Changing the Code on Corruption

Note: This article is an abridged version of a longer historical case study produced by Innovations for Successful Societies, a research program at Princeton University.

In February 2001, Brazilian newspapers noted something different in Rio de Janeiro’s annual Carnival celebration: The public officials who traditionally populated corporate boxes were no longer present. In the past, these high-profile officials received VIP treatment, with private beer companies paying for their airfare, meals, and reserved seating.

The difference hinged on Brazil’s year-old Public Ethics Commission. A few months earlier, the commission had published a rule that clarified what gifts, if any, senior civil servants could accept, deeming numerous perks unacceptable because they could bias politically-sensitive decisions.

The rule irked powerful individuals in the private and public sectors. The media exposed three officials who flouted the rule by accepting box seats owned by Brahma beer. The commission reviewed their cases, requested explanations, and issued warnings that discouraged future violations. After the officials apologized, they promised, in writing, to obey the rule in the future. The rule and its enforcement earned public support, with one newspaper survey indicating a 98% approval rating. Senior officials now had to think twice before accepting such perks.

Changing ingrained political behavior was no easy task. After Brazil emerged from decades of dictatorship in 1985, pervasive political scandals detracted from the new democratic emphasis on accountability. Politica de favores, or the politics of favors, rendered merit-based hiring, procurement, and privatization uncompetitive and inefficient. Officials accepted bribes thinly disguised as gifts and gave jobs to relatives as a matter of familial allegiance. Without a formal system of government ethics, doing the "right thing" often was considered foolish, impolite, or offensive. Frequent scandals involving nepotism and influence-peddling weakened public trust in government officials and embarrassed successive administrations. Although the constitution of 1988 set stringent rules and harsh penalties regulating civil servants’ behavior, they were rarely enforced.

In the mid-1990s, the administration of President Fernando Henrique Cardoso generated a clear impetus for change with a modernization, privatization, and government-reorganization drive. The administration was forced to take action after internal scandals exposed unseemly behaviour by senior government officials and cast public doubt upon the administration’s initiatives. "We felt that Brazilian society was changing with modernization and was no longer willing to accept such behaviors," said Cardoso’s chief of staff, Pedro Parente.

Cardoso appointed Luiz Carlos Bresser-Pereira, a well-known Brazilian economist, to spearhead broad civil service reforms and amend the human-resource rigidities of the 1988 constitution. In May 1995, Bresser-Pereira formed the State Council of Reform to devise options for public-sector reorganization. João Geraldo Piquet Carneiro, a former minister in charge of a large-scale de-bureaucratization effort in the 1980s, was one of the earliest council members. Piquet approached like-minded members on the council and quickly brought the issue of officials’ conduct onto the agenda. He then created a small team within the council to work on a code of conduct.

The team faced a daunting task. They sought to create a code that could reach and influence a large number of public officials at a reasonable cost. (Brazil’s civil service consisted of nearly 600,000 people.) Second, the team members realized they would have to set benchmarks for situations in which officials’ personal interests clashed with their public roles. Senior civil servants, accustomed to significant freedom in decision-making, were likely to offer the most resistance. Third, the code needed to specify reasonable parameters of behavior when the issue involved shades of gray. For example, when it came to the acceptance of gifts, at what monetary amount or under which circumstances was a gift considered improper? How long should a public official reasonably wait after leaving public office to accept a private-sector post? Finally, the code required an enforcement mechanism.

The issue fell to the back burner, but during a television interview in early 1999, a journalist asked President Cardoso about the code of conduct, sparking sudden media and public interest and bringing the code back into the limelight. Cardoso issued a presidential decree forming a new advisory body, the Public Ethics Commission, to work on ethics-related issues and implement the code of conduct, with Piquet as its first president.

All commission members were unsalaried volunteers appointed by Cardoso, and were prominent Brazilians who enjoyed reputations for integrity and efficiency. Few had government experience: Piquet believed that a team with no direct ties to the Cardoso administration would earn credibility for being independent of partisan interests. With a limited budget, they decided to target only senior government officials: presidential appointees, ministers within the Civil Cabinet, managers, and directors of public organs and companies, with the hope that senior officials could set an example for the government and potentially improve public opinion of civil servants.

Studying other countries’ codes of conduct, the final code set guidelines on receiving perks, reporting assets, investing in assets while in office, maintaining shareholder stakes in companies while in office, leaving public office for private positions, and publicizing conflicts of interest. The team also began to work on an enforcement strategy. Piquet organized a seminar for the drafting team, officials from the civil service, and international organizations to share ideas and models that could work well for Brazil. "Given the traditions and realities of the Brazilian political system, we wanted to see what could be adjusted and innovated for Brazil from international experiences," explained commission member Lourdes Sola.

In August 2000, another presidential decree established the code of conduct. Piquet’s team now faced six tasks: developing institutional capacity, communicating and publicizing the information among civil servants, monitoring whether individuals were following the code, establishing procedures to deal with violations, facilitating understanding and clarity of the code, and developing a system of ethics that would extend beyond high public officials.

The six commission members quickly realized the need for staff support; they all lived in different parts of the country, and their monthly meetings were not sufficient to enforce a code intended for all senior civil servants. They selected Mauro Sérgio Bogéa Soares, a former tax auditor and public servant known for his attention to detail, as their secretary. "Any successes we had … were mostly due to him and to Piquet, and a very motivated board," said commission member Roberto Teixeira da Costa. Soares meticulously conducted an informal count of officials who were covered by the code, and within two months of his appointment, identified 787 officials. He set about publicizing the commission’s work and inundating ministers and officials with copies of the code. He also met with ministries to explain the code, portraying it as a source of guidance rather than as a regulator of behavior.

