Corruption among government systems in the United States with comparison

to developing Asian countries

Abstract
Purpose: This article aims to investigate the differences and similarities
among corruption practices in the United States and in emerging Asian
countries. It also analyzes the various types of degrees that government
officials, public as well as private corporations go through in order to have
the upper hand in an industry or the appealing vote. Finally, our comparison
shows the depth of ethics behind these exploitation methods, which will
highlight the foundations and consequences of such practices over an open
free market economy.
Design/methodology/approach The data for this research was collected
from the following modals: Hofstede model, GLOBE model, Treisman: the
causes of corruption- A cross national study, World Bank, Transparency
International: CPI index 2014, Macrothink Institute, Google finance.
Findings- This research found several cases in which corruption played a huge role,
however all of the variables that lead to this corruption were not the same. We found that
these variables were subject to change give the country and circumstances in which they let
to. Hofsted model was used to compare our finding and found that this model in fact does
correlate in the means of power distance, individualism, masculinity, uncertainty avoidance,
long term orientation and indulgence. This research also found strong evidence to support
Trismans theory: low GDP will result in higher corruption rate. Multiple analysis were run on

several inputs of data, in return these analysis showed a solid correlation rate of .9654 in
the form of multiple-R.
Originality/ value This literature contributes by analyzing the dimensions among value,
ethics as well as cultural differentiation. The perseverance of this research is to provide
factual evidence to support major theories moreover it highlights the importance for the
need acts such as FCPA.

Keywords- Hofstede, China, Asia , United States, Cross national , corruption , FCPA, IRS ,
GDP, Nepal, Africa

Paper Type- Research paper

Introduction
This literature is proposed to comprehend the means of corruption among
several different variables. These variables, including research are not
intended to disprove nor approve the corruption practices that may or may
not go against acts such as Foreign Corruptions Practices Act (FCPA) of 1977.

Furthermore, this research is not projective against any acts that may be in
existence in the countries that have been selected and studied for the
purpose of understanding related datas. This literatures purpose is to
demonstrate practices that are conducted among United States as well as
uprising developing Asian countries. The variables that have been focused on
this paper includes the following: connotation of corruption, gift openhanded, influences in these means, effects on environment, lastly irregular
distribution.
Corruption by definition in Asian countries and U.S
Corporation- dishonest or fraudulent conduct by those in power, typically involving bribery,
the definition set by oxford for the United States of America. This definition has served as the
foundation for large corporations both domestic as well as internationally but why is it that we
find ourselves once again examining cases such as former Virginia governor Robert McDonnel
who was found guilty of nine counts of corruption for receiving extraordinary gifts that ranged
from a $6,500 Rolex watch to more lavish gifts that included $15,000 to cover wedding
expenses for his daughter. Then when we take a look at Asian countries we find ourselves as
westerns asking what is the norm, what is the ethical codes that corporations follow, what is the
definition that has been set in place? Asian countries have become notorious for gift giving it is
believed that giving a gift is necessary to maintain relationships with clients and to maintain
influence with government officials, otherwise it is very hard to sustain the relationships. These
gifts by law are not met to be extravagant nor should the exchange of the gift giving be
photographed (R.V, 2008). Even with these laws set in place many corporations still cant seem
to resist the temptation of this process in order to have the winning hand. (Garcia, 2014)

Avon the Gift

A recent case of this can be seen with Avon probe where Avon provided bribes and gifts
through a third party agents to Chinese government officials. These government officials
including local lawyers up to officials in the Chinese ministry of finance and commerce were
bribed by Avon in order to obtain the first authorization for a foreign invested company to utilize
a direct selling model during the period of 2004 all the way to the third quarter of 2008. These
gifts included covering the expenses that Chinese officials might have taken when travailing
within China or U.S, top box tickets to the china open tournament, Louis Vuitton and Gucci
merchandise, Tiffany & Co pens, as well as $1.65 million for entertainment that include meals.
All of this extravagate spending came with a price and in 2006 Avon became the first company
to win a direct selling. The results from this have resulted in Avon having to pay $135 million fine
from the U.S Department of Justice as well as the Securities and Exchange Commission. Avon
has suffered greatly from this; financially it has cost the company $300 million and has also
effected the market in a global business by bring their sells down 8% in third quarter on 2014.
These actions have not helped Avon in the least as we witness their stock price drop to $8.18
(April 7th 2015). A price that has not been seen since august of 1995. Most importantly these
circumstances have not helped China as a developing country, which is trying to inforce a clean
government system. As we can see below the stock ticker for Avon truly represents the damage
it has incurred from the effects of their bribery scheme. Not only does this chart shows us that
Avon has dropped 8%, it also shows us that they have not been successful in recovering what
was lost.

