism impact firms' perceptions of corruption obstacles. Furthermore, it examines whether governance quality mitigates the effects of generalized trust and relation centrism on firms' perceptions of corruption hindrances. In summary, this study aims to answer key questions: (1) Do higher levels of generalized trust and relation centrism relate to increased perceptions of corruption as a business obstacle? (2) How do regional variations affect the association between generalized trust, relation centrism, and firms’ perceptions of corruption obstacles? and (3) Does a country’s governance quality weaken the impact of generalized trust and relation centrism on firms’ perceptions of corruption obstacles?

Based on a comprehensive micro-firm level cross-country database in lower- and middle-income nations, the study indicates that firms' perceptions of corruption as a business obstacle inversely relate to higher levels of in-group friend centrism. However, notable regional variations emphasize the need for firms to acknowledge these differences, crucial for making strategic decisions when entering or expanding operations in new territories. For example, in regions where higher relation centrism in family or friends is associated with reduced perceived corruption obstacles, firms could strategically employ relational ties. Conversely, caution is advised in regions where the opposite holds true. Additionally, while legal institutional and regulatory quality partly mitigate the impact of generalized trust and relation centrism on the perception of corruption as a business obstacle, political stability consistently exhibits the most significant weakening effect on this relationship.

These findings hold significance for various reasons. Firstly, they illuminate the relationship between firms' perceptions of corruption as a business obstacle, out-group generalized trust, and in-group relation centrism. Consequently, it’s essential for firms to acknowledge and address both out-group and in-group dynamics within their operational contexts. Secondly, our study offers valuable insights for policymakers aiming to mitigate the detrimental impact of relation-centrism on corruption as a business obstacle. The results underscore the effectiveness of political stability in weakening the adverse effects of corruption hurdles for firms.

2 Literature review and hypotheses development

2.1 generalized trust, relation centrism and corruption as a business obstacle.

Putnam ( 1993 ) theorized that trust, reciprocity and civic engagement are indispensable to collective existence and argued that communities become prosperous because they have a vital civic life. A multi-level characterization and complexity of trust has also been recognized in management studies (Rousseau et al. 1998 ; Zheng et al. 2023 ). Generalized trust is impersonal and not related to specific social exchange relationships between people (Ellwardt et al. 2012 ; Martinangeli et al. 2023 ). It is an abstract attitude towards the out-group and people in general, encompassing those beyond immediate familiarity, including strangers (people one randomly meets in the street, fellow citizens, and foreigners, amongst others) (Freitag and Traunmüller 2009 ; Zheng et al. 2023 ). Generalized trust is associated more with “weak ties” social capital that can create bridges, promote openness, exchange, knowledge diffusion, and decrease corruption (Uslaner 2004 ). These weak ties could make it easier to engage in corrupt practices because social capital investments may not be needed to engage in corrupt activities.

The social network may also encourage corruption through wide-ranging social pressures that influence the decisions of agents (Besser and Miller 2011 ; Danis et al. 2011 ). According to Hofstede’s individualism-collectivism cultural dimension (Hofstede 2011 ), people, in individualistic societies are expected to care primarily for themselves and their immediate families while in collectivist cultures, people view themselves as members of larger groups, including extended family members, and are expected to take responsibility in caring for such larger groups (Huff and Kelley 2005 ). Collectivistic societies are typically found in low- and middle-income countries of the Global South such as most of Latin America, Africa, Asia, and the Middle East, where bribe-taking is widespread (Sanyal 2005 ).

In this paper, we introduce a new concept called “relation centrism”, which we define as the importance that people give to family and friends in society. While generalized trust refers to an abstract trust in the out-group, relation centrism builds on the concept of in-group centrism to refer to trust in family members or friends (Bullough et al. 2017 ; Eckel et al. 2022 ; Kruglanski et al. 2006 ). Ethnic and non-ethnic ties affect firms (H. Li 2020 ; Santana et al. 2009 ; Yeung 1997 ; Zhu et al. 2022 ) and the literature has defined particularized relational trust as trust found in close social proximity and extended toward people the individual knows from everyday interactions (e.g., family members, friends, neighbors and co-workers) (Freitag and Traunmüller 2009 ; Zheng et al. 2023 ). Furthermore, social networks can enable the coordination of corrupt activities and override practices meant to govern firm behavior (Ju and Wang, 2023; Liu et al. 2024 ; Santana et al. 2009 ).

Particularized relational trust has been reported to facilitate corruption (Uslaner 2004 ), with the following logic: to form a bribery-corruption relationship (the transaction type corruption), some minimal trust must exist because of the time lag and geographic separation between the bribe payment by the briber to the bribe receiver, and delivery of the good to the briber (S. Li and Wu 2010 ). The literature has however not distinguished between relation centrism in family and friends as regards the perception of corruption as a business obstacle. When investigating the spheres of trust and the role of relationships in the community and workplace, the deepest bonds are usually for the family (Gonzalez et al. 2018 ), followed by friendship bonds (Jamieson et al. 2006 ), and the weakest bonds are usually generalized trust in other members of society (Bjørnskov 2007 ; Tan and Tambyah 2011 ).

