Managing a Company’s Legal Risks Related to Corruption in International Business

Managing a Company’s Legal Risks related to Corruption in International Business

Shuangxiao Guo

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Introduction

When sales managers deal with the international business, they may have some corrupt practices, because they can gain business opportunities or personal benefits from the corrupt behaviors. However, corrupt practices are illegal and unfair to the competitors. These behaviors may also prevent consumers from getting the best products and lead to the culture of corruption in a company. Bribery is a very common type of corporate corruption. For example, Tommy, a sales manager of a computer company in the U.S., is responsible for the sales of computers in China. China has a large population and a large demand for computers. Wang is an employee in one of the largest computer companies in China. He is responsible for purchasing computers from American Company and selling them in China. In order to ask Wang to choose computer from Tommy’s company, Tommy bribed Wang. He brought some expensive gifts for Wang and invited him to dinner. Tommy also promised Wang that if Wang can purchase computers from him, he would provide 5% of the purchasing cost to him. In the end, Wang purchased the computers from Tommy and got the benefit. These behaviors are corrupt practices, which have negative impacts on business. Both America and China have set up certain laws to prohibit and/or penalize those corrupt business practices. In the following pages, I will compare anti-corruption laws between America and China to find their similarities and differences.

The U.S. federal anti-corruption laws

Corporate corruption means “Any corporation or employee of a corporation who, in their dealings with a public official and seeking benefits for himself or any third party, engages in behavior which promotes the violation of law or abuse of power on the part of the government official (National Association of Attorneys General, 2013).” Corrupt business practices have many negative impacts on the culture and operation of a company. America has already set up some relevant laws to prohibit the corruption. For example, Antitrust Law in the U.S. is a useful law to avoid corporate corruption. This law prohibits unlawful business activities. It advocates the fair competition among companies to benefit customers. The penalty for violating the antitrust law is also stiff. The company can be penalized up to $100million and the individual can be penalized up to $1 million, and up to 10 years in prison (Hylton K., 2003). Tommy bribed Wang to let him choose computers from his company other than other company’s computers, which destroys the fair competition of trade. Customers may be unable to get the best products. Thus, Tommy’s behavior is illegal and damages the customer’s benefits. He will be penalized for his corrupt business practice. The anti-bribery provisions of the Foreign Corrupt Practice Act (FCPA) prohibits American companies or their employees to use some means to bribe foreign officials, such as provide them with valuable gifts or a large amount of money, to obtain business. The Foreign Corrupt Practice Act applies to everyone in a company. People who avoid the law will be penalized and the penalty of bribing foreign officials is stiff. They may need to pay a large amount of fine or go to prison (Loughman & Sibery, 2012). According to the anti-bribery provisions, the person Tommy bribed is not a government official. Thus, Tommy may not be penalized under the FCPA’s anti-bribery provision. However, the books-and-records provision in the FCAP requires company to maintain accurate records and books to show the transactions in the company (2010 year-end FCPA update | Lexology, 2011). When a company did the bribe by paying others a large amount of money, the books or records for the company could not be accurate. This may violate the books-and-records provision. The company will be punished for its illegal action.

The Chinese anti-corruption laws

In China, both the Anti-Unfair Competition Law of the PRC and the Criminal Law of the PRC involve certain anti-corruption provisions. The Anti-Unfair Competition Law prohibits the unfair competition. It is unlawful for managers to do some things to damage other people’s or company’s benefits or rights. Managers who bribe others through valuable gifts, money or other means to let them purchase products will be penalized. (Chua & Wong, 20017).“If the acts violate criminal Law, the manager shall be investigated in accordance with the Criminal Law; if the acts do not violate the Criminal Law, the supervisor may fine an amount from more than 10,000 to less than 200,000 RMB Yuan in according to the facts, and confiscate the illegal income (People's Republic of China Supreme People's Court, 2003).” Tommy is a manager and his behavior obviously violated the Anti-Unfair Competition Law of the RPC, because Tommy bribed Wang to let him purchase the product, which is an unfair competition and damages other company’s benefits as well as Chinese consumers’ benefits and rights. Tommy can be sued and punished under the anti-unfair Competition Law. Criminal Law in China is another useful law to prohibit corruption. Article 385 of the Criminal Law of the PRC says, “ People who illegally accept things and money from other people and give favors to the latter are guilty of the crime of bribery.”(Criminal Law of the People's Republic of China, 1997) Penalties for violating this law are always fixed-term imprisonment. Individuals can be punished up to more than10 years of fixed –term imprisonment or life imprisonment. It is illegal that Wang accepted valuable gifts and money from Tommy and then purchased products from Tommy’s company. He would be punished according to how severe his behavior is.