Irregular distribution of income due to bribery, among upper and lower level classes
Corruption has not only effected the economies in which it is performed, but it has also given
ways to the new markets and irregular growth. Low GDP such as Nepal is normally leads to
corruption. As of April 2013 Nepals GDP per capita was $694.10 USD yet as of 2014 it also
ranked 126th country out of 174 for most corrupted country (cpi 2014 results, 2014). This is more
than astonishing given that the top corrupted countries in the world seem to becoming from

Africa where a stable government is never a sure thing. However unlike Africa (william, 2007),
Nepals government is not as unstable nor is the economy in a constant rate in such volatility.
Nepals main source of income arises from the exportation of good such as carpets, clothing,
leather goods, gains, herbs and tea, 55% of this trading is between Nepal and India. Yet some
growth has been depend on outside sources of revenue such as young adults leaving their
home land in pursuit of better jobs with higher income. This extra income is then sent back to
their home land in hopes of it becoming an investment and potentially sustain the family without
the means of working hard labor jobs. A family who is lucky enough to have someone send back
some sort of income must be wise and invest it carefully as so it does not become a loss, much
like China, Nepal is a gift giving country in which favoritism can get a construction worker a
government contract just as long as he doesnt forget to give the right people a large gift. This
sort of gift giving can result in delay of growth in many important sectors for the development. In
case of Nepal, we find a lack in the countries energy sectors (makers, 2015). Taking into
consideration that Nepal has high volume of free flowing rivers, one would expect to find a large
rate of hydroelectric power, yet this is where we find most of the countries black economy.
Friends of friends make the right connection with one in order to bypass certain regulation that
have been placed by the government. This is also where find the lucky few who have uncles,
fathers or even close friends that can bend the guidelines or show them the gray area in which
they should look; the term given to these actions is nepotism (Hooker, 2006). While for someone
one who is on the receiving end of this fence, this practice may seem like a great idea and why
wouldnt it? Always having the upper hand in an investment as well as a great return in
investment seems too good to be true looking at it from a western point of view, but the reality of
this is the FCPA regulations that we as citizens have to respect, we understand that the longer a
good thing continues can only lead to a disasters downfall as we have seen with many Ponzi
schemes in the past (wang, 2014). However, 95% of Nepals citizens do not have these
connections and must deal with the cards that they have been given. For that person who has

left the country in means of sending income, this might keep him abroad longer if not
permanently with little to show for.
Further data supporting
Treisman theory: Lower
GDP in correlation to
higher corruption
Data- CPI Data provided
by

Transparency

International,

has

provided myself with the

2014

corruption

perceptions index which measures the perceived level of public sector corruption in 175
countries and territories. , Trading Economics has provided myself with accurate gross domestic
product (GDP) measures of national income and output for a countrys economy. This GDP is
equal to the total expenditures for all final goods and services produced within the country in a
stipulated period of time.
Order- The order in which this data has been presented is in least to largest in corruption (far
left column), followed by 2014 scores all though 2012. GDP is found on the far right in
accordance to its following county.

Ra
nk
1
2
3
4
5
5

Country

2014
Score

2013
Score

2012
Score

GD
P

Denmark
New Zealand
Finland
Sweden
Norway
Switzerland

92
91
89
87
86
86

91
91
89
89
86
85

90
90
90
88
85
86

330.81
183
256.84
557.94
512.58
650.78

7
8
9
10
11

Singapore
Netherlands
Luxembourg
Canada
Australia

84
83
82
81
80

86
83
80
81
81

87
84
80
84
85

12
12

Germany
Iceland

79
79

78
78

79
82

14
15
15
17
17
17
17
21
21
23
24
25
26

United Kingdom
Belgium
Japan
Barbados
Hong Kong
Ireland
United States
Chile
Uruguay
Austria
Bahamas
United Arab Emirates
Estonia

78
76
76
74
74
74
74
73
73
72
71
70
69

76
75
74
75
75
72
73
71
73
69
71
69
68

74
75
74
76
77
69
73
72
72
69
71
68
64

26
26
29
30
31
31
31
31
35
35
37

France
Qatar
Saint Vincent and the Grenadines
Bhutan
Botswana
Cyprus
Portugal
Puerto Rico
Poland
Taiwan
Israel