Generalized trust beliefs likely facilitate the establishment of informal cooperation and the forging of alliances (Ellwardt et al. 2012 ). Institutional theory posits that a firm's corruption environment encompasses two dimensions – the formal corruption environment (FCE) and the informal corruption environment (ICE) (Kouznetsov et al. 2019 ). In many cases, corruption thrives within the context of the informal institutions in developing and/or low- and middle-income countries (Mateev et al. 2024 ). Informal networks and relationships based on kinship, ethnicity, or personal connections may influence access to resources, services, and opportunities. Nepotism, favoritism, and bribery are often facilitated through these informal channels, allowing individuals to circumvent official procedures and regulations for personal gain. As a result, corruption becomes entrenched within the fabric of society, eroding trust in public institutions, undermining the rule of law, and hindering economic progress. The association between corruption and informal institutions can be particularly pronounced in developing and low- to middle-income countries, where formal governance structures may be weak or ineffective (Mateev et al. 2024 ). In the absence of robust legal and regulatory frameworks, informal networks often serve as alternative mechanisms for resolving disputes, allocating resources, and exercising authority. However, these informal systems may lack transparency, accountability, and safeguards against abuse, creating opportunities for corruption to flourish unchecked.

The social network is important to this enquiry because research from Korea shows that family control of firms may facilitate corruption (Oh et al. 2019 ), and research from India suggests that firms with closer social networks with the government are more likely to engage in corruption (Collins et al. 2009 ). Similarly, in China, the process of building up guanxi (personal networks) for financing business operations has led to the normalization of corruption (Kang et al. 2023 ; Zhu et al. 2022 ). For this reason, we introduce a new construct “relation centrism”, defined as the importance that people give to family and friends in society. While generalized trust refers to trust in out-group members of society, relation centrism builds on the concept of in-group centrism to refer to trust in family members or friends (Kruglanski et al. 2006 ). Such ties and in-group favoritism affect firm activity (Yeung 1997 ; Zhu et al. 2022 ) and the literature has defined particularized relational trust as trust found in close social proximity and extended toward people the individual knows from everyday interactions (e.g., family members, friends, neighbors and co-workers) (Zheng et al. 2023 ). When investigating the spheres of trust and the role of relationships in the community and workplace, the deepest in-group bonds are usually for the family (Gonzalez et al. 2018 ), followed by friendship bonds (Jamieson et al. 2006 ), and then out-group bonds for generalized trust in other members of society (Freitag and Traunmüller 2009 ). We express this relationship in Fig.  1 .

Levels of generalized trust and relation centrism

When people put more importance on family members, they interact more frequently with them in activities and may make decisions in their interests although such decisions are sub-optimal from the broader society (Cruz et al. 2012 ; Zhu et al. 2022 ). This type of bond is especially strong in cases of vulnerability and also where there are ties of kinship and affection (Rose-Ackerman 2001 ; Zhu et al. 2022 ). A different bond could place importance on friends and can be “interest-based” reflecting shared values and goals (Braithwaite and Levi 1998 ; Cook 2001 ). Family and friendship ties, distinct from each other and from the weak ties implied by generalized trust, often hold greater strength and may represent in-group connections grounded in trust and relationships, albeit with potential variations in their individual effects. Similarly, in societies valuing relation-centric values, firms might perceive corruption as a more significant obstacle due to the robust emotional or interest-based ties within family or friends. This could potentially isolate individuals without strong family or friend ties, making them feel that corruption is a greater business obstacle.

Banfield ( 1967 ) argued that economic performance in southern Italy was depressed because of an inability to trust economic exchange partners outside a close family network. He called it “amoral familism” and showed that trust among members of a business group can functionally exist and be promoted by mistrust of other societal groups. Thus, “bonding” or “strong ties” social capital might lead to strong trust within groups but not between them; indeed, to the extent that strong ties are exclusive, they may promote disintegration and distrust between groups which could lead to increased corruption (Harris 2007 ). For these reasons, we anticipate a negative correlation between generalized out-group trust and in-group family centrism. Furthermore, we aim to explore whether heightened levels of generalized trust within society, as well as family or friend centrism, correspond to increased perceptions of corruption as a business obstacle for firms. These bonds range from generalized trust in society members to deeper connections within friend groups and the deepest affiliations with family members, forming the basis for our initial hypotheses:

Hypothesis 1a

Higher levels of generalized trust in society are associated with higher levels of the extent to which firms perceive corruption as a business obstacle.

Hypothesis 1b

Higher levels of friend centrism in society are associated with higher levels of the extent to which firms perceive corruption as a business obstacle.

Hypothesis 1c

Higher levels of family centrism in society are associated with higher levels of the extent to which firms perceive corruption as a business obstacle.

2.2 Regional differences

Getz and Volkema ( 2001 ) use Hofstede’s cultural dimensions to show that culture can allow corruption to be tolerated in some regions (Hofstede 2011 ). For example, the dimensions of uncertainty avoidance moderated the relationship between economic adversity and corruption in some regions, whereas power distance and uncertainty avoidance were positively associated with corruption in other regions. This implies that the relationships we have hypothesized are likely to vary across different regions and countries. Regional cultures vary in the degree to which people – individually and within their organizations – trust and interact with one another, which is why regional outcomes vary (Malecki 2012 ). Generalized trust has been found to have a relationship with ethnic nepotism in Africa (Zerfu et al. 2009 ), and political participation in Asia (Kim 2014 ). As broad categorizations, we group the countries in Africa and Asia separately to exploratorily examine the relationships of the role of generalized trust and relation centrism for the extent to which firms perceive corruption as a business obstacle in these two continents given their geographical and cultural differences (Dunford and Liu 2017 ; Gohou and Soumaré, 2012 ; Lipshitz and Raveh 1998 ).

