Abstract
While its scope and scale can be exaggerated, the power transnational corporations (TNCs) exert in the contemporary world is considerable. This is often at the expense of states, or at least is exercised in a way that can undermine states. Some interactions between corporations and states or their officers constitute prime examples of power crime. A blatant form is where corporations either offer or else agree to pay bribes to state officials in order to secure a major contract. This capacity to corrupt state officials via large scale bribes gives corporations significant potential power. This article begins by citing allegations of active corruption of state officials by TNCs, as well as counter-examples (i.e. where TNCs have taken a stand against rent-seeking officials). It then argues that active corruption by corporations constitutes a major dimension of power crime, and seeks to explain apparently contradictory behaviours by TNCs, relating these to rational choice theories and neo-liberalism. It is argued that recent changes in corporate governance and behaviour have made rational-choice models and simplistic neo-liberalism either questionable or redundant. Bu at the same time, globalisation and its stable mate neo-liberalism encourage improper behaviour–various forms of power crime-by corporations.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
It could be objected that all the scandals cited post-dated the TI change. The reason for their inclusion here is that these cases ‘enjoyed’ even higher profiles than those in the 1990s.
This investigation covered BAE activities in six countries, two of which were Saudi Arabia and Czechia—Czech Business Weekly, 21 July 2007.
It is interesting to note that, soon after the US criticisms of shady UK arms dealing practices, the British authorities accused the US of using improper means to secure a major Polish order for fighter aircraft, which BAE had also hoped to secure. To an outside observer, this all looks like a case of pots and kettles calling each other black! For the record, it emerged in July 2007 that the US Department of Justice was investigating American connections to possible BAE bribery.
The tarnishing was not clearly reflected in the 2006 BPI, however, in which Australia emerged as the 3rd cleanest country out of 30 assessed. This might be because the news had not yet spread widely by the time of the surveys for the 2006 BPI (early-2006) and/or because the Australian government had soon demonstrated a willingness to investigate the accusations—and perhaps even because some did not believe the allegations at that stage. The eventual outcomes of the inquiry (see below), however, could yet result in a further deterioration in Australia's corporate image.
The Cole Commission was extremely circumspect in its conclusions, arguing that, ‘what the IIC [Independent Inquiry Committee – LTH] described as ‘kickbacks’ did not necessarily carry with it any implication of illegality’ ([6]: 126). The word ‘bribe’ does not appear in the 346 pages (total) of Vol. 1 of the Commission’s findings, the sub-title of which is Summary, Recommendations and Background.
One view is that bribes are offered before an improper action is taken by a corrupt official, whereas kickbacks are given afterwards. However, recipients of kickbacks have usually been promised a ‘fee’, in return for a favour, before that improper favour has been granted. In this sense, the difference between a bribe and a kickback is minimal, and both the Cole Commission and the ATO can be argued to have been playing semantic games.
The term ‘meat-eating’ in this context refers to officials who actively solicit bribes, as distinct from less predatory ‘grass-eating’ officials, who will accept bribes offered to them. The terms derive from the Knapp Commission’s 1973 report on corruption in the New York Police Department.
It is worth noting here that the Russian company RussGPS accused Motorola in 2006 of violating patent rights, in connection with the alleged use of RussGPS technology in Motorola products—following which Motorola accused RussGPS of defamation. The defamation case was heard in Moscow in September 2006, and found in favour of the Russian defendant.
One of the better known advocates of RCT has acknowledged that using what he calls substantive and procedural forms of rationality (which appear largely to correspond to thick and thin notions of rationality) can result in very different conclusions about the rationality of a given action or actor—see [25]: 174. Once again, the usefulness of RCT must be questioned.
The future behaviour of a given corporation might reasonably be predicted on the basis of past and present behaviour. But such prediction is based on knowledge and experience, and the application of RCT would be superfluous.
For an example of a former advocate of RCT renouncing his faith in it see [30].
As of 2004, GE had been accused of misconduct (of various kinds) 63 times, and had had to pay fines, restitutions, costs etc. totalling almost US$1 billion [9].
Project on Government Oversight, http://www.pogo.org/p/contracts/co-020505-contractors.html, accessed 13 May 2008.
This is not to overlook the fact that the British government's decision in December 2006 to terminate the SFO's investigation was largely due to pressure from Saudi Arabia. But the British Ministry of Defence had also supported BAE's position, and the British government can be seen to have been defending the interests of one of the UK's most significant companies, in many ways against its better judgement.
The underlying theme in Stiglitz's comment is not new. Thus, Clinard and Yeager ([4]: 155) observed almost three decades ago that ‘Probably nothing has tarnished the image of corporations within recent years more than the public revelation of the widespread illegal payments made to attain certain corporate objectives’. For an early analysis of one form of questionable corporate payment (that to political elites to secure advantage) see [16].
Or, in some cases, higher bribes than those offered by companies not awarded contracts.
The four other firms were BICC Cables, Marubeni Corporation, Pirelli Cables and Tomen Corporation.