69
69
67
65
63
63
63
63
61
61
60

71
68
62
63
64
63
62
62
60
61
61

71
68
62
63
65
66
63
63
58
61
60

37
39
39
39
42

Spain
Dominica
Lithuania
Slovenia
Cape Verde

60
58
58
58
57

59
58
57
57
58

65
58
54
61
60

43
43
43

Korea (South)
Latvia
Malta

55
55
55

55
53
56

56
49
57

297.94
800.17
60.38
1825.1
1560.6
3634.8
2
14.62
2522.2
6
508.12
4901
4.22
274.01
217.82
16800
277.2
55.71
415.84
8.4
383.8
384
2734.9
5
202
0.83
1.88
14.79
21.91
219.96
220
517.54
489.21
291.82
1358.2
6
0.5
45.93
47.99
1.89
1304.5
5
30.96
9.64

43
47
47
47
50
50
50
53
54
55
55
55
55
55
55
61
61
63
64
64
64
67
67

Seychelles
Costa Rica
Hungary
Mauritius
Georgia
Malaysia
Samoa
Czech Republic
Slovakia
Bahrain
Jordan
Lesotho
Namibia
Rwanda
Saudi Arabia
Croatia
Ghana
Cuba
Oman
The FYR of Macedonia
Turkey
Kuwait
South Africa

55
54
54
54
52
52
52
51
50
49
49
49
49
49
49
48
48
46
45
45
45
44
44

54
53
54
52
49
50
#N/A
48
47
48
45
49
48
53
46
48
46
46
47
44
50
43
42

52
54
55
57
52
49
#N/A
49
46
51
48
45
48
53
44
46
45
48
47
43
49
44
43

69
69
69

Brazil
Bulgaria
Greece

43
43
43

42
41
40

43
41
36

69
69
69
69
76
76
78
79
80
80
80
80
80
85
85

Italy
Romania
Senegal
Swaziland
Montenegro
Sao Tome and Principe
Serbia
Tunisia
Benin
Bosnia and Herzegovina
El Salvador
Mongolia
Morocco
Burkina Faso
India

43
43
43
43
42
42
41
40
39
39
39
39
39
38
38

43
43
41
39
44
42
42
41
36
42
38
38
37
38
36

42
44
36
37
41
42
39
41
36
42
38
36
37
38
36

1.27
49.62
133
11.94
16.52
312.44
4893
198.45
97.72
32.79
33.68
2.23
12.58
7.45
745.27
57.54
35.58
68.23
80.57
10.22
820.21
183
350.63
2245.6
7
53.01
241.72
2071.3
1
190
15.15
651
4.43
0.31
42.52
47.13
8.31
17.83
24.26
11.52
104
11.58
1876.8

85
85
85
85
85
85
85
94
94
94
94
94
94
100

Jamaica
Peru
Philippines
Sri Lanka
Thailand
Trinidad and Tobago
Zambia
Armenia
Colombia
Egypt
Gabon
Liberia
Panama
Algeria

38
38
38
38
38
38
38
37
37
37
37
37
37
36

38
38
36
37
35
38
38
36
36
32
34
38
35
36

38
38
34
40
37
39
37
34
36
32
35
41
38
34

100
100
103

China
Suriname
Bolivia

36
36
35

40
36
34

39
37
34

103
103
103
107
107
107
110
110
110
110
110
115
115
115
115
119
119
119
119
119
124
124
126
126

Mexico
Moldova
Niger
Argentina
Djibouti
Indonesia
Albania
Ecuador
Ethiopia
Kosovo
Malawi
Cte dIvoire
Dominican Republic
Guatemala
Mali
Belarus
Mozambique
Sierra Leone
Tanzania
Vietnam
Guyana
Mauritania
Azerbaijan
Gambia

35
35
35
34
34
34
33
33
33
33
33
32
32
32
32
31
31
31
31
31
30
30
29
29

34
35
34
34
36
32
31
35
33
33
37
27
29
29
28
29
30
30
33
31
27
30
28
28

34
36
33
35
36
32
33
32
33
34
37
29
32
33
34
31
31
31
35
31
28
31
27
34

14.36
202
272.02
67.18
387.25
24.63
22.38
10.43
378.15
271.97
19.34
1.95
42.65
210
9240.2
7
5.23
30.6
1260.9
1
7.94
7.36
611.76
1.46
868.35
12.9
90.02
46.87
6.96
3.71
60.61
53.8
10.94
71.71
15.32
4.93
33.23
171
3.08
4.16
73.56
0.91

