From a 'Two Thrust Approach' to a 'Two Sword One Thrust Strategy' to Combat Criminal Corruption: Government Enforcement of Compliance and Oversight by Sovereign Investors

Abstract

The commitment of governments, international organizations and enterprises to combatting corruption appears to have intensified in recent years. The efforts of these institutions appear centered on a “Two Thrust Approach,” consisting of the simultaneous application of the development and enforcement of public legal regimes and the implementation and operation of private compliance systems. This system dies not produce regulatory coherence between the law making by the government and the compliance systems created by business are not coordinated well. However, recent regulatory and compliance trends suggest the emergence of a “Two Swords, On Thrust Strategy” as a supplemental approach to the enforcement of anti-corruption rules and norms. The Two Swords-One Thrust Strategy combines the power of state officials to exercise discretion in managing anti-corruption laws and the authority of financial institutions to control the access of enterprises to their investment universe or to exercise their shareholder authority to influence corporate behavior. The essay examines the possibility of developing this strategy. To that end, the essay first considers the emerging efforts to institutionalize rules for the exercise of prosecutorial discretion in criminal investigations to compel corporate governance reform. It then considers the “second sword”, the use of market power by sovereign investors to influence compliance oriented corporate governance reform that parallels those advanced by prosecutors. The essay ends by suggesting the utility of this strategy for Chinese anti-corruption efforts by considering the possibility of coordinating the work of the procuratorate with the financial power of Chinese sovereign wealth finds in the exercise of their shareholder power and their power to limit access to investment markets.

Note: The Chinese language version of this essay will appear in the Jilin University Journal, social science edition 吉林大学学报社科版 (forthcoming 2017).

Keywords: China, corruption, bribery, prosecutorial discretion, sovereign wealth funds, compliance, disclosure, Norway

JEL Classification: G02, G11, G23, K14, K22, K39, M14