ASSEGMANT NO 1 Submitted to Submitted by Subject Registration no Rasheed Waheed Tanzeelah sajjad corporate governance MBE-FA09-066

Contents

 Introduction  How effect bribery  Bribery in Islamic point of view  What is corporate social responsibility?  Why has CSR become important?  What effect does bribery and corruption have on business transactions?  Economic and social effects of corruption  HOW BAD GOVERNANCE AFFECTS THE USERS OF PUBLIC SERVICES

Introduction
Bribery the crime of giving or taking money or some other valuable item in order to influence a public official (any governmental employee) in the performance of his/her duties. Bribery includes paying to get government contracts (cutting the roads commissioner in for a secret percentage of the profit), giving a bottle of liquor to a building inspector to ignore a violation or grant a permit, or selling stock to a Congressman at a cut-rate price. Example: Governor (later Vice President) Spiro T. Agnew received five cents from the concessionaire for each pack of cigarettes sold in the Maryland capitol building Bribery is a manipulative method where one buys the power or influence of other person in order to satisfy his selfish need brides create a conflict of interest between the person receiving bribe and his or her organization the conflict would unethical practices when somebody is bribed for something his thinking and action are oriented to word his personal goal this direction to word personal goals always result in a mismatch between the interest of organization and of individual

How affect bribery

Briber destroy the community and organization We study how bribe behavior by firms varies with ownership structure in the framework of agency theory. Firms with owner- or shareholder-managers have a lower propensity than professionally managed firms to bribe corrupt officials to obtain illegal gains in the cases of legal or regulatory violation, but when they do bribe, owner- or

shareholder-managed firms pay larger bribes. In contrast, when bribes are extortionate, bribe propensity and size do not differ with ownership structure. These supply side results persist in equilibrium where the chances of inspection are endogenously determined. The extension of the agency model to bribery provides insights into the design of effective anti-corruption strategies Islamic point of view " "(Bribe) is an Arabic word from the root letters of " " and is pronounced in three different ways, rishwah, rashwah and roshwah. Rishwah is single form and it's plural form is " " or " " which means wage in Farsi. This term refers to achieving a goal through conspiracy and paying something. The Maraje have used all four sources of Islamic law (The Quran, the sunnah, Ijma'a and the intellect) to forbid bribing. 1- The Holy Quran:

In the Quran the Almighty says: " And do not eat up your property among yourselves for vanities, nor use it as bait for the judges, with intent that ye may eat up wrongfully and knowingly a little of (other people's) property " Allamah Tabatabei says in Tafisr Al-Mizan: " means to send down carrier pail to get water from a well and what is meant by this term in this verse is the bribing of rulers. The verse carries a very nice metaphor, saying that the bribe giver is analogous to the water at the bottom of a well which is pulled out of the well through the pail of bribery." Thus, the forbiddance of giving bribes entails the forbiddance of receiving them.

What is corporate social responsibility?

Corporate social responsibility (CSR) is also known by a number of other names: corporate responsibility, corporate accountability, corporate ethics, corporate citizenship, sustainability, stewardship, triple bottom line and responsible business, to name just a few. CSR is an evolving concept that currently does not have a universally accepted definition. Generally, CSR is understood to be the way firms integrate social, environmental and economic concerns into their values, culture, decision making, strategy and operations in a transparent and accountable manner and thereby establish better practices within the firm, create wealth and improve society. The World Business Council for Sustainable Development has described CSR as the business contribution to sustainable economic development. Building on a base of compliance with legislation and regulations, CSR typically includes "beyond law" commitments and activities pertaining to: corporate governance and ethics ,health and safety, environmental stewardship, human rights (including core labour rights),human resource management, community involvement, development and investment, involvement of and respect for Aboriginal peoples corporate philanthropy and employee volunteering ,customer satisfaction and adherence to principles of fair competition ,antibribery and anti-corruption measures ,accountability, transparency and performance reporting, supplier relations, for both domestic and international supply chains.Generally, CSR is understood to be the way firms integrate social, environmental and economic concerns into their values, culture, decision making, strategy and operations in a transparent and accountable manner and thereby establish better practices within the firm, create wealth and improve society. These elements of CSR are frequently interconnected and interdependent, and apply to firms wherever they operate.