126
126
126
126
126
133
133
133
136
136
136
136
136

Honduras
Kazakhstan
Nepal
Pakistan
Togo
Madagascar
Nicaragua
Timor-Leste
Cameroon
Iran
Kyrgyzstan
Lebanon
Nigeria

29
29
29
29
29
28
28
28
27
27
27
27
27

26
26
31
28
29
28
28
30
25
25
24
28
25

28
28
27
27
30
32
29
33
26
28
24
30
27

136
142
142
142
145
145
145
145
145
150
150
152
152
154
154
156
156
156
159
159
161
161
161
161
161
166
166
166
169

Russia
Comoros
Uganda
Ukraine
Bangladesh
Guinea
Kenya
Laos
Papua New Guinea
Central African Republic
Paraguay
Congo, Republic of
Tajikistan
Chad
Congo, Democratic Republic of
Cambodia
Myanmar
Zimbabwe
Burundi
Syria
Angola
Guinea-Bissau
Haiti
Venezuela
Yemen
Eritrea
Libya
Uzbekistan
Turkmenistan

27
26
26
26
25
25
25
25
25
24
24
23
23
22
22
21
21
21
20
20
19
19
19
19
19
18
18
18
17

28
28
26
25
27
24
27
26
25
25
24
22
22
19
22
20
21
21
21
17
23
19
19
20
18
20
15
17
17

28
28
29
26
26
24
27
21
25
26
25
26
22
19
21
22
15
20
19
26
22
25
19
19
23
25
21
17
17

18.55
232
19.29
236.62
4.34
10.8
11.26
816
29.27
368.9
7.23
44.35
522.64
2096.7
8
0.66
21.48
177
130
6.19
55.24
11.14
15.29
1.54
29.95
30.63
8.51
13.41
30.63
15.25
53.14
12.8
2.72
73.67
124
0.86
8.46
438
35.95
3.44
75.46
56.8
41.85

170
171
172
173
174
174

Iraq
South Sudan
Afghanistan
Sudan
Korea (North)
Somalia

16
15
12
11
8
8

16
14
8
11
8
8

18
#N/A
8
13
8
8

223
13.8
20.72
5.97
14.41
1.07

Summary output- Using the data that has been provided, I was able to run a series of analyzes
through the use of Microsoft Excel. First the data was put through a correlation test to determine
its correlation coefficient as well as the coefficient of determination in order to define which
points fall on the regression line. The reasoning for doing this was to determine if Treisman
theory: low GDP results in a higher corruption rate could be held true. In return we found that
the correlation was if fact at a Multiple-R: .965470342 and R-Square: .932132982. With this
Multiple-R of .96547042 we can see just how tightly correlated these two variables are, given
that the highest possible Multiple-R is the absolute variable of one. However realistically
speaking a correlation of that magnitude is nearly impossible. This value is than substantial, and
we can confidently suggest that there is indeed has true correlation in this data, Moreover this
R-square of .93213282 indicates that the model explains that most of all the variability in the
response data around its mean. If we look at our ANOVA table we can see the Significance F of
3.3316E-101. For this partial analyzes we have set our alpha: =.05, meaning that we may
confidently conclude that the observed effect actually reflects the characteristics of the
population rather just sampling error. What is needed to make this is possible is a p-value /
Significance F les then alpha, which is proven by this table furthermore if we were to set our
alpha = .001, the data would still more than significant. This data has also given us our
standard error of 13.20679441 showing the estimate of the standard deviation: of the error

2.465483782)+ .000231543. With

ANOVA

Observations

Standard Error

Adjusted R Square

R Square

M ultiple R

hope that this data may help

175

2
172
174

SS

understanding the correlation in

Treismans theory, as well as

192.9385827
-2.465483782

provide future academic with the

MS

proper information to run their

30000.14 174.4194186
442042.9943
t Stat

Upper 95% Lower 95.0%Upper 95.0%

188.1761515 197.701014 188.1761515 197.70101

Lower 95%

3.3316E-101

Signifc anc e F

0.0006447760.3591057760.719956411

-0.001041150.001504235 -0.00104115 0.00150423

0.051965533-47.444597041.0013E-100 -2.568056062-2.362911502-2.568056062-2.36291150

2.41275985379.965928875.6713E-138

P-value

412042.8543206021.42711181.184003

serve as a bridge in deeper

C oefc ients Standard Error

df

13.20679441

0.93134383

0.932132982

0.965470342

Regression Statistic s

SUM M ARY OUTPUT

this residual analyzes is set at

Regression
Residual

Interc ept

Total

support Treismans man theory. I

0.000231543

RESIDUAL OUTPUT

equation that can be derived from

2014 Sc ore
GDP

own test.

