Say what you will about the Worldbank, but they collect some interesting stats. check out the latest corruption stories here: Europe & Central Asia corruption
Things are getting better :) the Economist gives a nice synopsis if you are a subscriber check here economist article
basically the perception of corruption as a major issue for business people in Europe and central Asian countries is improving. Russia is a notable exception :(
The good thing about reduced corruption is that it leads to security, stability and economic growth for almost everyone in a country. The strengthening of trust in institutions and relationships means more entrepreneurism and lower costs of capital for everyone.
Now for the Shocker. The average firm still pays 2.9% of turn over (revenue) in bribes. Think about that for a moment. Doesn't sound much like the average person. But if you know how companies are valued from an EBIT perspective this is a huge drain on these economies. Many companies on US stock exchanges trade and are valued using a metric called PE or P/E multiple. this is basically the price of the share over the earnings (earning before interest & taxes) EBIT of the firm.
Firms in the US trade at a fairly high 18 PE. What this means is that for every extra $1 of earnings the value of the shares would theoretically increase $18. Now think about 2.9% of cash that just disappeared as a bribe. Ouch! If a company has revenue of $100m per year and pays $2.9m per year in bribes, that is a lot of value lost to shareholders and the economy.
Lets say the company above had 6% earnings a healthy return for US companies. The company above would be worth 18x$6m or $108m. Now if the same firm could recapture the 2.9% from bribes it would be worth $160.2m. Think about it corruption is costing the shareholders of this company $52m in value. Those shareholders may be family members, insurance companies, pension holders etc.
Without corruption these companies would be worth $48m more. That shareholder value could be borrowed against as debt. Consider the lost oppurtunity if companies or economies were able to have access to just 25% more capital for growth and investment in training, machinary, research.
If we look at the big picture and make a gross extrapolation to GDP, there is a lot of value that disappears due to corruption. This value could be taxed at corporate rates and flow through to the government and re-invested in health care and education. That 2.9% factor for corruption sounds small, but think about the "value destroyed"
By the way how would you feel if your annual salary had %2.9 taken away by thugs every year.
The good news is things are changing. Now it is time to get them changing faster. There is money and a lot of lives at stake, especially in poor countries.
If you spot corruption (big or small) report it at : Bribewiki
