Fighting Corruption: Past, Present and Future
April 11, 2016
Speech delivered by Professor Milton Seligman
Ladies and gentlemen,
It is a great honor to participate in this seminar alongside such distinguished individuals.
I would like to say thank you for this invitation from a group of brilliant young Brazilian lawyers who are doing their LLM at this University.
The fight against corruption incorporates the challenge of creating strong, legitimate, effective and credible institutions to establish limits on the relationship between the public and private sectors.
I had the opportunity to experience this on both sides.
I have held positions in public administration, directed a large private global company, have run an international NGO with consultative status with the UN, and I am currently a professor.
During my long period of professional experience, I have never before seen such distrust and suspicions regarding the relationship between public officials and private actors in addressing concerns they have in common.
It is not a coincidence that, according to different polls, corruption is considered the worst problem in the country, according to the Brazilians.
The reputation of companies, public officials and the professionals who put them in contact with one another has never before been so questioned.
I believe that there are reasons for this.
But before addressing these reasons, I want to take one step back and ask:
Do private companies really need to have relationships with governments?
Could we avoid all of this by simply banning such encounters?
Even considering conflicts of interest that exist and are real, I believe that society has much to gain from the development of a public policy created and implemented with the full participation of all legally established social actors, and the private sector is part of this group.
Moreover, I believe that this relationship is inevitable.
The greater the participation of the State in the economy, the more inevitable this relationship will be.
Therefore, there are good reasons for companies and governments to have a healthy dialogue.
The United States of America regulated the relationship between the public and private sectors, as stated in the first and fourteenth Amendments to the Constitution, along with the cases that strengthened these rights.
In Brazil, this is not the case, and both history and our traditions provide us with reasons for these upheavals and these concerns.
Patrimonialism, for example, is part of Brazilian political culture.
Historically, the appropriation of the state by private groups has always been present in politicians’ minds.
The interests of political parties, families, individuals, companies or groups of social pressure, such as trade unions and social movements, rather than the general interests of society, are what tend to define the dynamics of public policies.
Furthermore, there is a serious problem in our constitutional system of government.
The political regime in Brazil is coalition presidentialism, which exacerbates the problem.
The President who wins the election usually does not automatically have the majority in any of the houses of Parliament, since there are more than 25 parties represented in the Congress.
The means for creating parliamentary majorities utilizes two mechanism of highly questionable legitimacy.
The first is the using positions in the public administration to attract allies.
The second is making financial commitments to support the election campaigns of allies.
In order to fulfill this commitment, governments need the support of the private sector.
We are here to see what will come of Brazil after the crisis and to see how an improved relationship between companies and the state sector can help in the resumption of economic development.
In any case, how can investors and consumers once again have faith, and how can public authorities recover the ethical legitimacy that is today so tarnished?
The first major point to be addressed is to recognize, accept and defend that society can never be relegated to the background and cannot be forgotten or wronged by companies and government agents when they come into contact to negotiate, or whatever the case may be.
That is why I believe it is important to look deeply at the problem of this relationship in two respects.
The first is to identify the goals that society wants to achieve to permit a relationship among these actors. This is what each party can and should aspire to in this negotiation.
The second is to define the framework under which these negotiations will take place.
It is my belief that the purpose of a relationship between private companies and public agencies should be to create value for society, to make companies more competitive and to provide the political agent who makes the relationship possible with social recognition.
This relationship should utilize objective, ethical and transparent criteria and should be part of a triple-win strategy, where one of the winners is the diffuse interest of society.
Society should be the beneficiary of the synergy created by this relationship and these gains need to be clearly identified.
Specific experience shows that it is possible to measure these gains, and it is also possible to create performance indicators that can be monitored by everyone.
Indeed, if there is something that private companies can add to this debate it is to lend their experience and the methodologies that they use to measure the impacts of their actions, adapted in order to measure public policies.
In this relationship, the political authorities and party leaderships that run the State do this by means of delegation from the person who was elected for this purpose. They are under an obligation to negotiate on behalf of the interests of everyone.
The only acceptable compensation is to expect recognition of their capacity to meet social aspirations.
This gain is immense, as it will make the politicians competitive in the democratic battle to exercise authority over the State.
With regard to the businessmen, these seek to add value to their companies by increasing their competitiveness in the market.
This ordinary strategy creates value for their stockholders, but this is not enough.
It is also necessary to show what environmental and social values are being created for the whole of society.
This is not philanthropy.
A company's social responsibility is increasingly a way of reducing significant social and environmental liabilities as well as to create assets in order to negotiate with their public sector partners.
The January 17th 2008 issue of the magazine 'The Economist', preached that
“ … corporate social responsibility, once a do-gooding sideshow, is now seen as mainstream … ”.
It's time to show this side, as the world has most definitely changed.
The second aspect that I referred to is to propose, debate and finally approve the rules of this game in the National Congress and the institutions that will govern this relationship.
We need to have standards that create the rules of this game, which clearly state what can, what should and what cannot be done.
Over the threshold of this Law School there is a phrase by President Abraham Lincoln, which says: “No man is good enough to govern another man without the other's consent”.
The absence of institutions that regulate this relationship is serious and puts Brazil behind the more developed countries.
The North American professor Douglass North, winner of the Nobel Prize for economics in 1993 and who recently passed away, believed that institutional changes were more important than technological changes for explaining economic development.
“Institutions are the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction. In consequence they structure incentives in human exchange, whether political, social, or economic. Institutional change shapes the way societies evolve”.
This debate is not yet taking place in Brazil but the lack of legal institutions does not mean that the institutions do not exist.
Those who are following the information regarding the Car Wash (“Lava Jato”) Operation observe that there are indeed rules in these relationships and that there are punishments for those who do not observe them.
There are rules, which establish everything from the price of the bribes, the choice of market leaders and even the choosing of the winners in public bids.
Moving toward an institutionalization of this relationship is imperative and should be undertaken with a great deal of work and a great deal of care, but in the shortest amount of time possible.
There are already draft bills moving through the National Congress as well as other proposals circulating in addition to codes of self-regulation within companies or industries.
These initiatives may serve as a starting point.
Brazil should take advantage of the vast international experience of countries that have rules for this game, and rules that have been in effect for more than 300 years.
On the other hand, one cannot overlook the problems that exist in these other countries.
For example, the debate regarding the relationship between the political world and companies lies at the very heart of the democratic battle to succeed President Barack Obama.
Everybody knows that campaign financing is an important question anywhere in the world.
The financing of political campaigns, when it is not totally transparent, ends up becoming confused with the financing of political activity itself.
This results as Weber taught us in professional politicians “living from politics” instead of “living for politics”.
Having rules is fundamental, but what these rules are is the question that Brazil will have to answer after the crisis.
My personal experience at companies, and now as a university professor, shows that despite the challenges and the current problems, there are many people who are interested in thinking along these lines and in creating these much- desired parameters.
It's time to work together.
Milton Seligman is a Global Fellow of the Woodrow Wilson International Center for Scholars, and Professor of Governmental Affairs at Insper (São Paulo, Brazil).