Corruption prevails in numerous lower- and middle-income countries due to underdeveloped political landscapes that foster a culture conducive to corruption. Well-connected firms often leverage these conditions for personal gain (Beesley and Hawkins 2022 ; Petrou and Thanos 2014 ; Taylor et al. 2022 ; Wang et al. 2018 ). Additionally, cultural, religious, and contextual disparities in these nations significantly influence perceived corruption, impacting how firms view it as a business obstacle (Adomako et al. 2021 ; Budak and Rajh 2014 ; Mensah 2014 ). Given these regional disparities, differences in relation centrism and generalized trust play varying roles in shaping corruption as a business hurdle. Focusing on lower- and middle-income countries, we categorize these nations into four regions based on the United Nations geoscheme, Footnote 1 aligning with geographical, political, economic, and historical cultural contexts: South and Central Asia, Middle East and North Africa (MENA), Sub-Saharan Africa, and ASEAN (WorldAtlas, 2023). While these regions share commonalities, disparities in cultural norms, per-capita incomes, and legal institutions are prevalent. These disparities should facilitate different in-group and out-group dynamics due to different cultural bases for a wider range of market-based transactions thus significantly impacting how generalized trust, relation centrism in family or friends, and firms' perceptions of corruption as a business obstacle are interconnected, forming the basis for our ensuing hypotheses:

Hypothesis 2a

There are regional differences in how levels of generalized trust in society are associated with the extent to which firms perceive corruption as a business obstacle.

Hypothesis 2b

There are regional differences in how levels of family centrism are associated with the extent to which firms perceive corruption as a business obstacle.

Hypothesis 2c

There are regional differences in how levels of friend centrism are associated with the extent to which firms perceive corruption as a business obstacle.

2.3 Quality of governance weakens corruption as a business obstacle

Governance generally refers to “rule by the rulers” under some defined laws, processes and vivid authority and good governance, more specifically, entails effectiveness and efficiency in state administration (Kaufmann et al. 2011 ; World Bank 2017 ). Therefore, while good governance tends to imply impartiality and effectiveness in government, poor governance creates more incentives and chances for corruption. The role of governance in determining corruption is well documented. Kaufmann et al. ( 1999 ) contended that the predominant cause of corruption is weak governance. Meagher et al. ( 2005 ) made similar conclusions from a study in Bulgaria where they found that corruption was due to failures in regulatory quality and accountability in designing policies. Analogously, Shim and Eom ( 2008 ) and Dreher et al. ( 2009 ) also showed that good governance leads to a decrease in corruption. Likewise, Attila ( 2011 ) investigated the relationship between corruption and regulation, bureaucracy and political structures and concluded that better public institutions are connected to lower levels of corruption. Moreover, Goel et al. ( 2012 ) explored the impact of economic freedom, bureaucratic quality, democratic accountability, and law and order on corruption and found an inverse relationship between corruption and institutional factors.

The quality of governance is important for this research because related studies reveal that governance, economic, and socio-political features considerably affect anti-corruption disclosure (Manes-Rossi et al. 2023 ), and that managers should avoid obfuscating governance records to ensure greater accountability (Ferri et al. 2023 ). In the same vein, Bjørnskov ( 2007 ), who uses social confidence as a measure of institutional quality, posited that countries with a high level of social trust and confidence are more likely to address corruption problems effectively. Therefore, the level of social trust in a society and its relation to the perception of corruption as a business obstacle is influenced by the quality of governance that exists. Firms expect a country with high-quality governance to have less corruption as individuals will have faith in institutions and thus be less reliant on relations to get things done. Rothstein ( 2011 ), argues that government institutions, especially courts and law-enforcement offices matter in explaining why generalized or particularized trust is high in society.

Motivated by theory, this paper focuses on three aspects of governance: legal institutional quality, political stability, and regularity quality as corruption is a social, political and economic construct that is related to a country’s legal, political and social systems (Kaufmann et al. 1999 ; Keefer and Knack 1997 ). High quality legal institutions imply that the public has confidence that everyone will be treated equally under the law (Berkel et al. 2022 ; Lv et al. 2021 ). High political stability means that there is less politically motivated violence and terrorism within a country (Khurana et al. 2022 ; Miao et al. 2022 ), while high regularity quality means that the rules formulated by the state promote private sector development (Boudreaux et al. 2022 ; Kaufmann et al. 1999 ; Treisman 2000 ). Although these country-level aspects of governance are important for all economies, they are crucial for the less developed and emerging countries that we sample (Keefer and Knack 1997 ; Treisman 2000 ). We, therefore, propose that better governance indicators will reduce the perception of corruption as a business obstacle through generalized trust and relation centrism. Consequently, we make the following hypotheses:

Hypothesis 3a

Better country governance weakens the effect of generalized trust on the extent to which firms perceive corruption as a business obstacle.

Hypothesis 3b

Better country governance weakens the effect of family centrism on the extent to which firms perceive corruption as a business obstacle.

Hypothesis 3c

Better country governance weakens the effect of friend centrism on the extent to which firms perceive corruption as a business obstacle.

3 Data and methods

3.1 data sources and sample.

A comprehensive list and descriptive statistics of all our variables is presented in Table  1 . In the sample, the firm-level data on corruption perception, firm characteristics, and their views on legal institutional quality and business environment are from the 2013–2016 World Bank Enterprise Survey (WBES) database of the World Bank Group. Footnote 2 The sample is restricted to firms from 20 lower- and middle-income countries where data was collected using the global methodology Footnote 3 from 2013–2016 to ensure data uniformity. The Enterprise Surveys are administered to a representative sample of firms in the non-agricultural formal private economy and are firm-level data. The final sample consists of 16,785 firms from the manufacturing, services, transportation and construction sectors. Public utilities, government services, health care, and financial services sectors are not included in the sample. The WBES is based on a wide array of qualitative and quantitative information through face-to-face interviews with firm managers and owners regarding the business environment in their countries and the productivity of their firms. The topics covered in the WBES include corruption, infrastructure, trade, finance, regulations, taxes and business licensing, crime and informality, finance, innovation, labor, and perceptions about obstacles to doing business (World Bank 2017 ).

