The US Chamber of Commerce, Washington’s largest lobbying organization, spent more than $700,000 in 2011 in its quest to curb the Foreign Corrupt Practices Act (FCPA). Is that really what’s best for American businesses?
Invoking the rhetoric of a populist manifesto, the Chamber is trying to make the case that increased enforcement of the FCPA has had a chilling effect on US businesses, causing them to avoid doing deals abroad for fear of setting off a FCPA investigation. But while this sentiment sounds pro-America, it is actually quite the opposite.
Beneath the flag-waving sentiment, the Chamber is essentially asking for the US government to look the other way on bribery of foreign officials. That sets a dangerous precedent for a way of doing business that does not favor US corporations.
In its proposed amendments to the FCPA, the Chamber recommends the following:
- Adding a compliance defense, which would allow companies to avoid liability if they can prove they had robust measures in place to prevent bribes
- Limiting a company’s liability for the prior actions of a company it has acquired
- Adding a “willfulness” requirement for corporate criminal liability
- Limiting a company’s liability for acts of a subsidiary
- More clearly defining a “foreign official” under the statute.
By focusing on these five criteria, the Chamber has shown that they clearly recognize the root causes of most FCPA violations. We’ve seen again and again that companies with robust compliance measures in place are far less likely to find themselves embroiled in an investigation and, if they do, they are much more likely to avoid major sanctions. Similarly, we’ve also found that subsidiaries, agents and vendors are often a corporation’s weak link in foreign corruption cases and that newly acquired companies often come with skeletons in their closets.
But just because these issues are the most common stumbling blocks for US firms does not mean the law should be amended. The Chamber’s logic on amending the FCPA is akin to raising blood-alcohol limits to reduce the number of drunken driving cases.
The real challenge confronting large, multinational businesses as they continue to expand into high risk emerging markets is finding a way to compete profitably without compromising the standards of business ethics that have made them successful in the first place. If first world nations start bending the rules to allow bribery to proliferate in emerging markets, the fortunes of those first-world nations will rapidly decline. Consider the entrepreneurial logic: Why bother with FDA approval on a new drug when you can buy a license to produce it in Africa, Asia or Eastern Europe? The business world does not need lighter anti-bribery laws. It needs more universally applied rules that even the playing field for everyone with zero tolerance for fraud.
Increasingly, that is starting to happen. With the release of the UK Bribery Act last year and similar initiatives put in place recently in Russia and China, the global marketplace is stepping up to the challenge of corruption in emerging markets by attempting to cut it off at its source.
First world nations have benefited from the strength and predictability of their contract law. Understanding the rules of the game and that enforcement is consistent will benefit multinationals that are prepared for a world market where bribery is not tolerated. Any effort by the US Department of Justice to mitigate the power of the FCPA, now that the rest of the world is following its lead, would be a step backwards for free markets.
David Riker is managing director, Third Party Screening, Kroll.