See O’Brien ([24]: 3–4 and 101–2) for an argument that deregulation, in the form of the repeal of the Glass-Steagall Act in 1999, played an important role in the increase of corporate malfeasance in the USA in the 2000s.
References
BBC (2008). Q and A: the BAE-Saudi allegations, BBC news online, 10 April (accessed 6 June 2008).
Buchanan, J., & Tullock, G. (1962). The calculus of consent: Logical foundations of constitutional democracy. Ann Arbor: University of Michigan.
Camilleri, J., & Falk, J. (1992). The end of sovereignty?. Cheltenham: Elgar.
Clinard, M., & Yeager, C. (1980). Corporate crime. New York: Free.
Cohen, J. (1983). Rethinking social movements. Berkeley Journal of Sociology, 28, 97–113.
Cole, T. (2006). Report of the inquiry into certain Australian companies in relation to the UN Oil-for-food programme—Vol.1. Canberra: Commonwealth of Australia.
Dahl, R. (1956). A preface to democratic theory. Chicago: Chicago University.
Dahl, R. (1957). The concept of power. Behavioural Science, 2(3), 201–15.
Drew, K. (2004). Compliance with anti-corruption laws through access to public procurement: sanctioning or voluntary self-regulation, background paper for workshop 4, OECD global forum on governance—fighting corruption and promoting public integrity in public procurement, 29–30 November.
Evans, R., Traynor, I, Harding, L., & Carroll, R. (2003). Politicians claims put BAE in firing line', The Guardian, 12 June.
Ferejohn, J. (1991). Rationality and interpretation: Parliamentary elections in early Stuart England. In K. Monroe (Ed.), The economic approach to politics: A critical reassessment of the theory of rational action. New York: Harper Collins.
Foley, S. (2006). Daimler employees fired over bribery scandal, The Independent, 7 March
Fong, D. (2008). German firms not affected by siemens scandal, experts say, deutsche welle world online, 7 May (accessed 6 June 2008).
Goldman, M. (2005). Political Graft: The Russian way, Current History, October: 313–18.
Heimann, F., & Dell, G. (2007). Progress report 07: Enforcement of the OECD convention on combating bribery of foreign public officials. Berlin: Transparency International.
Jacoby, N., Nehemkis, P., & Eells, R. (1977). Bribery and extortion in world business: A study of corporate political payments abroad. New York: Macmillan.
KordaMentha (2006). Agribusiness industry roundup. Australia: KordaMentha research unit, December, No.618.
Krust, M., Scannell, K. and Power, S. (2006). Daimler, U.S. discuss a deal to end bribe case, wall street journal, 14 September: A11.
Kuzio, T. (2003). Ukraine's international image suffers as Kuchma threatens agricultural reform, Ukrainian Weekly, 71/17 (27 April).
Leigh, D., & Evans, R. (2007). BAE accused of secretly paying £1bn to Saudi prince, The Guardian, 7 June.
Leigh, D., & Evans, R. (2008). BAE: secret papers reveal threats from Saudi prince, The Guardian, 15 February.
Miller, W., Grødeland, Å., & Koshechkina, T. (2001). A culture of corruption: Coping with government in post-communist europe. Budapest: Central European.
Murphy, M. and Peel, M. (2008). Fraud officers vow to pursue BAE, Financial Times online, 30 July (accessed 6 August 2008).
O’Brien, J. (2003). Wall street on trial: A corrupted state?. Chichester: Wiley.
Riker, W. (1990). Political science and rational choice. In J. Alt, & K. Schepsle (Eds.), Perspectives on positive political economy. Cambridge: Cambridge University.
Robertson, D. (2007). Former law lord is asked to head inquiry into BAE's ethics, The Times, 12 June.
Shelley, L. (1998). Organized crime and corruption in Ukraine: impediments to the development of a free market economy. Demokratizatsiya, 6(4), 648–63.
Stiglitz, J. (2006). Making globalization work. Camberwell, Vic: Penguin.
Tanzi, V. (2004). Foreword. In D. Masciandaro (Ed.), Global financial crime: Terrorism, money laundering and offshore centres (pp. ix-x). Aldershot: Ashgate.
Taylor, M. (2006). Rationality and the ideology of disconnection. New York: Cambridge University.
Touraine, A. (1981). The voice and the eye. Cambridge: Cambridge University.
Walker, R. B. J., & Mendlovitz, S. (eds.) (1990), Contending sovereignties (Boulder: Rienner).
Wardell, J. (2008). UK law lords uphold decision to halt BAE enquiry, Washington Post online, 30 July (accessed 6 August 2008).
Woronowycz, R. (1997). Justice ministry announces program to fight corruption. Ukrainian Weekly, 65(16), 20 April.
Author information
Authors and Affiliations
Corresponding author
Additional information
I am indebted to the Melbourne Research and Innovation Office at the University of Melbourne for a grant that enabled me to conduct preliminary research into this topic in 2008.
Rights and permissions
About this article
Cite this article
Holmes, L. Good guys, bad guys: transnational corporations, rational choice theory and power crime. Crime Law Soc Change 51, 383–397 (2009). https://doi.org/10.1007/s10611-008-9166-9
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10611-008-9166-9