In addition to the WBES database, we make use of the World Value Survey (WVS) for the corresponding years to capture generalized trust and family and friend centrism at the national level. The WVS consists of nationally representative surveys conducted in countries that contain almost 90% of the world’s population, using a common questionnaire. The WVS is the largest non-commercial, cross-national, time series investigation of human beliefs and values. Variables in the WVS database explore the beliefs, values and motivations of people throughout the world (Alemn and Woods 2016 ; Harris 2007 ; Rose‐Ackerman 2001 ). Finally, we gathered two indicators of country governance, political stability and regulatory quality, from the World Governance Indicators (WGI). The WGI is a research dataset summarizing the views on the quality of governance provided by a large number of enterprise, citizen and expert survey respondents in industrial and developing countries (Kaufmann et al. 2011 ). The data are gathered from several survey institutes, think tanks, non-governmental organizations, international organizations, and private sector firms and scaled from -2.5 to 2.5. For these indicators, higher scores reflect higher-quality country governance, and lower scores reflect lower-quality country governance. Table 1 provides more details regarding each variable’s definition.

3.2 Variables

3.2.1 dependent variable: perception of corruption as a business obstacle.

Our dependent variable “Perception of Corruption as a Business Obstacle” is proxied using the question: “How much of an obstacle is corruption to the current operations of this establishment?” from the WBES database of the World Bank Group to measure corruption as an obstacle to operations as perceived by firms. World Bank Enterprise Surveys (WBES) are nationally representative firm-level surveys answered by top managers and owners of businesses. Answers to this question range from 1 to 5, with 1 indicating “no obstacle,” 2 indicating “minor obstacle,” 3 indicating “moderate obstacle,” 4 indicating "major obstacle,” and 5 indicating “severe obstacle.” This Likert-type ordinal scale variable is extensively used in the literature. The descriptive statistics presented in Table  1 show an average of 2.83.

3.2.2 Independent variables: generalized trust, family and friend centrism

Measures of social network ties were drawn from the WVS. We use three variables from the WVS. They are: (1) Most people can be trusted; (2) family is important and; (3) friends are important. The first variable implies generalized trust in most members of society, the second variable implies that family is important, and the third variable implies that friends are important. The first variable serves as a measure of generalized trust in most members of society, the second variable serves as a measure of family centrism, and the third variable serves as a measure of friend centrism.

3.2.3 Legal institutional quality

We control for the effect of institutions as their role in combating corruption has received attention (Harri et al. 2020 ; Uberti 2018 ) with studies suggesting large institutional effects on firms’ output levels (Efendic et al. 2011 ). Institutional quality can increase or reduce corrupt practices by having implications for the resultant consequences of corruption (Osei-Assibey et al. 2018 ). An effective legal system is a key institution for tackling corruption (Sarmidi et al. 2014 ). Corruption also flourishes where there are institutional voids with consequences for the business environment ( Khanna and Palepu 2013 ; Mickiewicz and Olarewaju 2020 ) . For legal institutional quality, we use the WBES variable that asks if “the court system is fair and impartial”. Responses range from 1 indicating “strong disagreement that the courts are fair and impartial”, which we interpret as meaning that the courts do not possess good legal institutional qualities to 4 indicating “strong agreement that the courts are fair and impartial”, which we interpret as meaning that firms perceive that the courts possess good legal institutional qualities.

3.2.4 Control variables

Control variables at the firm and national levels are also included from the WBES data. At the firm level, firm size, location in a capital or main business city, possession of a line of credit, fixed assets, annual sales, total labor costs, percentage of domestic sales, indirectly exported and directly exported, and percentage of firm ownership by the government, foreigners and domestic individuals are introduced as control variables in the estimations. At the national level, country classification by income classification, geographic region, and landlocked are introduced as control variables in the estimations. Twelve indices are of particular interest from the WBES database because they capture characteristics of the firm’s business environment and perceptions about institutions at the national level. They are indices that ask firms “how much of an obstacle to business are” (1) transport infrastructure, (2) crime, theft and disorder, (3) customs and trade regulations, (4) electricity, (5) telecommunications, (6) access to land, (7) tax rates, (8) business and licensing permits, (9) political instability, (10) access to finance, (11) labor regulations, (12) and an inadequately educated workforce. They measure how obstructive each of these variables are to business performance and responses range from 1 indicating “no obstacle” to 5 indicating “severe obstacle”.

As a final measure of internal consistency, we construct a Cronbach's alpha index from the twelve indices to operationalize a consistent indicator that measures obstacles in the business environment as perceived by the firms. In line with the underlying variables, the Cronbach's alpha variable ranges from 1 indicating “no obstacles in the business environment as perceived by the firms” to 5 indicating “severe obstacles in the business environment as perceived by the firms”. To ensure uniformity with our other variables, we invert this variable so that 1 represents the no obstacle and 5 severe obstacle. The scale reliability coefficient for the Cronbach alpha for the twelve business environment indices is 0.83. These variables are presented in Table  2 while the correlation matrix is presented in Table  3 and as expected, generalized out-group trust and family centrism in-group trust negatively correlate. Both the business obstacle index and court indices are typical of what the literature expects from the sample of countries with the business obstacles index having an average of 2.8 from a range of 1–5, and a legal institutional quality average of 2.19 from a range of 1–4 in ascending order (with higher values meaning better values) (Commander and Svejnar, 2011). The descriptive statistics also reveal that the most common business obstacles reported by all firms are electricity, political instability, and corruption. We show the United Nations geoscheme grouping in Table A1 of the appendix section.

