by CHARLES M. DENNY and DAVID WEISSBRODT
The anti-bribery standards Congress enacted 35 years ago help both U.S. businesses and global development.
For many years, Minnesota and its business community have proudly been leaders in instituting ethical business practices and promoting human rights, including adoption of the Foreign Corrupt Practices Act (FCPA) of 1977.
Chicago Tribune columnist Steve Chapman suggested in a column last month that complying with high ethical standards is bad for both U.S. businesses and development in other countries. But the column is contradicted by the facts, and the statements of business executives committed to both turning a profit and maintaining high ethical standards.
The Foreign Corrupt Practices Act was passed in the wake of Watergate and other scandals (one involving Lockheed and foreign bribery). The statute prohibits both U.S. companies and foreign companies with connections to the United States from bribing foreign government officials. The act has established America’s reputation as a strong proponent of ethical business practices abroad.
As Microsoft recognizes in its anti-corruption policy, “Corruption promotes poverty, hunger, disease and crime, and keeps societies and individuals from reaching their full potential. Corruption is one of the leading obstacles to economic and social development. Microsoft is committed to observing the standards of conduct set forth in the [act] and the anti-corruption and anti-money-laundering laws of the countries in which it operates.”
And make no mistake about the overall cost of bribery. The World Bank estimates that nearly $1 trillion is spent around the world on corrupt payments each year. This drain on both businesses and the countries where they operate was one of the reasons for the enactment of the Corrupt Foreign Practices Act in the first place, and it continues to be one of the central reasons strong enforcement is necessary.
The act protects those corporations seeking to uphold ethical business standards. Nearly 40 percent of executives polled by Transparency International reported that foreign officials have demanded bribes from them. The act provides corporations with a bright-line justification for refusing the corrupt practices of foreign officials who solicit bribes, and U.S. companies have continued to win contracts and work productively in foreign countries.
‘Like an insurance policy’
Newmont Mining, the second-largest oil mining company in the world, views the act as a valuable business tool. Just last year, Chris Anderson, Newmont’s director of corporate & external affairs for Africa, said: “Newmont’s experience, particularly in Africa has been that [the] FCPA has been an enormously valuable protective device for us … and we found it to be like an insurance policy.”
Alan Boeckman, former CEO of Fluor Corp., implemented strong anti-corruption policies at Fluor.
“When I became Fluor’s CEO …. I was sick and tired of losing business to overseas competitors who played by different rules. The engineering and construction sector has an especially large exposure to corruption, and I was frustrated that our employees were pressured occasionally to pay up. I did not want our industry — and especially Fluor — to wind up as the ‘poster child’ for world bribery.”
The act also levels the playing field for businesses by prohibiting any company from paying bribes, whether or not it can afford the additional expense. Businesses should receive contracts because they have the best product, not because they can provide the largest bribe.
No deterrent to competition
Chapman has joined critics of the Foreign Corrupt Practices Act who have argued that America’s strong stance on bribery disadvantages U.S. companies competing with foreign entities that willingly pay bribes. This is not the case. The Department of Justice prosecutes foreign companies that are doing business in the U.S. as well as American companies, so the act does not undermine the competitiveness of U.S. companies. In recent years, foreign companies have paid nine of the 10 biggest fines for foreign bribery.
Foreign governments, including the United Kingdom, Italy, India, South Korea, Russia and China, and multilateral institutions are developing increasingly stringent anti-bribery standards. As the rest of the world strengthens anti-bribery standards, the international field of corporate competition is more level than ever before for businesses that refuse to bribe. Now is not the time for the United States to move in the opposite direction.
In our experience, Minnesotans and Minnesota businesses do not support the myopic and cynical belief that businesses can only succeed if they operate without the hindrance of ethical or legal standards.
Minnesota’s business community is better than that.