English Writer 13 | - Freelance Writer
Feb 17, 2018 | #1
The United States has strict anti-corruption policies preventing US citizens, firms and officials from offering or accepting bribes in the areas of business or government. First enacted in 1977, the Foreign Corrupt Practices Act (FCPA) set anti-corruption regulations for firms operating abroad. The FCPA had two principal components - one dealing directly with anti-bribery, and the other with and transparency in record keeping. A subsequent amendment to the FCPA prohibits "...payments to any foreign official for the purpose of influencing any act or decision of such foreign official in his official capacity, or inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official" (Section 5003 of FCPA). In other words, offering bribes is prohibited in foreign business dealings just as it is within the United States, regardless of the local customs prevalent in the places where business is being done. While sources indicate that the FCPA was not consistently enforced during the first few decades following its enactment, nowadays, its enforcement is quite strict, offering consistent opposition and prevention of bribery in foreign business interactions.
Preventing corrupt practices such as bribery is in keeping with United States business ethics and values. The intention of the FCPA has always been to enforce the implementation of US values even when business is done abroad. However, when doing business in societies where bribing is a regular and accepted component of commercial practices, it is sometimes argued that strict adherence to US anti-bribery laws may put US companies at a competitive disadvantage in terms of international trade with foreign companies. US companies may be unable to compete effectively with firms from other countries which are willing to engage in or tolerate bribery, and therefore have an increased opportunity to attract and negotiate contracts. Since the enactment of FCPA regulations, these losses may have been substantial; for example, a 1995 study valued the loss in contracts due to US refusal to engage in bribery at an estimated $45 billion dollars.
Despite what seems to be a clear financial incentive to relax the enforcement of anti-bribery laws, the United States has, with some success, attempted to alleviate the competitive disadvantage described above by negotiating more stringent and consistent international regulations. This international cooperation with regard to anti-bribery and anti-corruption legislation had always been the intent; however, according to Low and Trenkle, early attempts to do so had failed in the 1970s. However, by the late 1980s, negotiations progressed, and five of the top ten export economies - the United States, Canada, Germany, Japan and the United Kingdom- took coordinated steps toward ratifying anti-bribery regulations, as did five other OECD members - Iceland, Norway, Hungary, Finland, and Bulgaria (Low and Trenkle). Moreover, with regard to these and other economically developed nations, anti-bribery laws have not only been ratified, but are also being strictly enforced on an ongoing basis.
Because of the increasing coordination of international standards, American firms are no longer faced with a preponderance of competitors who eschew such standards. As a result, the economic disadvantage of enforcing FCPA regulations is gradually dissipating. The Organization for Economic Cooperation and Development (OECD) has given a great deal of attention to anti-bribery regulations, and member countries typically have strong and consistently enforced policies. For example, the UK Financial Services authority imposed 5.25 million (in Pounds Sterling) fine on Aon Ltd., a British subsidiary, for failing to establish sufficiently powerful anti-bribery controls ("The Extraterritorial Reach of US Anti-Bribery Law"). Developing countries, likewise, are beginning to show the initiative in domestic investigations of bribery cases. It is admirable that, instead of abandoning their high standards of business ethics on the international market in view of competition, The United States instead initiated a similar process of regulation adherence among other powers. There are strong social and ethical reasons to resist corruption in business practices.
When business practices are generalized throughout a society and their broader effects are considered, it becomes undeniable that corrupt practices exist to the detriment of the society as a whole, even when short term advantages seem to be present. Logue suggests the following detrimental effects of bribery: First, an economic system which accepts or does not prevent the practice of bribery reinforces existing inequities in resources, disenfranchising those without resources and empowering those who have them, thus accelerating the inequitable effects of capitalism. Furthermore, bribery and corruption become barriers to economic development, as the system prevents economic improvement that is generalized throughout a society, concentrating financial gain among already affluent individuals. In fact, in 1996 both the World Bank and the International Monetary Fund (IMF) stated that corruption is "... the enemy of development". Finally, bribery tends to weaken the constructive and regulatory powers of government, eroding or preventing the rule of law.
For all of these reasons, despite the fact that it may constitute a short term advantage and may indeed be resonant with some cultural practices, bribery ultimately creates an unhealthy international trade environment. Increasing the strength and level of enforcement of anti-bribery laws will, in the long run, create more hospitable conditions for world trade. Currently, due to international cooperation on standards, the short term disadvantages of the US anti-bribery laws are disappearing, and the superior ethical standing and long term benefits seem clear.
Bibliography
Aubin, Dena. "Anti-bribery act could weigh on corp ratings". Reuters.
Logue, Niles. (2005). "Cultural Relativism or Ethical Imperialism? Dealing with Bribery Across Cultures". Proceedings of the Christian Business Faculty Association National Conference at Point Loma Nazarene University.