We also control for social media because trust in online environments is a different type of trust that needs to be measured differently (Enli and Rosenberg 2018 ). Most modern firms have a social media presence and firms are increasingly developing strategies that take advantage of social media platforms (Agnihotri et al. 2016 ). From a corruption perspective, the exposure that social media brings to firms could reduce corruption because of the fear of getting caught in the face of potential quick dissemination of proof through social media or increase corruption because the enhanced connectivity via social media could create more avenues for corruption. Many studies suggest that social media should reduce the incidence of corruption (Bertot et al. 2012 ; Enikolopov et al. 2018 ; Goel et al. 2012 ). We operationalize social media participation by including national-level proportions of Facebook and Twitter users thus capturing the proportion of the nation that actively uses these two popular social media sites. We focus on these two sites because they are the most popular social media sites (Etter et al. 2018 ; Gu et al. 2016 ). Research shows that Facebook and Twitter are the primary sources of social media usage across lower- and middle-income countries (Poushter 2016 ), so we focus on countries with this income classification. We also do not include countries that banned or temporarily limited access to Facebook and Twitter during the period we studied to our sample.

This study posits that higher levels of generalized trust in society and higher levels of relation centrism are associated with higher levels of the extent to which firms perceive corruption as a business obstacle. It also posits that there are regional differences in this regard, and that the quality of governance lessens the effect of generalized trust and relation centrism on the extent to which firms perceive corruption as a business obstacle. Empirically, it is tempting to test this proposition utilizing workhorse multivariate (multiple and multivariate) regression models. However, the outcome variable for the perception of corruption as a business obstacle used in this study is measured on a Likert-type ordinal scale which is multinomial distributed (see 3.2.1), where the natural evolution of the data drives the unobserved (latent) process of the outcome variable as it progressively moves towards higher thresholds of the obstacle corruption places on the operations of business organizations. For this reason, we employed the Least Absolute Shrinkage and Selection Operator (LASSO) model reduction method to help select the most important variables that are truly essential in influencing the Likert-type ordinal scale variable of corruption as a business obstacle (we have also included an explanation of the LASSO reduction method in the appendix). Consequently, we utilized the LASSO method for the variable selection of the baseline model to determine the nexus between the perception of corruption as a business obstacle, general trust and relation centrism covariates as follows:

\({\text{where }}{\mathbf{X^{\prime}}}_{i} {{\varvec{\upbeta}}} = \beta_{1} x_{i1} + \beta_{2} x_{i2} + ... + \beta_{k} x_{ik}\) , \(y_{i}^{*}\) is a latent variable ranged \(- \infty\) to \(+ \infty\) on the \(i^{th}\) observation, \({\mathbf{X}}\) denotes \(n \times K\) of explanatory variables, \(\varepsilon_{i}\) is the error term. Assuming that our data consists of \(n\) independent countries facing J-ordered alternative of obstacles to corruption, such that:

where \(\alpha_{1} < \alpha_{2} < \alpha_{3} ...\alpha_{J - 1}\) . Notice that the obstacles to corruption in country \(i\) , \(y_{i}\) , is observed in one of the \(J\) categories demarcated by the cutoff points. Consequently, for a model with m-alternative ordered alternatives, that alternative \(j\) for corruption is observed in country \(i\) is expressed as follows:

where F denotes the communitive density function of \(\varepsilon_{i}\) . The coefficients can be identified by both ordered logit and ordered probit models. However, the error term, \(\varepsilon\) , follows a logistic distribution for the logit model with \(F(z) = e^{z} /(1 - e^{z} );\) while it takes the form of a standard normal distribution with \(F(.) = \Phi (.)\) for the probit model. Footnote 4 The empirical estimation of Eq. ( 1 ) render estimators of \(\beta\) whose sign can determine whether the unobserved variable, \(y_{i}^{*}\) , increases or decreases. Consequently, the marginal effect of the \(j^{th}\) covariate, from Eqs. ( 1 ) and ( 3 ), is:

Thus, the estimation strategy of this paper including the modelling framework and model specification is underpinned by theoretical and empirical literature and aided by machine learning via LASSO model reduction (Belloni et al. 2012 ; Tibshirani 1996 ). We estimate the equations utilising the Stata software, we employed the ‘robust’ command to ensure that the standard errors were unbiased and to address the problem of heteroscedasticity.

4 Results and discussion

The Ordered Probit Model estimates, assisted by the LASSO method, are shown in Table  4 . We used the Ordered Probit Model because it is preferable in situations where the dependent variable has an ordinal scale. The Likert-type ordinal scale of our dependent variable, “How much of an obstacle is corruption to the current operations of this establishment?”, ranges from 1, indicating “no obstacle,” to 5, indicating “severe obstacle” for each firm. By using the ordered probit model in this scenario, we can appropriately handle the ordinal nature of the dependent variable, providing more accurate and meaningful interpretations of the relationships between the dependent variable and the predictors (Becker and Kennedy 1992 ). The first column represents the base model, while columns 2, 3, and 4 introduce generalized trust, family centrism, and friend centrism individually. The significant and positive coefficient for generalized trust aligns with Hypothesis 1a, indicating that increased generalized trust is associated with heightened perceptions of corruption as a business obstacle. However, Hypothesis 1b lacks support, and the noteworthy negative coefficient on friend centrism contradicts Hypothesis 1c, suggesting that increased friend centrism is associated with reduced perceptions of corruption as a business obstacle. The result indicating that higher levels of generalized trust in society are associated with a greater extent to which firms perceive corruption as a business obstacle is significant because it underscores the need for effective mechanisms to reduce objective corruption despite the subjective perception of corruption as a business obstacle.

