The private sector has much to offer public sector organizations. Firms excel in financial, IT, contract negotiation, service delivery, procurement and other business systems that are often poorly developed in government agencies. They often set standards for probity and human resource management. Some are adept at long range strategic, or operational, planning or have expertise in special areas of the law.

However, this potential is seldom realized. One possible reason is that even `socially responsible’ firms may have weak incentives to operate outside their core business areas. They may fear erosion of shareholder capital, conflicts of interest or reputational costs when their government partners fail. Such concerns over coordination, legitimacy and the returns to investments are creating obstacles to effective partnerships that might improve economic and legal frameworks, upgrade public sector management and result in better public services.

Despite recent pressures on the market share of multinational firms based in North America and Europe from soaring international BRIC investments, the interests of firms operating globally is served best by governments that are politically stable and perform well and by government and business partners that are predictable.

Presentation (PDF)

Presentation (PDF)

Governments and businesses are being targeted by initiatives to encourage the disclosure of information. Transparency is seen as a crucial organisational virtue and a means of improving efficiency, performance and equity. Yet, initiatives to promote transparency confront unexpected obstacles and sometimes fail to change organisational behaviour. What explains the gap between the intuitively powerful connection linking disclosure and better behaviour, and the frequently disappointing reality?

This note explores some theoretical and empirical factors that might help explain this `transparency gap’ and some possible ways of closing it. First, it examines the assumptions underlying most transparency initiatives with their foundations in economic theory and notions of good governance. It then assesses the limitations of abstract models linking disclosure and improved organisational behaviour by examining two transparency initiatives directed respectively at the private and public sectors – the FTSE4GOOD index and the Global Corruption Index of Transparency International. Finally, it identifies some circumstances when disclosure might have unexpected, or even counterproductive, consequences and arrives at some practical recommendations for more effective disclosure strategies.

Meeting note (PDF)

Presentation (PDF)

Presentation (PDF)

There are many reasons to pause and assess what we know about corruption, an activity that the World Bank estimates costs about $1 trillion a year, or 3% of world GDP. Corruption is alleged to hurt economic growth and reduce peoples’ welfare, affect governance and erode social networks of trust. With globalisation and the rapid increase in cross-border economic transactions, the potential opportunities for side-payments have multiplied. Hence understanding the sources of corruption and devising policies to curb it has become more urgent.

This note begins by examining the limitations of the widely accepted definition of corruption - “the abuse of public office for private gain”. It makes a case for the use of a broader conception of corruption to involve both public and private officials. Then, it discusses the problems inherent to measuring clandestine transactions, for which information is inevitably scarce, and the creative ways in which researchers have dealt with the lack of data. Finally, it presents and assesses three theoretical frameworks – individual, cultural and relational – that have been applied to examine corruption and analyses what each of the three frameworks has to say about the impact of globalisation on levels of corruption around the world.

Meeting note (PDF)

Presentation (PDF)

Private and public sectors have much to gain from collaboration. If businesses help governments improve their political, technical and financial performance, everyone – businesses included – can enjoy the benefits of a more stable and efficient economic environment. However, instances of such public-private collaboration are relatively rare. What is impeding this apparent win-win cooperation? This note argues that a key factor is businesses’ perception of their legitimacy to support the development of public sector capabilities without compromising their public image or business objectives.

The paper begins by discussing the notion of corporate legitimacy in relation to contributions to public sector performance. It examines the different conceptions of `appropriate’ or `legitimate’ corporate behaviour from the perspective of different stakeholders – shareholders, civil society and governments – and how businesses have to reconcile them before embarking on successful private public collaboration. It then analyses how social expectations about the acceptable level of business involvement in public affairs differ across countries and how businesses need to be aware of the boundaries of business legitimacy in each context. Finally, it offers a set of conditions under which firms might be better equipped to maintain – and even increase – their legitimacy to help governments improve their performance.

Presentation (PDF)

Presentation (PDF)

Booming oil and mineral sectors are generating massive profits for extractive industries around the world. While they please both management and shareholders, they are also the source of wariness. Rising profits are being eyed by host governments and unleashing a wave of contract renegotiations in mineral-rich countries. This situation merits some reflection: Are these renegotiations the result of flawed contracts? Are there better ways to manage long-standing agreements when external circumstances are prone to change so dramatically?

This note presents insights from contract theory which help to explain recent renegotiations between host governments and MNCs in the extractive sectors. It emphasises that incompletely specified contracts have benefits as well as costs and, as such, may be intentionally designed to be `incomplete’ by both parties. Then, it discusses the two typical contracts in the oil and gas industry – tax and royalty (T&R) contracts and production sharing agreements (PSA). It suggests that the context is as important as the contract itself to the way risks are shared, because norms, regulations and the relationship developed among the contracting parties are all crucial to the way agreements are framed and bounded. Finally, the note acknowledges that there is no such thing as a perfect `model contract' and that if the past is prologue, most oil and gas agreements will have to be renegotiated at some point. However, there are ways to improve the way contracts are specified so as to minimise economic inefficiencies and promote good relational governance in resource-rich countries.