Foreign Corrupt Practices Act

Foreign Corrupt Practices Act

Introduction

The Foreign Corrupt Practices Act was enacted in 1977 in United States to regulate the trade and commerce for tight monitoring and transparency in accounting practices adopted by the commerce agents i.e. businesses and corporate concerns which are engaged in carrying out business with foreign countries (Gatti, Clive & Ogrady

1). This act strictly prohibits any act of bribery from or to any person to get things accomplished in an unlawful manner.

The law was enacted because there was a serious concern for corrupt practices among American traders. These trading activities had a profound impact on the image of USA among other major trading partners. In the mid of 1970s, more than 400 companies of US origin having international footprints of were paying almost more than $300 million to different groups and individuals such as political parties, major politicians, ministers and the authorities that were holding power (Weiss 6). The renowned company, manufacturer of the world renowned fighter jet F-16 had paid personnel of foreign countries to show a tendency and preference for their product. In another investigation, it was reported that a famous company actually bribed the president of a foreign country, Honduras, to offer them discounted tax policy for their operations in that country. They give $2.5 million to the country's president for a tax saving of around $7.5 million and another $750,000 to Italian official for allowing the import of the company's products. When the president of Honduras raised the taxes, the chairman of the company was so depressed that he committed suicide.

These were some important reasons which led to the making of this famous law which is now an essential for good corporate governance for any company. The act which was enacted by President Jimmy Carter was further amended in 1988 as the international anti-bribery law.

Ethical Standing:

Ethical behavior is strictly not a global standard at all. In some of the regions of the world, paying a bribe in terms of cash kickbacks and/or other tangible favours is still not considered an ethical or moral issue that can be termed as unlawful; rather it is just the 'cost of doing business' (Howell 1). The question here arises that should the bribe be paid or not. However, with globalization and emerging trade relationships ethics and corporate governance are gaining strong grounds.

In most of the business schools, the faculty might be educating their future generations with adaptability and ways of working out with the situation. Mostly the reason they give of doing so is as they believe that the entire motive is the bottom line. So the fact that whether any particular business's ethics should become accustomed to the local environment or become as a standard for its operations around the whole globe becomes a question mark in terms of ethics. Many of the business graduates and young managers give the argument, "When in Rome, do as the Romans do." In simple words, we should follow local/host country's practices and assimilate according to their businesses customs if we have to build a successful and sustainable business environment. In Harvard Business School, a termed coined by two leading faculty members of business ethics, Joseph Fletcher and James Adams, was "situational ethics," which was based on bendable and realistic approaches towards such complex business dilemmas (George 1). Perhaps, most business tycoons do follow it as well and that is why they have been very successful. The corrupt systems and politicians with big wide open mouths are ready to swallow dollars for each tiny task they can control.

Foreign corrupt practices are an umbrella to guide the businesses when they start operating globally. When businessmen talk about the "business ethics" they typically refer to one of three aspects:

* Keep away from breach the 'criminal law' in their work-related activities

* Stay away from actions that might result in civil law suits against them or their businesses

* Avoid any procedures or activities that are not in favour of the company's image.

Such is the case with the standards of ethics, which make it inevitable to set a framework of rules to guide the businesses to avoid corruption when going international.

Impact on Businesses:

Foreign Corrupt Practices Act had significant repercussions on US companies doing