This result gains further importance considering that perceptions of corruption as a business obstacle decrease with improved legal institutions, greater political stability, higher regulatory quality, increased Twitter engagement, and fewer business obstacles, aligning with previous research findings (Enikolopov et al. 2018 ; Herzfeld and Weiss 2003 ). The marginal estimates from the Ordered Probit Model using LASSO (columns 2, 3, and 4) are illustrated in Fig.  2 and detailed in Tables A2 , A3 , and A4 in the appendix. These findings suggest that the connection among key variables varies based on the severity of corruption’s impact on firms. Notably, they indicate a substantial rise in generalized trust when corruption significantly hampers business operations.

Marginal effects estimation results for key variables tested in relation to the extent to which firms perceive corruption as an obstacle

To test Hypotheses 2a, 2b, and 2c, we employ the Ordered Probit Model using LASSO for African and Asian countries separately (Fig.  3 and 4 , Tables 5 and 6 ). The results indicate stronger support for Hypothesis 1 in Asian countries, revealing a more pronounced link between increased generalized trust and heightened perceptions of corruption as a business obstacle in this group. Furthermore, while increased family centrism is associated with severe corruption in African countries (Table  5 ), the opposite holds for Asian countries (Table  6 ). These findings underscore substantial regional disparities in how relation centrism and generalized trust are associated with firms' perceptions of corruption as a business obstacle.

Marginal effects estimation results for key variables tested in relation to the extent to which firms perceive corruption as an obstacle: Africa

Marginal effects estimation results for key variables tested in relation to the extent to which firms perceive corruption as an obstacle: Asia

In the context of Hofstede’s individualism-collectivism cultural dimension (Hofstede 2011 ), greater social bonding and trust could be held in the family over friends or the general society (Bengtson 2001 ; Harris 2007 ; Shi et al. 2015 ). Such trust in one group over another can lead to behavior that undermines state functions (Huff and Kelley 2005 ; Warren 1999 ), and this sort of behavior could differ across contexts (Cuervo-Cazurra 2016 ; Getz 2006 ; Luo 2011 ), to create levels of disintegration, promoting distrust between groups and leading to differences in the extent to which firms perceive corruption as a business obstacle. Collectivism culture in African and Asian societies shares some commonalities but also exhibits distinct differences shaped by historical, social, and cultural factors. In both African and Asian cultures, collectivism emphasizes group harmony, interdependence, and loyalty to family or community over individual desires. Both cultures often prioritize cooperation, consensus-building, and maintaining social cohesion. Family ties are usually strong, and decisions are often made with the well-being of the group in mind rather than individual interests.

However, notable differences exist between African and Asian collectivism, ultimately impacting management and control systems within these cultures (Mitter et al. 2023 ). In African cultures, collectivism is often deeply rooted in communal traditions, extended family structures, and tribal affiliations. Social identity and belonging are closely tied to one's lineage, clan, or ethnic group. Cooperation and mutual support are emphasized within these tight-knit social networks. In contrast, Asian collectivism often emphasizes hierarchical relationships, respect for authority, and adherence to social norms and roles. Confucian values, prevalent in many Asian societies, underscore the importance of filial piety, respect for elders, and maintaining harmony within social hierarchies. Group harmony is prioritized, and individuals may suppress personal desires for the sake of preserving social order.

Religious and philosophical influences also shape collectivist cultures differently in Africa and Asia. African collectivism may be influenced by indigenous spiritual beliefs, animism, or Islam, Christianity, and other religions introduced through colonization obstacle (Mensah 2014 ). In Asia, collectivism may be influenced by Confucianism, Buddhism, Hinduism, or other indigenous belief systems, each emphasizing community and duty (Tan and Tambyah 2011 ). The differences between Tables 5 (Africa) and 6 (Asia) show the importance of contextualizing the relationship between the perception of corruption as a business obstacle, generalized trust and relation centrism in these regions given that family centrism is associated with severe perceptions of corruption as a business obstacle in the African sample but not in the Asian sample. The results support show that Asian family centrism which emphasizes hierarchical relationships, respect for authority, and adherence to social norms and roles has a negative relationship with severe perceptions of corruption as a business obstacle.

To explore Hypotheses 2a, 2b, and 2c further, an Ordered Probit Model is applied using United Nations geoscheme categories: South and Central Asia, Middle East and North Africa (MENA), Sub-Saharan Africa, and ASEAN. Table 7 highlights deeper regional disparities in the relationships among generalized trust, family or friend centrism, and firms' perceptions of corruption as a business obstacle. In South and Central Asia and MENA, both generalized trust and family centrism significantly affect how firms perceive corruption, with an additional notable positive effect of friend centrism in the MENA region. However, in Sub-Saharan Africa, friend centrism displays a significant negative effect. Conversely, in ASEAN, both generalized trust and friend centrism exhibit a significant negative effect on firms' perceptions of corruption as a business obstacle. As seen in Tables 5 and 6 , friend centrism displays a significant negative effect with the perception of corruption as a business obstacle again for the Sub-Saharan Africa sample and the ASEAN sample.

