Summary

The Corruption Perception Index (CPI) is a global measure of public sector corruption in 180 countries, influencing international business operations and economic development.

Abstract

The Corruption Perception Index (CPI) quantifies the perceived corruption in the public sectors of 180 countries on a scale from 0 (highly corrupt) to 100 (very clean). With an average score of 43, the index highlights that over two-thirds of countries score below 50, indicating significant corruption levels. Wealthier nations tend to have lower perceived corruption, although high-scoring countries are not immune to corruption. The CPI is both lauded for raising awareness and encouraging policy changes to combat corruption, and criticized for its narrow focus on public sector corruption, omission of private sector corruption, reliance on expert perceptions rather than public experiences, and potential to create negative perceptions that can harm economies. The highest-ranked countries, predominantly in the European Union, are characterized by economic, political, and social freedoms, stable governments, and safety. In contrast, the lowest-ranked countries face dictatorships, lack of freedoms, conflict, inequality, and limited access to information and technology. Businesses are advised to use CPI scores as a starting point for understanding corruption levels in potential markets, while also conducting thorough local research.

Opinions

Supporters of the CPI believe it effectively raises awareness about corruption levels and encourages citizens and governments to address the issue.
Critics argue that the CPI is an oversimplification and does not account for the unique complexities of each country.
The CPI's exclusive focus on public sector corruption is seen as a limitation, as it does not expose corruption within private businesses and organizations.
Reliance on expert opinions for the CPI may lead to a biased view that overlooks the experiences of the general public.
The CPI can inadvertently stigmatize countries, deterring investment and tourism, which can negatively impact their economies.
High CPI-scoring countries are recognized for their transparent and accountable institutions, contributing to their economic and social stability.
Low CPI-scoring countries are often marked by a lack of freedoms, ongoing conflict, and significant barriers to development and economic growth.
Despite its flaws, the CPI is considered a useful tool for businesses to gauge the potential challenges of operating in different countries, provided they conduct additional localized research.

Corruption Perception Index: What Is It?

Why it matters and how it impacts global business operations

Introduction:

No matter how advanced or civilized, corruption is a problem every country faces. The Corruption Perception Index (CPI) measures the perceived levels of public sector corruption in 180 counties and territories.

The index ranges from 0 to 100, where 0 represents highly corrupt and 100 represents very clean. The average score is 43 and more than two-thirds of countries score below 50 (Transparency International). The lowest-ranked countries are governed by untrustworthy and bad functioning institutions, while the highest-ranked countries are governed by honest and less corrupt institutions.

Poor countries are perceived as being more corrupt, while the perception of corruption decreases as countries become wealthier (Mujtaba, Mujtaba, Cavico, & McClelland). However, it does not mean that highly ranked countries are completely free from corruption. We’ll discuss the benefits and flaws of the Corruption Perception Index, as well as analyze the highest and lowest ranking countries.

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Benefits:

There are many supporters, as well as critics, of the CPI. First, supporters believe one advantage of the CPI is that it helps citizens understand the level of corruption in their government compared to other countries. The rankings allow people to become aware of issues within their country.

Citizens then realize and understand the need to change the global policy agenda to combat corruption, which helps to reduce criminal activities. The CPI sends a message to people who work in the public sector to always be honest and not take part in illegal or unethical activities.

The CPI does a great job by helping reduce the misuse of public power for private benefit by drawing global attention through the ranking system.

Flaws:

On the other hand, critics believe that the CPI is an inaccurate representation of corruption. They believe each country is different, has its own complexities, and cannot be compared equally.

Another disadvantage is that the index measures corruption only in the public sector, not private. Since the index does not go into detail and discuss specific businesses and organizations, it is difficult to find out which particular businesses or organizations practice corruption (Seagal).

The index also only takes the perceptions of experts and professionals; the opinions of the general public are overlooked. Instead of experiencing a country first-hand, the index creates a negative perception for investors and travelers. Foreigners decide not to invest or visit, which hurts the economy of low ranking CPI nations.

Critics believe there are many reasons why the CPI is inaccurate and biased and therefore do not trust the CPI.

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Countries With The Highest CPI Scores

The five countries with the highest CPI scores:

Denmark
New Zealand
Finland
Singapore
Sweden

A majority of these countries are in the European Union. The countries are highly developed and there is a high degree of economic, political, and social freedom.

Citizens can access information easily. Technology plays a large role in the citizens’ lives: they are connected to the rest of the world via various types of media.

These countries also have a stable and well-structured government. Most are democratic and the government relies heavily on the citizens’ opinions. The countries also rank highly for safety and peacefulness among citizens.

Countries With The Lowest CPI Scores:

The five countries with the lowest CPI scores:

Somalia
South Sudan
Syria
Yemen
Venezuela

These countries tend to be the least peaceful places in the world. The citizens are controlled by the government, usually by a dictatorship. There is little to no economic, political, and social freedom. Many of these countries are in a war zone; the government and citizens are constantly fighting.

Moreover, the levels of inequality and poverty are the highest in the world. Access to media, information, and technology is highly limited and regulated. The countries rank highly for being unsafe and dangerous.

Corruption has been argued to be a barrier to development and economic growth, which is evident in the five countries with the lowest CPI scores (Wilhelm).

Conclusion:

For businesses and organizations wanting to compete in global markets, it is imperative for decision-makers to understand CPI scores of the countries they are looking to enter. The CPI scores will inform decision-makers of the level of corruption in the public sector. It will inform them of whether doing business in a specific foreign country will be smooth or difficult.

However, decision-makers will also need to understand that the index is not perfect. The index should only be a foundation to study corruption, with additional research into the local people and private sectors needed. Thorough research of the economic, political, and social environments of a country will allow decision-makers to understand whether it will be beneficial to start a business or organization in a foreign country.

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Resources:

Corruption Perception Index 2018. Transparency International. Retrieved from https://www.transparency.org/files/content/pages/CPI_2018_Executive_Summary_EN.pdf

Mujtaba, B. G., Williamson, P., Cavico, F. J., & McClelland, B. (2013). Managing the link between bribery and wealth based on corruption perception index (CPI) and gross national product (GNP) per capita. Journal of Management Policy and Practice. Retrieved from http://ezproxy.redlands.edu/docview/1467971019?accountid=14729

Segal, P. (2000). Corruption index may aid asia investors — least transparent nations are worst market performers. Wall Street Journal Retrieved from http://ezproxy.redlands.edu/docview/398747940?accountid=14729

Wilhelm, P. G. (2002). International validation of the corruption perceptions index: Implications for business ethics and entrepreneurship education. Journal of Business Ethics. Retrieved from: http://dx.doi.org.ezproxy.redlands.edu/10.1023/A:1013882225402