Corporate Governance as an Antidote to Corruption in Emerging Markets

Abstract

This chapter assesses what is known about the likely role of corporate governance reforms and best practices as an antidote to commercial and political corruption in emerging markets. The purpose of the assessment is to marshal knowledge about the relationship between corporate governance and corruption and to help identify best practices with respect to anti-corruption efforts. The methodology combines literature review and identification of sources of information and data about corporate governance and anti-corruption measures. The scope of the chapter includes corporate governance norms promoted by international institutions, effects of foreign direct investment, and interactions among quality of government, quality of corporate governance, and corruption levels and forms. The vital issue is whether and if so how and to what extent corporate governance reforms and best practices will operate to reduce corruption in emerging markets. General findings are that corporate governance best practices are desirable for several reasons, and such best practices, in combination with business integrity and governmental anti-corruption efforts, should operate gradually against commercial and political corruption. Effectiveness of governance and anti-corruption measures depend on personal integrity of business directors and executives. Structural measures typically recommended in corporate governance codes are not well linked to anti-corruption effectiveness.