The perception of corruption by firms can be influenced by friend centrism in several ways. In societies where friend centrism is strong, personal relationships and networks play a significant role in business interactions and decision-making (Mitter et al. 2023 ). As a result, firms may perceive corruption as a more significant obstacle when personal relationships or connections are perceived to be necessary for successful business transactions (Massaro et al. 2019 ). Additionally, in environments where trust in formal institutions is low and reliance on personal relationships is high, firms may be more likely to perceive corruption as a pervasive and unavoidable aspect of doing business. Once again, while friend centrism in Sub-Saharan Africa, ASEAN, South and Central Asia and the MENA regions share some similarities due to cultural values that prioritize personal relationships and social connections, there are some notable differences due to clan and tribal structural differences within these regions. In many sub-Saharan African and ASEAN countries, tribal or clan structures play a significant role in social organization and identity. Friend centrism may intersect with these traditional structures, influencing social and economic dynamics within communities. Such tribal affiliations are less prevalent in the MENA and South and Central Asia regions. Furthermore, the MENA region is characterized by the predominance of Islam, which shapes cultural norms and social interactions. Islamic principles of brotherhood, hospitality, and solidarity may influence the expression of friend centrism and interpersonal relationships in business and society. This could explain why the MENA region has the highest positive association between friend centrism and the perception of corruption as a business obstacle. Overall, however, the results emphasize that family centrism holds greater importance for firms compared to friend centrism concerning their perceptions of corruption as a business obstacle.

Table 8 incorporates an interaction term between corruption and three governance indicators to test our hypothesis regarding the moderating influence of better country governance on generalized trust and relation centrism concerning corruption as a business obstacle. Overall, the results support Hypotheses 3a, 3b, and 3c, indicating that enhanced country governance diminishes the impact of generalized trust and family or friend centrism on firms’ perceptions of corruption as a business obstacle. Notably, political stability consistently emerges as the most influential governance indicator in weakening this effect. Specifically, Table  8 (Columns 2, 5, and 8) illustrates that even when regulatory quality (Column 3) and legal institutions (Column 4) do not exhibit a similar effect, political stability consistently weakens the impact of generalized trust and relation centrism on firms' perceptions of corruption. This trend remains evident in the estimations conducted separately for Africa and Asia, as shown in appendix Tables A5 and A6 (Columns 2, 5, and 8), signifying that higher political stability in countries reliably diminishes the influence of generalized trust and relation centrism on corruption as a business obstacle. As robustness checks, we also rerun all the estimations with country-fixed effects, year-fixed effects, and industry-fixed effects included in the regression analyses. The results remain consistent across all specifications.

5 Contribution and limitations

5.1 contributions.

We have expanded the connections within the trust and corruption literature (Hatak et al. 2015 ; Keig et al. 2015 ; Raz et al. 2023 ) by emphasizing the significance attributed to trust in family, friends, or the broader community (Bullough et al. 2017 ; Harris 2007 ; Uslaner 2004 ). There are three possible interpretations of our results. The first is that medium ties do not create pressures to engage in corrupt behavior because they do not imply significant obligations towards members of the family in-group, nor do they imply substantial trust in out-group members. The second, and in our view more likely interpretation, is that the moderate ties implied by friend centrism serve to deter severe forms of corruption that could pose obstacles to firms in such contexts. This interpretation aligns with consistently lower coefficients for corruption as a business obstacle in Tables 5 and 6 , columns 4 and 5. The third interpretation, related to the second, may stem from not having to rely on dense kinship ties to perform business tasks. Markedly, the results for family centrism in Tables 7 and 8 highlight that family centrism generally outweighs friend centrism in firms' perceptions of corruption obstacles.

Our focus has revealed that higher out-group generalized trust, and to a lesser extent, in-group family centrism, are most frequently associated with greater perceptions of corruption hindering business operations. We have also discovered that moderate relation centrism, particularly friend centrism, is most frequently associated with a decrease in the extent to which firms perceive corruption as an obstacle in their operations. Our contribution does not end there, however, as we have also found that regional disparities exist in the nature of these relationships, but that family centrism generally outweighs friend centrism in firms' perceptions of corruption obstacles. Regionally, family centrism is associated with severe perceptions of corruption as a business obstacle in the African sample but not in the Asian sample. Thus, two significant contributions of this paper are that: (i) friend-centric approaches, particularly in organizational or group settings, are more likely than generalized trust and family-centric approaches to maintain checks and balances in lower- and middle-income countries, ensuring that firm relationships and decisions remain ethical, unbiased, and effective; and (ii) family-centric approaches, which emphasize ordered relationships, respect for the rule of law, and adherence to social norms and roles, are more likely to have a negative relationship with severe perceptions of corruption as a business obstacle. Furthermore, we have contributed to the anti-corruption literature by demonstrating the crucial role of political stability in moderating the impact of trust spheres and relationship dynamics on the perception of corruption as a business impediment across regions (Hauser 2019 ; Jong and Ees 2014 ).

5.2 Limitations

The study's limitation lies in our examination of lower- and middle-income countries, where strong family ties often play a crucial role in surmounting societal and structural challenges (Mertzanis 2019 ). Additionally, we remain uncertain about the interplay: whether political stability diminishes the necessity for corruption through generalized trust and relation centrism, or if, in stable political contexts, these elements are employed to reduce corruption. Nevertheless, the robust findings we've presented hold significance, highlighting the crucial need for firms to acknowledge and tackle in-group and out-group dynamics. This awareness is essential not only to foster positive group dynamics but also to alleviate the adverse impacts of exclusion and discrimination within their operational spheres.

Consequently, in societies where family and friend centrism, which focus on relationships, demonstrate a positive and significant relationship with corruption as a business obstacle, firms must ensure that their employees make unbiased decisions devoid of influence from family or other in-group considerations. These findings hold particular importance for firms situated in lower- and middle-income countries, where ethnic and group ties profoundly impact business activities. In such contexts, relationship-centric interactions occur frequently and may significantly impact corruption as a business obstacle and the strategies adopted to mitigate it. Future research could benefit from utilizing longer time-series data across a wider array of countries, as this may reveal deeper dynamics in the evolving nature of regional disparities in how generalized trust and relation centrism impact firms' perceptions of corruption obstacles over time.