(Y=192.9385827+

confidently
can
we
data
this

mathematical
The
mean:

Observation
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38

Predicted Rank
-33.80932855
-31.3780691
-26.43000442
-21.42931934
-18.97433834
-18.94233913
-14.09306911
-11.51129761
-9.217106834
-6.343014949
-3.938774222
-0.993019859
-1.831250884
1.214858733
5.679466804
6.696606273
10.49375998
10.5562279
10.54321751
14.38270089
13.0224503
12.9711659
15.52003517
17.89117918
20.4435841
22.90911419
23.4534596
22.86697341
27.75136153
32.68257221
37.61652899
37.61817757
37.66403461
37.66404388
42.66390467
42.65734506
45.07712462
45.32405106

Residuals
34.80932855
33.3780691
29.43000442
25.42931934
23.97433834
23.94233913
21.09306911
19.51129761
18.21710683
16.34301495
14.93877422
12.99301986
13.83125088
12.78514127
9.320533196
8.303393727
6.506240018
6.443772103
6.456782489
2.617299108
7.977549699
8.028834101
7.479964832
6.108820824
4.556415897
3.090885807
2.546540404
3.133026585
1.248638474
-2.68257221
-6.616528991
-6.618177575
-6.664034614
-6.664043876
-7.663904667
-7.657345061
-8.077124622
-8.324051061

39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77

49.94063915
49.95115814
49.95163512
52.40644478
57.63903381
57.34414329
57.3392068
57.33726879
59.81394766
59.8332537
59.80522313
64.73725116
64.80576929
65.8663647
67.24485951
69.68702
72.13746971
72.13767578
72.13039376
72.13279023
72.13160242
72.30243928
74.60868417
74.60359949
79.54212693
82.01046795
81.99417892
82.18172622
84.49966865
84.53848216
87.4427487
86.93505419
86.97874862
87.40237691
86.96677323
86.92628799
87.07351444
89.38928963
89.38833567

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78
79
80
81
82
83
84
85
86
87
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89
90
91
92
93
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95
96
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100
101
102
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105
106
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109
110
111
112
113
114
115
116

91.86359288
94.33014407
96.78663936
96.78884365
96.79033247
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96.80879569
99.25288029
99.68475844
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101.7161343
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111.5884703
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111.578477
114.0431017
114.0571355

-13.86359288
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0.956898284
0.942864479

117
118
119
120
121
122
123
124
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126
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128
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133
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136
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140
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142
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145
146
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148
149
150
151
152
153
154
155

114.0555587
114.0456348
116.5251894
116.5121327
116.509727
116.5162797
116.5481793
118.9747824
118.9750325
121.4565853
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121.4438482
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121.4440195
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121.440558
123.9075375
123.907644
124.0939757
126.3772979
126.4559367
126.3721947
126.3807895
126.4915341
126.8560148
128.8361572
128.8409779
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131.3315887
131.3029214
131.3142786
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131.3050285
133.7673285
133.7739067
136.2395479
136.2344262
138.7010445
138.7050317

0.944441285
0.954365206
2.474810572
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2.490272996
2.483720337
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5.025217568
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9.092462494
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13.16384277
13.15902205
13.12301253
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13.68572139
13.69593242
13.69497152
16.23267145
16.22609332
15.76045209
15.76557382
15.29895548
15.29496831

156
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165
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169
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171
172
173
174
175

141.1669543
141.1757275
141.1663871
143.6295369
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146.1231022
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146.0963497
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148.5773469
148.5730263
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153.5424763
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163.3575749
165.8196434
173.218049
173.2149602

14.83304566
14.8242725
14.83361293
15.3704631
15.35403515
14.87689782
14.90540999
14.90365027
14.8041934
14.89728516
17.43932883
17.42265312
17.42697371
17.96495149
16.45752374
15.0404787
8.642425078
7.180356551
0.781950985
0.785039765

