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International
Round-up
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CORRUPTION
IN ASIAN JUDICIARY |
Political
and Economic Risk Consultancy (PERC)
conducted a regional survey, which
reveals only four countries favourably
in terms of corrupt legal systems.
The report reveals that the legal
system is weak where the countries
are relatively poor or under communist
control or both. Countries with roots
in British Common Law have been ranked
high (better) with the exception of
two countries – India, and Philippines.
The judicial system in China was rated
as unreliable, vulnerable to corruption,
and difficult to deal with. Chinese
appear to be relatively free from
the threats of being caught or prosecuted.
Indonesia also came in for scathing
criticism in the report. Malaysia
and Singapore appear to be far better
and leading the entire region in terms
of better legal systems. In the case
of India, the legal system is reportedly
hurt by corruption due to low levels
of pay for the judiciary and the police.
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Hony.
Editor
Dr.
Bindi Mehta
(Director,
Research at ICSI - CCRT, Formerly, Chief economist,
CRISIL,
with long experience at IDBI and independent consulting,
Writer and Researcher on CG)
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survey conducted by Transparency International in fifteen
emerging market economists revealed that the former communist
countries rank high in bribing officials apart from the Russian
and Chinese countries. Taiwan and South Korea are also among
the leaders in paying bribes. Multinationals from the US are
not exactly clean – they are about average at 5.3 in
a scale of 10 (least corrupt).
Business houses from Australia, Sweden, and Switzerland appear
to be far more respectable at 8.3. There are indications that
domestic companies probably have higher propensity to pay
bribes (as brought out by Gallup). The quantum of bribes seem
to be high in the public works, construction, arms and defense,
followed by oil and gas, real estate, telecom, and power.
It also appears that US government exerts pressure through
diplomatic and financial measures, including threats to reduce
foreign aid, to enable its companies gain unfair advantage.
France, UK, and Japan seem to follow US in putting pressure
on behalf of their business houses.
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COMMERCIAL
FRAUDS BAROMETER |
KPMG,
despite its own accounting scandals, has been tracking frauds,
and their implications. Its fraud barometer shows that the
cost of commercial fraud doubled last year from 82 million
GBP to 162 million GBP. Several respondent companies have
reported being affected by various types of frauds –
43 being hit by embezzlers, 27 per cent by breach of trust,
14 per cent by cyber crime, 7 per cent by money laundering,
7 per cent by general corruption, and 2 per cent by extortion.
The worry is that 89 per cent of the crimes are by people
within the company – the employees.
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ANDERSON
VERDICT SHAKES GLOBAL ACCOUNTING |
Arthur
Anderson, the 89-year old stalwart of the accounting profession,
has been found guilty of obstructing justice in the Enron
investigations. The US no. 5 accounting firm, once held as
a model of probity and professionalism, has been struggling
to stay in business under the weight of the US department
of justice. After the indictment in the middle of June 2002,
Anderson cannot audit US publicly traded companies after the
end of August.
Arthur Anderson founded the firm in the year 1913, and put
his personal stamp of rigorous ethics on the firm. After the
wall street crash of 1929, and the ensuing depression, Anderson’s
firm led the way in re-building Americans faith in business,
as he insisted on honest accounting and eliminating conflicts
of interest. Public accountants should be answerable to the
investing public and not the companies they audit, Anderson
argued in his many writings. This culture was deeply infused
into the firm and continued till the 1990s, when Anderson
like many of its rivals, realized that the real money was
in consulting. The ‘Big Five’ firms started to
undercut each other on price for auditing services, and used
these as a springboard to sign up clients for more lucrative
business. At its height last year, Anderson had 85,000 employees
around the world, with about 2300 clients and US $ 9.3 billion
in annual revenues. Over the past few months, about 700 clients
have dumped the firm, and its employee base has shrunk to
10,000 from 26,000 in the US.
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© 2001 Academy of Corporate Governance
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