6 Conclusion

Utilizing a pioneering approach introduced in this paper, machine learning has been employed to delineate the nature of social ties within lower- and middle-income regions. These regions exhibit stronger ties within family circles, medium ties within friendships, and weaker ties within the broader societal context. Through this investigation, we have observed a consistent trend: an increase in medium-tie friend centrism is most frequently associated with a decrease in how extensively firms perceive corruption as a business obstacle. Thus, this research underscores the existence of significant relationships between firms' perceptions of corruption as a business impediment and various spheres of trust. Furthermore, our study highlights a significant finding: a country’s governance quality diminishes the connections between firms’ perceptions of corruption as a business obstacle and generalized trust, along with relation centrism. This emphasizes that superior governance is associated with reduced instances of corruption as a business obstacle. Finally, our distinctive analysis elucidates that enhanced country governance, particularly political stability, consistently mitigates the impact of generalized trust and relation centrism on firms’ perceptions of corruption as a business obstacle.

The ICE encompasses corruption subcategories that are only identifiable through out-group generalized trust and in-group relation centrism. Consequently, corruption exhibits a social dimension, aligning with the social aspects of firm conduct. This study establishes a connection between the degree to which corruption impedes business operations and the influence of generalized trust and relation centrism. It also demonstrates the pivotal role of political stability in moderating the associations that generalized trust and relation centrism hold with how firms perceive corruption as a business obstacle.

The United Nations geoscheme is a system devised by the United Nations Statistics Division which divides the countries of the world into regional and subregional groups based on the M49 coding classification. The groups are closely correlated with geographical, political, economic and historical cultural contexts.

The Enterprise Surveys implemented in Eastern Europe and Central Asian countries are also known as Business Environment and Enterprise Performance Surveys (BEEPS).

Meaning that all the firms were given the same questionnaires and the variables capture the same dimensions in all the country settings.

Assuming that errors are jointly normally distributed, \(\varepsilon \sim N(0,\Sigma ){\text{ where }}\varepsilon { = [}\varepsilon_{1} ...\varepsilon_{m} ]{\prime} .\)

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Crime and Courts

Menendez lawyer tells jury in closing that prosecutors failed to prove a single charge, menendez has pleaded not guilty to charges that he accepted bribes including gold and envelopes of cash from 2018 to 2022, by larry neumeister • published july 9, 2024 • updated on july 9, 2024 at 8:10 pm.

A lawyer for Sen. Bob Menendez on Tuesday urged jurors to acquit him of every charge at the Democrat's New York City corruption trial , saying federal prosecutors had failed to prove a single count beyond a reasonable doubt.

The attorney, Adam Fee, told the Manhattan federal court jury that there were too many gaps in evidence that prosecutors wanted jurors to fill in on their own to conclude crimes were committed or that Menendez accepted any bribes.

“The absence of evidence should be held against the prosecution,” he said. “There's zero evidence of him saying or suggesting that he was doing something for a bribe.”

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And he defended over $100,000 in gold bars and more than $480,000 in cash found in an Englewood Cliffs, New Jersey, home during a 2022 FBI raid, although he acknowledged of the valuables: “It's provocative. It's atypical.”

“Prosecutors have not come close to meeting their burden to show you that any of the gold or cash was given to Senator Menendez as a bribe,” Fee said.

“This is a case with a lot of inferences,” he said, suggesting there were large gaps in the evidence that was unsupported by emails, texts or other evidence.

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Prosecutor tells jury at bribery trial that Sen. Bob Menendez put power ‘up for sale'

Bob Menendez says he didn't testify because prosecution failed to prove bribery case

Sen. Bob Menendez's defense begins with sister testifying about family tradition of storing cash

After the jury was sent home Tuesday, Fee told Judge Sidney H. Stein that he was about halfway through a five-hour closing that will resume Wednesday morning. His closing will be followed by arguments from two other defense lawyers before prosecutors present a rebuttal argument. The jury is likely to get the case on Thursday.

Earlier Tuesday, Assistant U.S. Attorney Paul Monteleoni said in a closing statement that began Monday that the senator had engaged in “wildly abnormal” behavior in response to bribes, including trying to interfere in criminal cases handled by the top state and federal prosecutors in New Jersey.

Menendez, 70, has pleaded not guilty to charges that he accepted bribes including gold and envelopes of cash from 2018 to 2022 from three New Jersey businessmen who wanted his help in their business ventures.

His trial entered its ninth week on Monday.

Menendez is on trial with two of the businessmen — Wael Hana and Fred Daibes. Hana, who prosecutors say enlisted Menendez to help him gain and protect a monopoly on the certification of meat exported from the U.S. to Egypt, and Daibes, an influential real estate developer, have also both pleaded not guilty. A third businessman pleaded guilty and testified at the trial.

Monteleoni rejected attempts by the defense to make it seem that Menendez was unaware of efforts to get cash or favors from the businessmen by his then-girlfriend, Nadine Arslanian, who became his wife in fall 2020. Fee has argued that she went to great lengths to hide her financial troubles, including an inability to pay for her home, from Menendez.

To demonstrate his point that Menendez was in charge of bribery schemes, the prosecutor pointed to testimony about a small bell the senator allegedly used to summon his wife one day when he was outside with one of the businessmen and wanted her to bring him paper.

The bell “showed you he was the one in charge," Monteleoni said, "not a puppet having his strings pulled by someone he summons with a bell.”

Nadine Menendez, 57, also is charged in the case, but her trial has been postponed while she recovers from breast cancer surgery.

Menendez has resisted calls, even by some prominent Democrats, that he resign, though he did have to relinquish his powerful post as chairman of the Senate Foreign Relations Committee after the charges were unveiled last fall.

Several weeks ago, Menendez filed to run for reelection this year as an independent.

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