• Understand ethical challenges for business in a global environment
• Summarize the Foreign Corrupt Practices Act
• Understand what a sweatshop is

Corruption in Foreign Markets

When a large corporation decides to enter a foreign market, it must usually secure a number of licenses, permits, registrations, or other government approvals. Certain types of business may even be impossible or illegal unless the corporation is first able to obtain a change or adjustment to the nation’s laws or regulations. Since the power to authorize the foreign corporation’s activities is vested in the hands of local politicians and officials, and since corporations have access to large financial resources, it should not be surprising that some corporate executives resort to financial incentives to influence foreign officials.

Understanding Legal and Illegal Incentives

While certain financial incentives, such as promises to invest in local infrastructure, may be legitimate, any form of direct payment to the foreign official that is intended to influence that official’s public decisions will cross the line into illegal bribery. In addition, what may be viewed as unethical in one culture may be standard business practice in another.

The Risks and Consequences of Bribery

Bribery is one of the main examples of a corporation engaged in unethical behavior. A number of problems can be attributed to business bribery. First, it is obviously illegal. The company engaging in bribery exposes its directors, executives, and employees to serious legal risks. Second, the rules and regulations that are circumvented by bribery often have a legitimate public purpose, so the corporation may be subverting local social interests and/or harming local competitors. Third, the giving of bribes may contribute to a culture of corruption in the foreign country, which can prove difficult to eradicate. Fourth, in light of laws such as the U.S. Foreign Corrupt Practices Act (FCPA), bribery is illegal not only in the target country, but also in the corporation’s home country. Fifth, a corporation that is formally accused or convicted of illicit behavior may suffer a serious public relations backlash.

Prevalence of Corruption Around the World

Despite these consequences, experts report that worldwide business corruption is common, particularly in developing countries. Transparency International (TI), a leading anti-corruption organization based in Berlin, estimated that one in four people in Africa paid bribes to access services^[1] while one out of five people in Asia paid bribes to access services.^[2] It appears that the total number of bribes continues to increase annually. The World Economic Forum calculated the cost of corruption in 2022 at about five percent of global GDP or $3.6 trillion.

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