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#Governance, Risk and Compliance

Corruption: perception and reality in the Netherlands

International Compliance Association

Corruption , Netherlands , Transparency International

Corruption can be defined as ‘Dishonest or fraudulent conduct by those in power’ and usually falls into three main categories: grand corruption, petty corruption and political corruption, which the anti-corruption campaign organisation Transparency International defines more specifically.

  • Grand corruption consists of acts committed at a high level of government that distort policies or the central functioning of the state, enabling leaders to benefit at the expense of the public good.
  • Petty corruption refers to everyday abuse of entrusted power by low and mid-level public officials in interactions with ordinary citizens...
  • Political corruption is a manipulation of policies, institutions and rules of procedure in allocating resources and financing by political decision-makers, who abuse their position to sustain their power, status and wealth.’

 

Scales of corruption

Let’s look at a simple example of corruption in everyday life. You’re caught speeding by a policeman, who explains the potential punishment for the offence: a fine, penalty points on your licence, perhaps a driving ban.

He offers you another option: give him ‘a small payment’ in cash and he’ll rip up your speeding ticket, so you pay the money and go on your way. The policeman has his money and you’ve avoided a potential driving ban. This sort of thing is practically accepted as part of life in some countries, but that does not make it right. In many ways it’s the worst type of corruption because it affects millions of innocent people every single day.

Research suggests that a significant majority of people think corruption is at least fairly widespread in the Netherlands, and we’ll return to that later, but first let’s examine another example of how corruption can have far-reaching implications.

I read an article recently comparing the earthquakes that took place in Haiti and Chile in 2010. The Haiti earthquake was measured at a magnitude of 7 on the Moment Magnitude Scale (MMS), and an estimated 200,000 people died. The Chile earthquake was 500 times stronger, measuring 8.8 MMS, but the death toll was in the hundreds. The fact that a much stronger earthquake resulted in a much lower death toll cannot just be down to chance – the disparity between the figures is too great.

The article drew a line between the outcomes of the earthquake and levels of corruption. In Haiti, the construction of buildings and infrastructure failed to undergo checks necessary to meet required quality standards, thanks to bribes, ‘corruption and carelessness [that] left such regulation all but nonexistent’.

In Chile, quality and safety checks and standards were much more rigorously enforced. The conclusion was that Haiti’s poorly constructed buildings collapsed much more easily in the earthquake, claiming many more lives: a very stark illustration of how corruption can have devastating and far-reaching consequences.

 

The Corruption Perceptions Index

Transparency International’s Corruption Perceptions Index (CPI) is an annual survey, ranking countries by perceived levels of public sector corruption, as determined by expert assessments and opinion surveys. Conducted every year since 1995, it is considered by many as a fundamental measure of corruption levels in the world today.

So what does it have to say about Haiti and Chile in relation to the theory above? The Corruption Perceptions Index (CPI) 2015 seems to give this some weight, with Haiti ranked at number 158 out of 168 countries and Chile at number 23.

In contrast, the Netherlands was ranked 5th in the 2015 index, up from 8th place in the previous two years and maintaining the top ten ranking it has held since 2006.

 

The bigger picture in the Netherlands

So the CPI gives the Netherlands a pretty clean bill of health, but let’s dig a little deeper. According to the European Commission’s 2013 Eurobarometer public opinion survey on corruption, 61% of respondents in the general population thought corruption was fairly or very widespread in the Netherlands, substantially below the EU average of 77%. Even more positively, only 9% felt personally affected by corruption in their daily lives, compared with the EU average of 26%.

On a more negative side, in a 2015 Eurobarometer survey of businesses’ attitudes towards corruption, 74% of Netherlands respondents thought it was widespread in the country (higher than the 71% EU average); favouring family and friends in business was rated top of the practices considered most common. However, only 8% thought corruption had prevented their company from winning a public tender or public procurement contract in the last three years (the EU average was a whopping 34%). In terms of whether corruption represented a problem to doing business, only 19% of Netherlands respondents considered that it was.

 

The legal framework

The Dutch Criminal Code includes offences of bribing a public official (with a gift, a promise or offering a service) and public officials receiving a bribe. The law also has broad extraterritorial reach, for example a Dutch public official can be prosecuted for accepting a bribe abroad. Criminal offences can be committed by ‘natural persons and legal persons’: in other words individuals and organisations such as a company or partnership, and individuals within a ‘legal entity’ may also face prosecution. Penalties include prison sentences and fines.

Back in December 2012, that issue of foreign bribery was at the heart of recommendations made by the Organisation for Economic Co-operation and Development (OECD), when it published a report examining the way the Netherlands was implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

It urged the Netherlands to do more to ‘vigorously pursue’ foreign bribery cases and do more to enforce the law in this area, pointing out that only eight out of 22 foreign bribery allegations had led to an investigation. However, the OECD also noted positives, including Netherlands’ efforts to raise awareness of the foreign bribery offence.

By May 2015, an OECD follow-up report found that the Netherlands had made ‘substantial’ progress, although a number of recommendations from 2013 had yet to be fully or wholly implemented. However, it said the Netherlands had ‘taken substantial steps’ and highlighted the opening of a number of new foreign bribery investigations and the conclusion of two cases, with some hefty penalties.

The report gave further details of those cases, which involved Dutch companies SBM Offshore andBallast Nedem, with sanctions imposed via out-of-courtsettlements. SBM Offshore agreed to a US$40 million fine and a US$200 million disgorgement, while BallastNedem agreed to pay €17.5 million; KPMG Accountants NV also agreed to a €3.5 million fine and €3.5 million in confiscation over bribery-relatedaccounting misconduct in the Ballast Nedem case.

 

The global picture

So overall, the picture in the Netherlands seems to be a pretty positive one. However, at a global level, corruption is devastating, and the human cost enormous. The results from the 2015 CPI show that, broadly speaking, little significant change has occurred from a global perspective.

Some countries have improved over the last few years – Greece, Senegal and the UK; and others have experienced deterioration during the same period – Australia, Brazil, Libya, Spain and Turkey. The correlation between the most corrupt and those experiencing conflict is still there though – Afghanistan, Syria, Somalia, Iraq and Libya are examples of this. Where conflict isn’t present, inequality and poverty are apparent in those countries that rank poorly. Sub-Saharan Africa continues to experience difficulties in this respect with 40 of the region’s 46 countries showing a serious corruption problem. 

Along with the Netherlands, the other five least corrupt countries in the 2015 CPI are from Northern Europe – Denmark, Finland, Sweden and Norway. The fact that these countries, (and most others in Northern Europe that performed well) are not experiencing conflict, extreme poverty or inequality issues comes as no surprise, and perhaps gives some hope that corruption can end. It is a collective fight though, and everybody, people and countries alike, needs make their contribution. Only then can we hope to see real change. 

 

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