Low, Lucinda A. and Trenkle, Timothy P. (1999). "U.S. antibribery law goes global: Standards tightening up". Business Law Today.
Seitzinger, Michael V. "CRS Report to Congress: Foreign Corrupt Practices Act".
"The Extraterritorial Reach of US Anti-Bribery Law". (2009). Freshfields Bruckhauser Deringer LLP.
Preventing corrupt practices such as bribery is in keeping with United States business ethics and values. The intention of the FCPA has always been to enforce the implementation of US values even when business is done abroad. However, when doing business in societies where bribing is a regular and accepted component of commercial practices, it is sometimes argued that strict adherence to US anti-bribery laws may put US companies at a competitive disadvantage in terms of international trade with foreign companies. US companies may be unable to compete effectively with firms from other countries which are willing to engage in or tolerate bribery, and therefore have an increased opportunity to attract and negotiate contracts. Since the enactment of FCPA regulations, these losses may have been substantial; for example, a 1995 study valued the loss in contracts due to US refusal to engage in bribery at an estimated $45 billion dollars.Despite what seems to be a clear financial incentive to relax the enforcement of anti-bribery laws, the United States has, with some success, attempted to alleviate the competitive disadvantage described above by negotiating more stringent and consistent international regulations. This international cooperation with regard to anti-bribery and anti-corruption legislation had always been the intent; however, according to Low and Trenkle, early attempts to do so had failed in the 1970s. However, by the late 1980s, negotiations progressed, and five of the top ten export economies - the United States, Canada, Germany, Japan and the United Kingdom- took coordinated steps toward ratifying anti-bribery regulations, as did five other OECD members - Iceland, Norway, Hungary, Finland, and Bulgaria (Low and Trenkle). Moreover, with regard to these and other economically developed nations, anti-bribery laws have not only been ratified, but are also being strictly enforced on an ongoing basis.
Because of the increasing coordination of international standards, American firms are no longer faced with a preponderance of competitors who eschew such standards. As a result, the economic disadvantage of enforcing FCPA regulations is gradually dissipating. The Organization for Economic Cooperation and Development (OECD) has given a great deal of attention to anti-bribery regulations, and member countries typically have strong and consistently enforced policies. For example, the UK Financial Services authority imposed 5.25 million (in Pounds Sterling) fine on Aon Ltd., a British subsidiary, for failing to establish sufficiently powerful anti-bribery controls ("The Extraterritorial Reach of US Anti-Bribery Law"). Developing countries, likewise, are beginning to show the initiative in domestic investigations of bribery cases. It is admirable that, instead of abandoning their high standards of business ethics on the international market in view of competition, The United States instead initiated a similar process of regulation adherence among other powers. There are strong social and ethical reasons to resist corruption in business practices.
When business practices are generalized throughout a society and their broader effects are considered, it becomes undeniable that corrupt practices exist to the detriment of the society as a whole, even when short term advantages seem to be present. Logue suggests the following detrimental effects of bribery: First, an economic system which accepts or does not prevent the practice of bribery reinforces existing inequities in resources, disenfranchising those without resources and empowering those who have them, thus accelerating the inequitable effects of capitalism. Furthermore, bribery and corruption become barriers to economic development, as the system prevents economic improvement that is generalized throughout a society, concentrating financial gain among already affluent individuals. In fact, in 1996 both the World Bank and the International Monetary Fund (IMF) stated that corruption is "... the enemy of development". Finally, bribery tends to weaken the constructive and regulatory powers of government, eroding or preventing the rule of law.
For all of these reasons, despite the fact that it may constitute a short term advantage and may indeed be resonant with some cultural practices, bribery ultimately creates an unhealthy international trade environment. Increasing the strength and level of enforcement of anti-bribery laws will, in the long run, create more hospitable conditions for world trade. Currently, due to international cooperation on standards, the short term disadvantages of the US anti-bribery laws are disappearing, and the superior ethical standing and long term benefits seem clear.
Bibliography
Aubin, Dena. "Anti-bribery act could weigh on corp ratings". Reuters.
Logue, Niles. (2005). "Cultural Relativism or Ethical Imperialism? Dealing with Bribery Across Cultures". Proceedings of the Christian Business Faculty Association National Conference at Point Loma Nazarene University.
Low, Lucinda A. and Trenkle, Timothy P. (1999). "U.S. antibribery law goes global: Standards tightening up". Business Law Today.
Seitzinger, Michael V. "CRS Report to Congress: Foreign Corrupt Practices Act".
"The Extraterritorial Reach of US Anti-Bribery Law". (2009). Freshfields Bruckhauser Deringer LLP.