The commission then devised ways to enforce the code. Civil servants who were already in office were to sign and submit the code within 30 days; Incoming hires had to submit the signed code within 10 days of their appointment. Failure to comply could result in the commission recommending their removal. A Declaration of Confidential Information required officials to submit details of their finances with the signed code. Senior government officials tended to bring "private baggage" when they entered office — many were former chief executives of companies or public banks. The commission would work with officials to untangle their private and public interests if conflicts arose. The staff studied the declarations meticulously and became adept at detecting conflicts of interest — and also uncovered attempts to subvert the process.

Informing officials about the code and the declaration was a difficult task. Many accused the commissioners of mistrusting the president’s judgement, as many senior officials were presidential appointees. But President Cardoso and Chief of Staff Parente stood firm, encouraging all ministers to comply. Piquet and Soares would also meet with non-cooperative ministers, explaining the consequences of failing to comply. "It was a very difficult public position [for senior ministers] to hold, to say that you did not want to behave in a proper manner," Sola said.

Reports of infractions could come to the commission either through a complaint from an official’s colleague or, more often, through the media. As soon as the commissioners discovered a violation, they collected as much information as possible on the situation, and would then issue a warning to the official involved and request an explanation. If the official’s explanation was satisfactory, the case was closed; if not, the commission took disciplinary action, sometimes making an official donate to charity or reimburse public coffers. If the official ignored the initial notice, the commission issued a more stringent warning and informed the president’s chief of staff. If the official ignored the commission a third time, the commission advised the chief of staff and the president to dismiss the offender; presidential support was thus vital to the model’s success.

From the start, the commission faced a dilemma. If it was too strict, it would alienate civil servants, but if it was too lenient, it would lose purpose and efficacy. It had to balance the roles of watchdog and collaborator. Piquet stressed the importance of building respect through a flexible, low-key approach of consultations and conciliation. "It was important for the authorities to perceive that we were not witch hunters, [and] that they would have the support of the commission if something happened," he said.

Piquet arranged several highly publicized demonstrations of how individuals complied with the code. One such case involved the president of the Central Bank of Brazil, Arminio Fraga: His position was fraught with potential conflicts of interest because he had advance knowledge of economic indicators like inflation and exchange rates. Fraga volunteered to transfer management of his financial assets to an independent third party. This public display of a high-profile financial management agreement set a standard for how economic decision-makers could separate their public and private interests; it was also the first time that a Brazilian minister discussed the management of his own assets.

Piquet looked to Brazilian culture to illustrate why a conciliatory system enforced by social pressure worked better than rigid legal enforcement. He referred to Rio’s famous Samba dance halls, where rowdy behavior evoked warnings from both hall officials and dancers. If the misdemeanor persisted, fellow dancers ejected the offender. This shared enforcement system effectively suppressed misbehaviour better than rigid laws; it was a way of changing behavior by taking a middle path, acting as a mediator rather than an enforcer.

Much of the commission’s enforcement system hinged on trust: The commissioners had to demonstrate a degree of trust in officials’ compliance. Piquet felt that this trust-based system generated mutual respect, but critics doubted its stability and said it created room for duplicity. The team largely overcame this challenge with the support of the president and the chief of staff, as well as the media’s watchdog role as an indirect enforcer of the code.

The Public Ethics Commission set a clear precedent in the Brazilian political system, eliminating a gray area in officials’ duties and holding those in the upper echelons of the civil service more accountable to the public. During the first three months after the ethics code’s adoption, over 40% of the 787 officials failed to submit their financial declarations. Instead of issuing stern warnings, the commission sent reminders to the defaulters and arranged face-to-face interviews with the few individuals who repeatedly ignored the code. Within six months, the level of missing financial declarations fell to a rate below 1%.

The commission spread ethical standards by encouraging decentralization, routinely meeting with heads of government agencies to encourage them to set up their own internal control mechanisms, codes of conduct, and ethical panels. Ethical behavior became the norm as opposed to the exception among the upper echelons of the civil service: By 2010, commission members and officials acknowledged that gifts and perks were universally frowned upon in Brazilian political culture. Fernando Neves da Silva, who served as the commission’s president after Piquet, said, "The commission can really be an entity that bothers politicians, like a mosquito buzzing in your ear."          

While enthusiastic about the commission’s overall impact and the endurance of its early successes, several former commissioners expressed disappointment regarding its operation under Cardoso’s successor, President Luiz Inácio Lula da Silva. At the beginning of President Lula’s tenure, the commission was still operating strongly under Piquet’s leadership. After Piquet left in 2004, however, it lost momentum. From 2006 to 2008, the commission operated with only three members; Lula claimed that he could not find people willing to take the unsalaried positions. Additionally, there were cases where the president was not supportive of commission decisions, causing commissioners to resign in protest. The commission regained some momentum in 2009, but the divergence in its performance between the Cardoso and Lula administrations highlighted the critical importance of a strong working relationship between the president, the chief of staff, and the commission.

Piquet offered a modest but positive assessment of the commission’s impact: "We kept worrying about very ordinary things, which doesn’t compare to some of the large scandals in Brazil," he said. "But if you have a government function and don’t regulate the gray areas, your area of contamination becomes a lot larger. Nobody had done it before … but we did a little bit. That’s certainly better than nothing. We created a background reference that is still important today."