Since businesses play a pivotal role in job and wealth creation in society, CSR is a central management concern. It positions companies to both proactively manage risks and take advantage of opportunities, especially with respect to their corporate reputation and broad engagement of stakeholders. The latter can include shareholders, employees, customers, communities, suppliers, governments, non-governmental organizations, international organizations and others affected by a company's activities Above all, CSR is about performance: moving beyond words on a page to effective and observable actions and societal impacts. Performance reporting is all part of transparent, accountable -- and, hence, credible -- corporate behaviour. There is considerable potential for problems when stakeholders perceive that a firm is just engaging in a public relations exercise and cannot demonstrate concrete actions that lead to real social and environmental benefits.

Why has CSR become important?

Many factors and influences, including the following, have led to increasing attention being devoted to CSR: Globalization -- with its attendant focus on cross-border trade, multinational enterprises and global supply chains -- is increasingly raising CSR concerns related to human resource management practices, environmental protection, and health and safety, among other things. Governments and intergovernmental bodies, such as the United Nations, the Organisation for Economic Co-operation and Development and the International Labour Organization have developed compacts, declarations, guidelines, principles and other instruments that outline social norms for acceptable conduct. Advances in communications technology, such as the Internet, cellular phones and personal digital assistants, are making it easier to track corporate activities and disseminate information about them. Non-governmental organizations now regularly draw attention through their websites to business practices they view as problematic. Consumers and investors are showing increasing interest in supporting responsible business practices and are demanding more information on how companies are addressing risks and opportunities related to social and environmental issues. Numerous serious and high-profile breaches of corporate ethics have contributed to elevated public mistrust of corporations and highlighted the need for improved corporate governance, transparency, accountability and ethical standards. Citizens in many countries are making it clear that corporations should meet standards of social and environmental care, no matter where they operate.

There is increasing awareness of the limits of government legislative and regulatory initiatives to effectively capture all the issues that corporate social responsibility addresses. Businesses are recognizing that adopting an effective approach to CSR can reduce risk of business disruptions, open up new opportunities, and enhance brand and company reputation

What effect does bribery and corruption have on business transactions?

Bribery and corruption can have a very detrimental effect on an economy and the World Bank has estimated that 0.5% of GDP is lost through corruption each year. Engaging in corrupt practices also creates a very unfavorable business environment by encouraging unfair advantage and anti-competitive practices. As well as allowing organized crime to flourish, corruption is one of the primary obstacles to the economic development of a country; it undermines the rule of law, weakens trust in public institutions and challenges democratic principles.

Economic and social effects of corruption

Bribery and corruption impacts upon the poor and vulnerable people in developing countries, it undermines public services and has an economic impact, increasing the costs of doing business whether the corruption is overseas or domestic. Case Study A young mother in a developing country died in childbirth along with her new born baby, because the new road that she and her husband chose to travel to the Hospital had not been completed due to the corruption of a public official by a UK person.

HOW BAD GOVERNANCE AFFECTS THE USERS OF PUBLIC SERVICES: COSTS AND ACCESS
Over the past five years researchers have increasingly focused on the link between governance, growth and delivery of public services. The cross-country evidence has shown how bad governance can be harmful for the standard of living and the distribution of income among citizens, reducing income per capita, literacy, and increasing infant mortality.4 Further, bad governance distort public expenditure and increase poverty reducing efficiency of investment. Governance has therefore begun to be seen as a key intermediate input to social and economic development, as well as a welfare-enhancing developmental outcome itself. These empirical findings are in line with the theoretical literature on public service provision and bad governance. The price and the level of public services provided are affected by the presence of corruption (Shleifer and Vishny, 1993): more widespread corruption translates into higher prices and reduced offering of public services. At the sometime, corruption can reduce government revenues, in turn eroding the quality of the services provided (Bears, Gloom and Janeba, 2000). Furthermore, corruption within the public sector can lead to lower investment in human capital (Ehrlich and Luis, 1999). This in turn may lead to a vicious circle (Alesina, 1999), in which users choose not to use publicly provided services, further reducing a country s tax base and its ability to improve the quality of the services. Figure 1 formalizes the distributional effect of bribery on service provision.Weassume for simplicity that there are only two groups of citizens that differ in terms of income(low and high income).We also assume that the lowincome group has a more inelastic demand for service curve than the high-income

group. If public officials are able to impose a bribery tax the cost of the service for the citizens increases, and the demand declines. However the change in demand will depend on the elasticity of the demand curve.