For many years, Transparency International’s Corruption Perception Index (CPI) was the only game in town. (See here for why compliance professionals should take the CPI with a grain of salt).
But with each passing year it seems, there are other attempts to measure corruption and a sort of corruption index competition has developed. In other words, my corruption index is better than your corruption index and here are the reasons why.
For instance, this recent FCPA Blog post is titled “Not All Corruption Indexes Are Created Equal” and like much of what appears on the FCPA Blog the post is written by a person pushing their own organization’s product or service offering.
My own two cents, as discussed below, is that corruption rankings are like “best places to live” or “best places to retire” lists. They are interesting to read, but at the end of the day what do they tell you that you didn’t already know?
Like most people, I have my own criteria for what makes a location a desirable place to live. Given the choice between a small town or big city, I prefer the former. Mountains vs. ocean, let’s just say you can’t hike the ocean. Ideal commute: that’s easy a bike, not a car.
In other words, do I really need a “best places to live” list to tell me that I might enjoy living in say Lone Tree, Colorado, Bozeman, Montana, Beaverton, Oregon, or Orem, Utah (all places that appeared on this “best places to live” list)? Do I really need a “best places to retire” list to tell me that I might enjoy retiring in say Fayetteville, Arkansas, Colorado Springs, Colorado, or Spokane, Washington (all places that appeared on this “best places to retire list”).
The short answer is no, I already generally knew that those locations were desirable given my preferences.
Similarly, who cares that Schaumburg, Illinois (a Chicago suburb) was high on the “best places to live” list or that Sarasota, Florida was ranked as the “best place to retire. Given my above preferences, I am just not into those places and as to the later location three things I dislike are humid weather, sand, and salt water.
In other words, the above rankings were interesting to read, but: (i) didn’t actually tell me anything that I didn’t already know; and (ii) certain things the lists were trying to tell me I dismissed because they didn’t apply to me given my preferences.
I view corruption rankings the same way.
Do I really need the CPI or another list to tell me that corruption might be high in Somalia, Venezuela and Haiti? No, I already generally knew that.
On the flip side, do I really need the CPI or another list to tell me that corruption is likely low in New Zealand, Denmark, and Norway? No, I already generally knew that.
Moreover, “best places to live” and “best places to retire” lists generally rank locations in numerical order and with any numbered ranking there is a material difference (in terms of rankings) between 1 and 28, and between 28 and 48. Yet (as a practical matter), is there really that much difference? No.
The same could be said of the CPI and other rankings. There is a material difference in the rankings between, for instance, a country that scores a 59 vs. a country that scores a 51 just like there is a material difference between a country that scores a 39 vs. a country that scores a 31. Yet (as a practical matter), is there really that much difference? No.
The above linked “best places to live” and “best places to retire” lists are just a small portion of the many such rankings out there often sponsored or hosted by magazines and other publications. Which list is right? Is there really that much difference between the lists?
For instance, the above-linked FCPA Blog post is authored by a Trace International representative highlighting its Bribery Risk Matrix. The author acknowledges that in certain respects there is very little difference between the CPI and its Bribery Risk Matrix. Yet, thereafter the author asserts that there are “potentially significant divergences” and the post offered the following charts which show the Matrix scores and the (inverted) CPI scores plotted against each country’s per capita GDP.
I don’t know about you, but I look at the above graphs and conclude that yeah there are some minor differences here and there and some isolated outliers, but these two graphs, as a practical matter, basically show the same thing.
The same is true for many “best places to live” or “best places to retire” lists. Sure there are some differences and outliers and Eagle River, Wisconsin is not on many such lists, but if you like to fish and snowmobile, well this place is pretty much your heaven. Yet as a practical matter is Eagle River that different than the many other places one can fish and snowmobile in the winter? No.
Moreover, “best places to live” and “best places to retire” lists fail to account for the unique preferences, hobbies, and desires of people. Just because I prefer small towns over big cities and prefer the mountains over the ocean, obviously other people have different preferences.
The same could be said of the CPI and other rankings as they fail to account for the unique products and services of companies. If Company A sells fighter jets and Company B sells dental floss, these companies will have materially different risk profiles because FCPA and related risk is the function of specific business actors (employees and agents) being in contact with specific foreign officials, in the context of specific foreign business conditions.
In other words, one can imagine a scenario where because of the industry, because of the product or service, and because of the go-to-market strategy, Denmark may present more risk than Somalia.
In short, while I find the CPI and other rankings of corruption interesting, these rankings really don’t actually tell me anything that I didn’t already know and hence the parallel to “best places to live” or “best places to retire” rankings.
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