Determining corruption
The word corruption is used in common speech, but in the professional anti-corruption space, definitions and precision are important. This is increasingly so when allegations of corruption are weaponised, including for authoritarian purposes.
Transparency International defines corruption as “the abuse of entrusted power for private gain”. The Centre for the Study of Corruption at the University of Sussex builds on this definition: “Corruption is the abuse of entrusted power for private gain which harms the public interest, typically breaching laws, regulations, and/or integrity standards”.
The important component parts of this definition that must be unpacked in order to determine if corruption has occurred are therefore:
- Is there entrusted power?
- Has that power been abused?
- Has there been private gain?
- Has the public interest been harmed?
The Centre for the Study of Corruption suggests taking these questions in turn and sequentially can assist in determining if corruption has occurred.
1. Is there entrusted power?
“Entrusted power” is the power vested in a trusted role (in public office, the private and non-profit sectors, or religio-cultural institutions) held by an individual or institution that exercises discretionary power in relation to another person or entity.
Normal assumptions of entrusted power are that it sits alongside elected officials or those responsible for public money. But are there other areas of public life where the power vested in a trusted role might fall into this definition? Charities who receive public donations and have a published mission of altruism and benevolence for example.
The concept of entrusted power relies on the principal-agent theory of corruption where the agent is entrusted by the principal to work on their behalf. The theory goes on to suggest that it is often impossible for the principal to have sufficient knowledge of how the agent is using their discretion (so the principal has delegated responsibility without managing how it is exercised by the agent – which could occur in an entirely benign environment where the agent is a trustworthy holder of that delegation).
The theory goes on to suggest that the interests of the principal and the agent might at some point diverge, and this risks the agent acting in their own interests rather than those of the principal.
In anti-corruption theory, this information asymmetry or lack of accountability, which prevents the agent from being observed, is corrected by mechanisms which limit the opportunities to act corruptly. As conceptualised into an equation by Robert Klitgaard: Corruption = Monopoly + Discretion – Accountability.
Examples of the principal and agent relationship that could be exploited without effective counter measures might include:
- A planning official (agent) using their knowledge of the bureaucratic system to secure a bribe from a developer, knowing the municipal government (the principal) cannot monitor every application.
- Politicians (agents) might pass laws that favour specific sectors in exchange for campaign contributions, overriding the best interest of the public (the principal).
To assist in establishing if entrusted power exists beyond public office and extends into other sectors, it is helpful to ask whether abuse of the power vested in a role could potentially harm the public interest. Essentially this moves us away from purely looking at cases where the entrusted power involves public service or public monies, and into areas where the public interest is a factor. Consider the CEO of a charity (agent) in receipt of public donations expected to be used to advance the stated charitable purposes. The donors and the board (principal) have placed trust in the CEO to carry out the work of the charity and use the funds responsibly to support the mission of the charity, in the public interest. This seems like a clear example of entrusted power out with the public sector.
This consideration of the public interest also allows us to identify where the entrusted power might have multiple sources. For instance, charities are beholden to their donors, their beneficiaries (where relevant), and the appropriate regulators. Equally one might consider how law firms have entrusted power directly from their clients, but also responsibilities to follow the law and their regulations and to uphold the overall justice system.
Given this, it is perhaps helpful to consider this question of how regulatory structures indicate where abuse of entrusted power might harm the public interest.
One way to identify this is to look at regulatory structures which cover both bodies delivering services with public monies and bodies acting in the public interest, for instance by contributing to democracy or to civil society at large. Regulations exist in order to ensure the regulated bodies act in ways which are fair and to ensure the governance of the body is transparent, accountable and serves the public interest and / or meets its charitable objectives. They are there to address the information asymmetry and accountability requirements we identified as being a corruption risk in the principle-agent relationship.
To apply this therefore to the specific and salient example of the embezzlement by Peter Murrell when he was CEO of the SNP: Political parties are an essential part of our democracy. In recognition of their unique role connecting the public with government and parliament, there are rules, regulations and standards to be abided by. Office bearers in political parties are trusted by the membership and the elected representatives to act in the best interests of the party and also carry responsibilities to follow the law and their attendant regulations. If office bearers in a political party fail to uphold those rules, regulations and standards, they have betrayed the trust of the membership. That in and of itself may not necessarily be considered to harm the public interest.
