Institutional corruption is on the rise. Illegal corruption is relatively simple to identify and combat - dumping of chemicals into water supplies, bribes offered and accepted, election fraud. However, a different type of abuse has been getting increasing attention in the media, which often involves acts that are technically considered legal, but can be just as damaging, to employees, constituents and the organization's reputation. Recently the Edmond J. Safra Center for Ethics at Harvard University, an organization founded by professor and political activist Lawrence Lessig to study institutional corruption, turned to the InnoCentive Solver community to help develop systems that expose corrupting forces within public and private institutions. We talked to Neeru Paharia, Director of Research for the center, about this particular Challenge.
Hi Neeru - thank you for talking with us today. Your Challenge focuses on ideas for a system to monitor institutional corruption. What would an ideal solution look like?
We hope a solution would outline how to collect and present relevant information about an institution to constituencies in a meaningful way so that 1. they can make better personal decisions, and 2. the institution now has an additional incentive to serve its constituents.
What would you consider to be the biggest hurdle to monitoring corruption?
Watchdog groups, the media, auditors, and regulators have all been deployed to monitor corruption. However all these groups are also vulnerable to capture. For example, in most cases financial auditors are employed by those whom they are auditing. What is their incentive to find fraud when their future business is also at risk? Thus, we are excited about the possibility of data transparency, analysis, crowd sourcing, etc. to take on a monitoring role. With technology and the internet, this is an emerging area and there are some promising projects already underway. Organizations like maplight.org, guidestar,org, and even yelp.com in the case of business are collecting and exposing data in a meaningful way that is of use to constituents.
Is there a profession or industry that you think is in most dire need of this solution?
I think people have differing opinions on this. Campaign finance is certainly one that if reformed, may have beneficial trickle down effects into other institutions and industries.
Can you give us an example of a form of “legal” corruption?
Imagine there is a regulator, and the organization she regulates suggests that they might consider her for a future job with a pay rate that is at least double of what she currently earns. Do you think the regulator will be more or less lenient with the company?
In what ways do you think you’ll be able to apply the winning solution?
We still do not really know what to expect so make no firm assertions about what we will do. However, if we receive a solution that we think is especially viable we may attempt to deploy it.
Would you say that the majority of the organizations that you would target with these new tools will be motivated to implement them? Or is the benefit purely to the organizations’ stakeholders?
If the solution is something an organization has to implement, their incentive is to improve trust and legitimacy with their stakeholders. If the solution can be deployed by an outside party then it does not matter.
What are your thoughts on current methods of drawing attention to corporate corruption (Occupy Wall Street, etc.?) Do you think they are effective in shining a light on this problem, or do they stand in the way of true solutions?
The protesters on Wall Street are advocating for many different things. What is most resonant to us is that we have a bigger systemic problem. In the case of the financial crisis, these problems have led to a system failure with very little accountability. We hope attention to these systemic problems continue to be a point of discussion in the public debate.
Very interesting. Thanks for talking with us today and good luck with your Challenge.