American Values Or Chinese Profits?

Professor Andrew Brady Spalding of the Chicago-Kent College of LawI am fascinated and gladdened by the FCPA Blog`s ongoing discussion — particularly the posts of Jeffrey Kaplan and John Ruggie —  concerning corporate conduct and human rights. Not only are the FCPA and human rights laws both key components of any overseas compliance function, but they bear a much deeper affinity: they are two planks of an international business law regime that increasingly distinguishes the U.S. from the world`s emerging powers.

In numerous ways, federal business law concerning extraterritorial business conduct is premised on the core conviction that certain values are more important than short-term economic gain. Under the FCPA, we prohibit participating in corrupt business transactions, regardless of prospective profits. We similarly signal a commitment to promoting human rights by prohibiting corporate violations through economic sanctions and, to a lesser but still significant degree, the Alien Tort Statute. 

We obligate corporations to fund federal programs through a regime of taxing overseas income that is among the most progressive and demanding in the world. And not everyone appreciates that Congress twice amended our major employment discrimination laws to ensure that they apply to the overseas employment of U.S. citizens. In each of these areas, we use corporate conduct to promote liberal-democratic values that we deem more important than financial gain. 

(For further reading see A.B. Spalding, “The Irony of International Business Law:  U.S. Progressivism, China’s New Laissez Faire, and their Impact in the Developing World,” available at SSRN, forthcoming in the UCLA Law Review).  

But we must also recognize the rising presence of other influences in the developing world: nations that do not prohibit corporate complicity in human rights abuses and do not (yet) enforce extraterritorial anti-corruption laws. These are the economically powerful, capital-exporting, developing nations, particularly China. Across the developing world, when a U.S. company says, “I want to do business with you, but I cannot engage in bribery or human rights abuses,” a Chinese (or Russian, or Turkish) company steps up and says, “but I can.” And in doing so, they build important economic and diplomatic ties that affect many other areas of global policy.

What is the impact in developing countries? We have undoubtedly succeeded to a remarkable degree in promoting anti-corruption and human rights norms across the developing world. But because FCPA enforcement lacks transparency and predictability, operating in a seeming due process and checks-and-balances vacuum, we too often scare companies away from certain transactions, or sectors, or even from certain countries. In doing so, we leave developing nations to be ravaged by companies that are not similarly restrained by human rights and anti-corruption laws. What is the remedy? 

We might call it the Golden Mean of FCPA Enforcement. We must develop ways to promote anti-corruption norms while at the same time empowering companies to fully engage in the developing world. Our human rights and anti-corruption agenda, and much else, depend on it. What distinguishes the U.S. economy from developing nations is innovation, and we are in need of some here. 

Here’s hoping that historians will one day say, to adapt Mark Twain, that rumors of our death were greatly exaggerated.

Andrew Brady Spalding is a member of the faculty at Chicago-Kent College of Law. As a Fulbright Scholar based in India, he conducted research on the impact of FCPA enforcement. His work has been featured in the Wall Street Journal, Forbes, and various international publications.