Professor: Ms. Gleason
A Traveler's Guide to Gifts and Bribes
Harvard Business Review
Why might bribery become a problem for U.S. managers working in foreign countries?
The FCPA was structured to help U.S. companies understand what bribery is, and what is or is not acceptable behavior at home and in other countries. The confusing issue is that even with this guidance, it is not always clear what exactly is to be considered a bribe. Under the Act, not all payments are deemed to be bribes. FCPA doesn’t forbid payments to lesser figures, it allows bribes to facilitate ongoing business activities, as there is no monetary guideline it requires companies to keep reasonable records of the transaction. Brides given to influence political decisions are banned and usually small payments that are designed to get a foreign official to perform a non-discretionary function. The distinction between the two is blurred. Confounding this is that many U.S. business people do not know what is permitted and what is not, as there is no clear guidance. As there is no clear guidance on what you can and can’t do working with foreign countries a lot of U.S. Managers could actually be offering bribes that should actually be banned. This creates no equal opportunity for everyone; the foreign company will go with whomever’s bribe seems to be greater. This will create a huge problem because this is where a lot of U.S. manger will cross the line just to win the business. What are the major features of the Foreign Corrupt Practices Act (FCPA)? The Foreign Corrupt Practices Act (FCPA) was enacted in 1977 and substantially revised in 1988. The FCPA generally prohibits corrupt payments to foreign officials. To complement this prohibition, the FCPA has accounting provisions that require maintenance of transparent and complete financial records. The Justice Department enforces the anti-bribery provisions, while the Securities and Exchange Commission has jurisdiction over the accounting requirements. The key provisions of the FCPA are as follows: (Hart, 2001) * The FCPA prohibits payments (including promises to pay) of anything of value to influence, corruptly (with corrupt intent), the discretion of a foreign official to do something in violation of his or her official duty; to obtain, retain, or direct business; or to gain any improper advantage. * The FCPA prohibits indirect payments, as well. These provisions also apply to acts of a non-U.S. representative that is attributable to the U.S. party. * The FCPA exempts “facilitating” payments. These are usually small payments that are designed to get a foreign official to perform a non-discretionary function. * The Justice Department can pursue criminal sanctions of up to $2 million per count for legal entities, with individuals facing fines of up to $250,000 per violation and imprisonment up to five years. Civil penalties may also apply at a rate of $10,000 per violation for an entity or individual. Additional fines by an SEC civil enforcement action may apply. * FCPA conviction can result in the party being debarred from U.S. government contracts, prevented from participating in the securities industry, and barred from loan programs of certain U.S. and international lenders. In addition, there may be tax ramifications. * Compliance should be reflected in international agreements. (It is not sufficient, however, to state in an agreement that the FCPA applies and is part of the agreement). * FCPA require corporations to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls.
Why might the Foreign Corrupt Practices Act create a competitive disadvantage for U.S. firms? Many believe that the FCPA has created a competitive disadvantage for the U.S. as, historically, both the Europeans and Japanese have and continue to use...