Influences that contribute to corruption

Resent studys from Treisman The causes of corruption: a cross national study given insight to
what they conclude were the major factors in determining why fighting corruption in many
countries has proven so difficult. In theory we can divert that corruption does not solely come
from the amount that public official are at will to risk his or her political career and exchange it
for federal prison (Treisman, 2000). Evidence shows us that corruption can arise through a

weak government system. As we see in the (Herstein, 2014)case of India in 1992 when an
American firm saw the potential India had in becoming an information- age powerhouse (shafiq,
2015). Enron ventured with Bechtel and General Electric to fund an extraordinary power plant at
Dabhol, in Maharashtra State, this would become one of Indias largest private foreign
investment. (Hooker, 2006) The U.S. government saw a great deal of benefit from American
companies gaining access to conduct business in India which at the time was the worlds largest
democracy. Despite what was to be a huge improvement for the country; Indian government
officials would soon come to find that the cost of generating power at the plant was projected to
be substantially greater than the prevailing rate. In addition, in April 1993 an analysis working for
World Bank began to question the projects economic viability, citing the high cost of importing
and using liquefied natural gas relative to other domestic sources of fuels. Because of those
findings, the World Bank refused to provide funds for the project. (parry, 2001) Despite the
accusations of their integrity in 1993, Prime Minister Narasimha Rao overruled objections from
his own Finance Minister to give state guarantees for both foreign and domestic investors in
energy projects. The guarantees could be counted by lending institutions as additional state
debt, which created a larger risk for the Indian government. Even though this larger liability the
Indian government guaranteed Enron a very generous rate on investment. Fast forward to June
of 2001, the project was yet to be fully completed as it was once again put on hold over new
disagreement over the price of energy.

Effects on living environment for a country under corruption

A country living under corruption is not only effected by the economic hardship, but also the
living environment in which mankind must unfortunately learn to adapt in. We have come to see
China rise from a small developing economy to a large player in the world economy, its growth
in GDP a currently put it as $9.240 trillion ( (Ianchovichina, 2010)). This impeccable growth has

not come without its price. More than three decades of expansion in economic growth has
delivered a great prosperity to millions of Chinese, but also in return the country now has some
of the worlds most polluted air, water as well as soil. As of 2006, 16 of the worlds 20 cities with
polluted air are found in China. Reports show 90% of waterways that flow in and out of major
cities and 75% of lakes are contaminated with some sort of bacteria. In the summer of 2006 the
Chinese government set aside $175 billion for environmental protection for the upcoming five
years. Although, last time an amount of this magnitude was set in place we found that approvals
for construction projects worth more than $12.5 million had found violations in almost 40% of
case. As quoted by Zhou chinas senior environmental official It is clear the conflict between
economic growth and environmental protection is coming to a head. (chenpeng, 2015)
Not only does this lack of environmental admiration effect what was once a stunning marvel of
natural perfection in China, it has also come to effect United States not only in the form of smog
but also in forms of forestation. Beijing on Feb 2014 small particulate matter (PM25) for 6
consecutive days. These matters put most of the city at a halt outside, the air was smoky and
the sky turned into a sunless thick grey yellow. A sheet of dust covered most vehicles and
surfaces and you could almost taste it through your face mask. One that day when you call a
taxi for a school run, which on clear day is a 20 min walk. The driver can see no more than 150
meters ahead in the haze. The few pedestrians on the streets are mostly unmasked, confirming
fears that public awareness of the health risks are low, or that some simply do not have the
choice. There is a lone jogger ignoring the orange alert (the second highest level in a four-tiered
system) issued for the very first time by the Beijing Environmental Bureau, closing industrial
plants and advising people to stay indoors and to refrain from exercise (living in smog: china
and air pollution, 2014). In recent years we have also seen these effect of smog causing a
problem in the United States in forms of acid rain caused by toxicants such as sulfur dioxide.
This rain has impacted forest, freshwaters and soils which in return had an impact in human

health. It caused heart and lung problems including asthma and bronchitis. Moreover this rain
has had a major impact on forests and vegetation, it has been lick that this rain weakens tree by
damaging their leaves, limiting the nutrients available to them, or in most cases exposing them
to toxic substances slowly released from the soil followed by death of the tress. On average the
cost of acid rain on the lumber industry can range from $5 to $10 billion. We also see other
forms of deception between the United States and China more recently in the case of Lumber
Liquidators, where an American public corporation had flooring made in Chinese factories and
had falsely labelled them. These Chinese-made floors contained very high levels of
formaldehyde. Of the 150 floor sets that were tested none of them met formaldehyde emission
standards set by California state law, furthermore some of these sets test twenty times over the
permissible level. The total figure in terms of cost have not yet been brought to light. Although,
some investors believe it could surpass $50 million. As of now there are several class act
lawsuit that have been set in place, but the total response has not yet been provided nor
amount per victim/household. Lumber liquidators stock (LL) has also taken one of the biggest
downfalls from this lawsuit, peaking at $119 dwindling to $33.40 as of April 10, 2015. Below we
can see the results of their stock and its reaction to the accusations as well as lawsuit.