However, because political parties serve such a pivotal role in our democracy, actions that diminish trust in a political party and by association the regulatory system which provides accountability for all political parties, can also cause the relationship between the wider public and democracy to be damaged.
Democracy is fragile. It is built on trust. When that trust is betrayed, compromised, or undermined, there isn’t just a personal consequence; the impact sends ripples through our democratic institutions.
Following this logic therefore, it is possible that the role of chief executive of a political party, although not a publicly elected position, or wholly in charge of public monies,
2. Has that power been abused?
An “abuse” is a violation of the duties or misuse of the power associated with the trusted role, either through action or inaction. The abuse does not necessarily have to be illegal to be corrupt and can include a breach of regulations and/or integrity standards. This can also include a pattern or aggregation of activities which amount to a collective abuse.
Whilst an abuse of entrusted power does not have to be illegal, there are certain illegal acts which, if proven, can be said to constitute an abuse of entrusted power. However, the important element here is that the abuse must be associated with the trusted role. This would include abusing access to the finances of the political party to furnish one’s own needs rather than those of the party. It would also encompass deliberate actions to avoid regulatory oversight such as presenting information to mislead auditors of the accounts.
3. Has there been private gain?
“Private gain” involves (financial and non-financial) personal gains that accrue to individual(s) or their personal acquaintance(s) and partisan gains that benefit a particular group or institution; it may include the avoidance of losses, or gratification gained through inflicting harm on others.
Private gain does not have to be financial, and there is also a proportionality argument which proposes that minor abuses, even where they add up and may affect an institution’s ability to function, do not constitute corruption if they fail the public interest test. Embezzlement of funds donated by the public to further the aims of a political party demonstrates both personal financial gain and harm to the public interest. Again, it should be considered that by placing the political party in a vulnerable position in terms of its public reputation and its trusted status as a conduit between the public and democratic institutions, the public interest in a resilient and trusted democracy has been harmed.
4. Has the public interest been harmed?
Harm to the “public interest” is useful in determining which abuses of entrusted power constitute corruption. Corruption can harm the public interest in various ways, including direct harms to the intended beneficiaries of the entrusted power; and indirect harms caused by a) undermining the rule of law and/or the purpose of an institution, profession, or other relevant body; b) failure to perform a function whose proper exercise is in the public interest; and/or c) violating the established rights of individuals or groups. Not all failures to act in the public interest are corrupt, only those that constitute an abuse of entrusted power for private gain. From a public policy perspective, the public interest may also provide the grounds for government interest or intervention.
As can be seen in the analysis above, the public interest test is useful in bringing clarity to grey areas. However, it is not an uncontentious element of definitions of corruption, with opposition to its inclusion centred on how subjective public interest may be.
Conclusion
In defence of democracy, there are rules and standards governing behaviour. And those rules often need to be updated in the face of abuse – the cash for honours scandal saw reform to House of Lords appointments, the expenses scandal resulted in new and more stringent rules for MPs.
As elaborated on in discussion of the principal-agent theory of corruption, the risk of the agent abusing their position is mitigated by regulation, transparency, and reward for good behaviour, with sanctions for abuse hoping to serve as a deterrent as well as a punishment or means of recouping the loss. But even with these protections in place, corruption can still occur. What is important is that we learn from the loopholes that have permitted the corrupt activity and consider how to tighten the protections provided by anti-corruption tools.
With this in mind, we have some sympathy with demands for an inquiry into the political rules and regulations that govern the financial dealings of political parties. Lord Jack McConnell has suggested a joint parliamentary inquiry with Holyrood and Westminster co-operating to consider how to “toughen up the management and regulations around party funding”.
As Professor Mitchell goes on to say: “Nobody should be in any doubt that recent revelations have damaged Scottish politics and the Scottish parliament. Demands that something should be done are valid, but we need to make sure that what is done results in improved outcomes, enhances transparency and improves internal party governance and not an opportunity for grandstanding, obfuscation and hyper-partisanship.”