Miguel Schloss ’68, Managing Partner of DamConsult, was the opening guest for the 2005-2006 Paul M. Montrone Seminar Series on Ethics.
Schloss held a roundtable discussion with students on international corporate governance, anti-corruption and transparency. Schloss opened the session with an overview of international corruption and its negative effects on economic growth in emerging markets. He also described his own experiences in combating corruption by working to increase transparency in the developing world.
Before joining DamConsult, Schloss had a long career at the World Bank, before becoming Executive Director of Transparency International. The discussion touched on evidence from studies by academics and multi-lateral agencies which indicate that the levels of bribery in a country are correlated with low levels of civil liberties and professionalism of the civil service, and high amounts of regulatory discretion in decision making by government officials.
In addition studies have examined the “demand side” by looking at the occurrence of bribery by companies across industries and by country. For example, in the oil extraction and refining industry, he pointed to a World Bank study which quantifies the “significant potential savings” from anti-corruption measures, at each step of the manufacturing and distribution chain.
The roundtable also discussed the need to “de-politicize” corruption between countries and to reject “cultural” and “moral relativism” arguments. Referring to an international survey on attitudes towards ethical behavior, Schloss said “When people around the world were asked: ‘If you found a wallet with money in it, would you return all the contents to the owner?’, the percentage of people who answered yes (and no) was the same in Vietnam, Chile, the United States and every other country.” Instead, varying levels of corruption across countries can be explained by differences in internal controls, legislation and the relationships between institutions and society.
When asked about the role of MBAs as future business leaders in “increasing the demand for accountability”, Schloss stressed three specific approaches: establishing and enforcing clear policies within the company; creating alliances both within your organization, with companies in the same industry or region, and sometimes with other governments outside of the country; and advocating for criminal penalties in companies’ country of origin. He stressed that “corruption is like a balloon – if you press down on one side, the other side grows bigger”.
To be effective, systemic actions are needed which involve all interested parties – including citizens, multinational corporations, local and federal government – to clamp down together to “pop the balloon.” Schloss gave the example of how American companies lobbied the European Commission to create legislation similar to the Foreign Corrupt Practices Act, which sets anti-corruption standards for US companies doing business abroad.
On a positive note, Schloss’ message to the students gathered at the roundtable was that there is hope in combating corruption. He cites his own country, Chile, as an example of how internal anti-corruption measures can lead to external growth and investment. “Success stories in other countries need to be captured and applied in other parts of the world”, he said.
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