Manipulation and its effect on open markets

Stock market manipulation is considered to be the act of artificially inflating or deflating the price
of a security. In most cases, manipulation is illegal. It is much easier to manipulate the share
price of smaller companies, such as penny stocks, because they are not as closely watched by
analysts as the medium- and large-sized firms by agency such as the SEC or FBI none the less
these acts have a major effect on the ethical foundation in which a free market economy were
developed (kim, 2010) . In total there are five forms of manipulation which includes,

Churning - when a trader places both buy and sell orders at the same price.
This increased activity is intended to attract other investors and increase the
price
Painting the Tape - when a group of traders create activity or rumors to drive
up the price of a stock (also referred to as "Runs" or "Ramping").
Wash trading - selling and re-purchasing the same security or substantially
the same security to generate activity and increase the price.
Bear raiding - attempting to push down the price of a stock by heavy selling or
short selling.
Cornering (the market) - purchasing enough of a particular stock, commodity,
or other asset to gain control of the supply and be able to set the price for it.
(According to Girard Gibbs)

One of the more infamous case that set the foundation for stock manipulation case as
well as becoming the result of a major act of 1988 was Ivan Boesky case (Andrew, 95).
Ivan Boesky was boundless in corporate mergers as well as takeovers. However, Ivans
fortune did not come from the means of great acquisition strategies, but in the form of
inside information (Imisiker, 2013). By buying stock in company before a takeover or
leverage buyout reached the public news Ivan would sometimes more than double his
return on investment, this continuous wave went on throughout the 1980s, it is unclear
how many times this was done by Ivan F. Boesky & Company. Unfortunately, the laws

that were meant to stop this type of legal actions were not heavily enforced at the time
being. Boesky amassed a fortune of more than $250 million by betting on corporate
takeovers and collecting $136 million in proceeds from the sale of the Beverly Hills Hotel
Corp not to mention his $23 million divorce settlement he received from his wife in the
year 1991. All of this was made possible from a seed investment of $700,000 that was
given to Ivan F. Boesky & Company in the early stages of the company, yet this great
empire soon fell like a roman empire, Ivans grand mistake came in 1986 when the
Maxxam Group Holdings, Inc. a group which engages in forest products operations
offered to purchase Pacific Lumber but just three days before this news was announced
to the public Boesky acquired 10,000 shares which he then sold, giving away his
scheme SEC. on Nov. 14, 1986 Boeskys action had come to an end, having agreed to
pay a total of $110 million in fines, serve time in federal prison as well as being banned
from trading stock professionally for life, moreover his actions pioneered the way for
congress to passed the Insider Trading act of 1988. This act increased penalties for
insider trading and also provided rewards to whistleblowers and also allowed individuals
to sue for damages caused by the acts of insider trading violations (knoeber, 2013).
Research has also shown us that in most recent years there has been a major shift in
the Chinese stock market from China Securities Regulatory Commission in means to
reform the regulations for stock market manipulation. (tong, 2013). A key example in this
new reform can be seen the Guo Shuqing actions as he took helm of the CSRC in Oct.
of 2011, in which he brought to trial Zhonghengxin. Zhonghengxin was accused by
regulators of stage-managing pump and dump schemes related to 552 diverse stocks in
order to gain a profit if 426 million Yuan or 67 million USD, this has made a monumental
impact among the Chinese stock market furthermore has accelerated to clean up the
Chinese markets (wei, 2015). Regrettably inside information is still a collective problem

among markets such as Shanghai Stock Exchange. In recent years, we have seen
CSRC moving towards an Americanized law enforcement and mimicking of certain
requirements for companies which are publicly traded. First securities and exchange act
was introduced in China on July of 1999, which devoted as many as five articles to
insider trading and molded the foundation of the rule of law based parameter for insider
trading. Major articles of this parameter are highlighted by said following.

