Learn It 6.4.2: Ethics in the Global Environment

Anti-Corruption Laws

The first major international anti-corruption law was the United States’ Foreign Corrupt Practices Act (FCPA), adopted in 1977. The FCPA criminalized bribery of foreign public officials by American businesses as well as foreign businesses that are listed on stock exchanges in the U.S. Initially, the FCPA was not popular. Few other countries followed suit, and U.S. companies complained that the FCPA shut them out of competition for billions of dollars’ worth of overseas business contracts.

Slowly, however, the push for concerted anti-corruption measures gathered momentum, and intergovernmental institutions such as the Organization of Economic Cooperation and Development, the African Union, and the United Nations eventually adopted anti-corruption conventions. Further support for a global anti-corruption agenda was provided by lending institutions such as the World Bank, by organizations such as Transparency International, and by the rapidly evolving CSR movement. Notable among these efforts was the Communist Party of China’s promulgation of a code of ethics to fight the widespread corruption within the Communist Party of China.

Foreign Corrupt Practices Act (FCPA)

Unlike most federal laws that regulate activity within the United States, the FCPA applies only to bribes paid (or offered) to foreign government officials to obtain or retain business or to develop an unfair competitive advantage.

The concepts of what is a “bribe” and who counts as a “foreign government official” can be interpreted broadly. While companies and executives charged with FCPA violations have often sought to characterize their payments as business gifts, this has not shielded them from liability when there was evidence that the payments were intended as a means of obtaining illegal objectives. However, where payments have been characterized as “facilitation” or “lubrication” payments, meaning that they merely created an incentive for an official to promptly execute legal actions, such as mandatory customs inspections, the payments have been allowed. In countries with command economies, the state owns all or part of commercial enterprises, so a great number of business executives could be classified as foreign government officials.