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ETHICS / MANAGEMENT ACCOUNTING

Struggling European nations seen as more corrupt, report shows

 

By Neil Amato
December 7, 2012

In most parts of the world, perceived corruption of countries has remained the same during the past year. That’s good news in New Zealand, Denmark, and Finland, viewed in general as the most transparent. It’s more of the same for Somalia, North Korea, and Afghanistan, viewed as having the highest perceived corruption in the public sector.

But some movement in the middle shows that countries going through severe financial crises or government upheaval dropped in Transparency International’s annual Corruption Perceptions Index, which was released Wednesday.

Greece, which has taken billions of dollars in loans in an attempt to salvage its foundering economy, is now viewed as more corrupt, according to the index. Italy, another European Union member facing financial and political upheaval, has steadily dropped in the index, which has been published by global watchdog group Transparency International since 1995.

The 2012 index measured perceived corruption in 176 countries, using a variety of data sources. Although scores from year to year cannot be fully compared—because of changes in methodology and the amount of available data for each country—a country’s fall in the rankings is viewed as troublesome.

Two-thirds of the countries ranked below 50 on the index’s 100-point scale, which, according to Transparency International, shows that the public sector must be more transparent.

“Corruption is the world’s most-talked-about problem,” Cobus de Swardt, managing director of Transparency International, said in a press release. “The world’s leading economies should lead by example, making sure that their institutions are fully transparent and their leaders are held accountable. This is crucial since their institutions play a significant role in preventing corruption from flourishing globally.”

Other highlights from the 2012 index:

  • The top five countries in the 2011 index—New Zealand, Denmark, Finland, Sweden, and Singapore—remained in the top five this year. In this year’s survey, Denmark, Finland, and New Zealand tied for first place, followed by Sweden and Singapore, respectively. Last year, New Zealand held the top spot; Denmark and Finland were tied for second; and Sweden and Singapore were fourth and fifth, respectively.
  • The United States, 24th in the 2011 index, is 19th this year. The U.K., tied for 16th in 2011, is tied with Japan for 17th this year.
  • Greece has fallen steadily since the 2009 index. The country was 71st in 2009, then 78th in 2010, 80th in 2011, and 94th this year.
  • Italy has fallen as well, but not as rapidly, going from 63rd in 2009 to 72nd this year.
  • Spain, another economically strapped southern European nation, has approximately 25% unemployment. Yet it has remained relatively stable in the index, going from 32nd in 2009 to 30th in 2012.
  • Egypt, which had a citizen-led overthrow of the government in 2011, still has a corruption perception problem, falling from 112th in 2011 to 118th in 2012.


Finance professionals in a CGMA survey released in May said they felt more pressure to act unethically during an economic downturn. Pressures are most apparent in emerging economies, according to the survey.

The CPI is based on perception only, Transparency International says, because “there is no meaningful way to assess absolute levels of corruption in countries or territories on the basis of hard empirical data.”

Perception has a way of keeping businesses out of countries, such as those in Africa, a continent that has the highest perceived level of corruption. Ninety percent of sub-Saharan countries scored below 50 on the index.

Another aspect of transparency is enforcement. The United States and the U.K. are among Transparency International’s 2012 progress report of countries that actively enforce bribery laws set forth by the Organisation for Economic Co-operation and Development (OECD). Some emerging markets have not yet joined the OECD’s anticorruption effort.

Neil Amato (namato@aicpa.org) is a JofA senior editor.

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