Article 75 of securities law (2006) outlines inside information that concerns the
business or finance of a company or may have a major effect on the market price
of the securities thereof and that has not been publicized in securities trading.
Article 73 which in it states that Any insider who has access to any inside
information of securities trading or who has unlawfully obtained any inside
information is prohibited from taking advantage of the inside information as held
thereby to engage in any security trading.
Article 76 conditions Where ant insider trading incurs any loss to investors, the
actor shall be subject to the liabilities of compensation according to law (tong,
2013)

These acts not only set in motion for a cleaner economy, but also set forth for a sharestructure reform that aimed to end the split share structure of Chinese listed firms by
converting all non-tradable shares the tradable this as enacted on April 29, 2005
(Zhuang, 2015). Prior to the structure as little as on third of issued by exchange- listed
firms in China were publicly tradable yet the remaining of the two thirds, primarily owned
by the Chinese government agencies or government- linked enterprises, were prohibited
form public trading. (tong, 2013). An undersized comparison of the two market can be
shown in the table below, unlike the United States, China has not been fully developed

in the form of clear and enforced regulations for public markets. This being said in no
way, shape nor form is the U.S. at the point in which we can consider ourselves
corruption free and in no need of agencies such as SEC, FBI, IRS, and FASB.
(Thompson, 2013).

Countries

Enforcement

Specific Laws

Year

Body

Maximum

Maximum

Key points of

Fines &

Prison

difference

Fees

Time

with insider
trading laws

United

Securities

SEC act of

States

and

1934

China

1934

Civil:Greate

20 years

One of the

r of $1

first to

Exchange

million or 3

institute

commission

times

trading laws /

amount of

most

profit

developed

China

Establishment

1993

Five times

Securities

of Securities

illegal

with devolved

Regulatory

Companies

proceeds

countries

Commission

with Foreign
Equity
Participation
Rules

*Data has been provided by Macrothink Institute (Thompson, 2013)*

10 years

Catching up

Avon and the confliction towards FCPA be considered a small miscue impact if looking at
this from a greater picture, but if we were to compare this situation to geert-hostede model
we can abstract the data that has been collected and enlarge our picture. In this particular
situation we can see that power distance as well as indulgence are playing a greater role
than the other remaining four cultural dimension. We start our comparison by looking at
indulgence. As a whole United States scored a 68 and China scored a 24 (Geert-Hofsted,
n.d.). From this high indulgence level we can see Avons lack of restraint and better
understand how come they pushed to inquire Chinas direct consumers. Although one could
say by looking at the stock ticker that Avon might have been influenced by shareholders to
cease such great fluctuation in their stock performance prior, we can look at the end result
and see that this created far more damage as opposed to reward. Fast-forward to present
day Avon is now planning to focus its market share into the greater North Americana, yet the
cost of these new interchanges are not without a price. Several federal agencies are now
closely watching each and every move that is made, leaving little room for future error. The
second observation that can be made by comparing the data of Power Distance, the extent
to which the less powerful members of institutions and organizations within a country expect
and accept that power is distributed unequally (Geert-Hofsted, n.d.) . This plays a large role
throughout this literature since for the most part the countries that were chosen were those
who for the most apart of that of a free open economy. This idea of an open economy should
in fact allow citizens for the most part overthrow leaders who are seen as unbeneficial (Lee,
2015). What is could also imply is lack of education, members of these society may be
unaware or uneducated of their political parties who are meant to help them. Further
updated research is needed to make any conclusions.

This research has also set aside consideration to understand the influences that may give
ways for acts of corruption as well as bribery. As we take a look at of Enron an iconic
American corporation in India and their involvement in Dabhol, Maherashte 1992. Enron as
an American corporation sought out to make a significant return on investment regardless of
the price others would incur. In comparing these two countries on the Geert-Hofstede model
we can see that individualism plays a significant role. The difference in these two countries
are at the level of 91 and 48 for United States and India respectively. What comes as a
surprise is Indias behavior related to this model, in general they are not on the higher scale
in individualism in comparison to the United States. This being said Indias culture can be
seen as one that discourages attention to status difference and ranking, encourage a
reduction of power differences between management and employees (Geert-Hofsted, n.d.).
From the information that was given throughout this case we can make an assumption that
Enron as a giant corporation influenced certain parties of in the Indian government. This
influence in which these parties fell into went as far as making a mockery of the World Bank,
but in short their vison of future gains was undersized when this powerhouse never went
fully operational furthermore the bankruptcy of Enron dimensioned any hope of income.
Further research is need to in order to observe the changes in current influence that may
lead to new unregulated practices between United State corporations and Indias new
uprising government. (W, 2015)

This research is also aimed to look at developing countries with a low GDP and find the
comparison between corruption levels. Our finding highlighted what Treisman indicated in
his cross national study performed in 2000. Taking the CPI index provided to us by
Transparency International, we observed that 2014 corruption perception index measures
the perceived level of public sector corruption in 175 countries which made it possible to find
the comparison of low GDP that Tresiman indicated in his study. Within the process of

creating readable data, Nepal the countries GPD Per Capita this research found Nepal as
being the most optimal country in which these two factors are present.

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