(Assignment 3) Baksheesh or Bribe: Payments to Government Officials and the Foreign Corrupt Practices Act By Frank Cavico and Bahaudin Mujtaba - Vishali Sairam

1.     “One aspect of “going global” is the presence of complex anti-corruption laws that create potentially very serious legal risks, and thus warrant the keen consideration by the international business executive, manager, or entrepreneur. This article primarily addresses one major anti-corruption statute – the United States Foreign Corrupt Practices Act”(pp 83)

2.     “What exactly is a payment to the foreign official? Is it a legal, moral, socially
responsible, and culturally acceptable “little” gift, or is it an illegal, immoral, socially
irresponsible, and culturally inappropriate, “big” crime of bribery? The purposes of this article are to seek to answer these questions with the focus centered on a major law of the United States that prohibits the bribery of foreign officials – the Foreign Corrupt Practices Act (FCPA)”.(pp 83)

3.     This article looks at ‘purchase bribes’ - “payment is made to the foreign official with a corrupt motive to induce the foreign official to misuse his or her position or authority in order to wrongfully secure a contract or direct business to one’s firm” (pp 84)

4.     “The Foreign Corrupt Practices Act (FCPA) of 1977 has two main parts: 1) an anti-bribery component that makes it illegal to provide anything of value to officials of foreign governments or political parties with the wrongful intent to obtain or retain business; and 2) an accounting component that requires companies to maintain books and records that thoroughly and accurately reflect transactions with foreign officials as well as to establish and maintain appropriate internal controls to ensure the integrity of the records and accounting processes.” (pp 86)

5.     The anti bribery component casts a wider jurisdictional net than its recordkeeping counterpart. For example :

●      “regarding the requirement of obtaining or retaining business, paying bribes to secure a contract would of course trigger the statute; but violation can also occur if a company obtained some type of “improper business advantage” from the payment to the foreign government official, for example, reducing custom duties and waiving regulations, even if no specific contract was secured”  (pp 88)

●      “The term “Foreign officials” are also broadly defined. Any person who receives at least a portion of his or her salary from the public treasury of a foreign government will be deemed to be a foreign government official, which includes doctors and nurses who work in state-owned facilities, employees of state-owned companies, as well as government contractors that are working in some type of official government capacity, such as providing security services” (pp 88)                                                        

6.     A major exception to this law is the case of ‘legal bribe’ which are payments to the govt officials especially lower level, who expect a little “grease” money to “facilitate and expedite” routine governmental actions. The exception also realistically reflects the real world view that these payments are usually considered normal business practices to afford additional compensation to inadequately compensated lower level government officials. (pp 89-90)

7.     “Bribery is a common way of doing business in many societies; it is in many places an ingrained cultural practice. Bribery more prevalent in developing countries where jobs do not pay well” (pp 94) “However, in many other countries, this culture of doing business is illegal and immoral” (pp 95). “If business in the host country cannot be conducted in an effective manner without adopting the illegal or immoral local common practice, the company must be prepared to withdraw from the host country and forego the business opportunities. If that is the case, then Ethical Relativism, which has been popularly, and a bit cynically, called the “best friend” ethically of the global business person, may become his or her “worst enemy.””(pp 96)

Final Sentence : Bribery and corruption can pose as a huge hurdle to country’s advancement. This paper on FCPA clearly shows how there is an increase in government investigation and more anti corruption laws across the world. This will lead to a decrease in ethical relativism across cultures. Efforts to act in a legal or ethical manner will save business time , effort and money in the long term for the company.

 Reference

Cavico, Frank & Mujtaba, Bahaudin; Baksheesh or Bribe: Payments to government officials and the Foreign Corrupt Practices Act, Journal of Business studies Quarterly 2010, Vol 2 No.1, pp 83-105