Jonathan Herman

Why the Foreign Corrupt Practices Act is GOOD for Business

Jonathan Herman
  • The FCPA levels the playing field and helps ensure fair competition

Bribery distorts competition and rewards those who cannot compete in an open and fair market.[i] As Congress recognized, bribery “…rewards corruption instead of efficiency and puts pressure on ethical enterprises to lower their standards or risk losing business.” [ii]  The FCPA levels the playing field, allowing the most competitive company to win a bid or contract.

  • The FCPA gives corporate officials a protective measure when operating in corrupt markets

The FCPA is a shield that enables corporate officials to operate in corrupt markets or in situations where contracts are contingent on bribes.  Newmont Mining Director of Corporate and External Affairs Africa has said:

“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.’”[iii]

  • The FCPA reduces the cost of doing business

The World Bank estimates that more than $1 trillion dollars in bribes are paid each year – roughly three percent of the world economy.[iv]  Once a bribe is given, it sets a negative precedent in which bribes may be expected in order for business to continue.[v]  Furthermore, when word spreads that a company gives bribes, others the company may desire to work with in the future may also expect a bribe.

  • The FCPA compliance programs help companies detect potentially corrupt partners

Through robust compliance programs, companies are able to use the information gathered to identify potentially corrupt foreign partners. Such due diligence processes enable companies to determine what actions must be taken, for example, finding a new partner or redirecting resources to another project.

 

 

 

[i] Cortney C. Thomas, The Foreign Corrupt Practices Act: A Decade of Rapid Expansion Explained, Defended and Justified, 29 Rev. Litig. 439,441 (2010).

[ii]See Foreign Corrupt Practices Act: Hearing on 15 U.S.C. §78dd-1 and §78dd-2(f) Before the H. Subcommittee on Crime, Terrorism and Homeland Security, 112th Cong. 2 (1977) (statement of Greg Andres, Acting Deputy Assistant Attorney General Criminal Division).

[iii] Statement by Chris Andersen, Director Corporate & External Affairs Africa, Newmont Mining Panel Discussion: New and Emerging Financial Reporting Requirements and the EITI, Extractive Industries Transparency Initiative Global Conference, March 2,2011, Paris, France. Available at: http://soundcloud.com/eiti/paris2011-en-emerging-reporting-requirements at 20:03mins.

[iv]  The World Bank, The Cost of Corruption(April 8,2004),  http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:20190187~menuPK:34457~pagePK:34370~piPK:34424~theSitePK:4607,00.html. [Last Accessed June 30, 2011]Andres Testimony, supra note 2, at 2.

[v] See Thomas, supra note 1, at 441-442.