I was surprised to see the continuing defense of the
Foreign Corrupt Practices Act (FCPA) in publications normally thought of as
pro-business. On July 1, authors Amol Mehra and Ajoke Agbool published an
article in Forbes.com entitled, "The
Corporate Responsibility to Prevent Corruption." This article followed
two articles in the Wall Street Journal (WSJ) from the previous week which
discussed the positive effects of the FCPA. In the Forbes.com article, the
authors focused on a company's corporate social responsibility to refrain from
engaging in bribery and corruption.
The authors began their piece on the recent Deferred
Prosecution Agreement involving Johnson and Johnson (J&J). However, rather
than concentrating on the specifics of the FCPA violative actions engaged in by
J&J, the authors reviewed the J&J conduct in light of J&J's own
stated Corporate Social Responsibility (CSR) Policy, which the authors quoted
We must provide competent management and
their actions must be ethical. We are responsible to the communities in which
we live and work and to the world community as well. We must be good
citizens - support good works and charities and bear our fair share of taxes.
The authors noted that the actions of J&J which were
found to violate the FCPA involved bribery in several countries in Eastern
Europe. This corruption was disconnected from their stated company CSR Policy.
The authors went onto state that company compliance
programs should not simply be seen as a means of reducing liability and risk;
they are also critical components of a company's CSR Policy. The reality is
that corruption should and does have its costs, and not just in situations
where companies get caught. Bribery distorts competition and rewards those who
cannot compete in an open and fair market. In his prepared statement before the
recent House Judiciary Committee hearing on the FCPA, Department of Justice
(DOJ) representative Greg Andres stated:
"Corruption undermines the democratic process,
distorts markets, and frustrates competition. When government officials,
whether at home or abroad, trade contracts for bribes, communities, businesses
and governments lose; and when corporations and their executives bribe foreign
officials in order to obtain or retain business, they perpetuate a culture of
corruption that we are working hard to change."
The authors cited to the FCPA Legislative History for the
statement, "As Congress recognized, bribery ". . . rewards corruption
instead of efficiency and puts pressure on ethical enterprises to lower their
standards or risk losing business." Returning to Greg Andres written
testimony, he stated: As the FCPA's legislative history makes clear,
"Corporate bribery is bad business. In our free market system it is basic that
the sale of products should take place on the basis of price, quality, and
The authors also used examples of US businessmen who see
value in the FCPA. After initially noting that if one bribe is given, it sets a
negative precedent in which bribes may be expected in order for business to
continue. The authors cited the example of Newmont Mining's Director of
Corporate and External Affairs for Africa, who publicly stated:
Newmont's experience, particularly in Africa,
has been that FCPA has been an enormously valuable protective device for us . .
. when you have a government person saying . . . 'we'll give you that license
if you buy us a car or something' . . . it's not about 'look I'm a mean
guy and I don't have value our relationship, and therefore I'm not going to
give it to you,' you say 'look, there's a law out there that means I'm going to
go to jail if I do that, I'm not going to go to jail for you or anybody else.'
The above example and the one previously reported in the
WSJ of Alcoa may be one of the reasons why some business leaders have come out
in defense of laws like the FCPA that both incentivize companies to develop
compliance programs and punish violators.
Mehra and Agbool argue that a strong internal compliance
program should be an integrated part of corporate social responsibility. They
believe that businesses should be able to identify and mitigate against bribes
and corruption, not only to ensure compliance with the law but additionally to
keep markets competitive and to ensure that their activities are benefiting the
societies in which they operate. Lastly they note that, "companies need to
follow Newmont's lead and understand that regulations like the FCPA have the
potential to be used as a shield, enabling access to areas where corruption is
rampant by providing a defensive measure against those seeking bribes."
The key takeaway from this article and the previous
articles in the WSJ is that review of the FCPA must be something more than what
we saw in the House Judiciary Committee hearing. Not only did the
Representatives who put forward questions fail to cite any examples of the loss
of US jobs by US companies because of the FCPA, they completely failed to
discuss any of the positive aspects of the FCPA and would barely allow DOJ
Representative Greg Andres to respond to any questions on this point. As Mr.
Andres said, if companies do not engage in bribery and corruption they do not
have anything to worry about with regard to the FCPA. It would appear that some
of the country's more pro-business newspapers and journals are beginning to see
the benefits of the FCPA.
Visit the FCPA Compliance and Ethics Blog,
hosted by Thomas Fox, for more commentary on FCPA compliance, indemnities and
other forms of risk management for a worldwide energy practice, tax issues
faced by multi-national US companies, insurance coverage issues and protection
of trade secrets.
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© Thomas R. Fox, 2011
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