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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

Beyond Balance IX: Encouraging Ethical Business by Incentivizing Compliance

 Nowhere is the difference between Clean Hands and Constructive Engagement more evident than in the central plank of the reform agenda: the good faith compliance defense.

The question is not whether the enforcement agencies might, on occasion, reward companies for compliance — that happens now. The question is whether companies should be able to count on it — that is, whether the reward for compliance becomes predictable and transparent, a function of law and not of whim.

The principle objection is that companies might hide behind it — that executives would construct and document the most elaborate of compliance programs, all the while authorizing, knowing about, or deliberately ignoring ongoing violations. Remember, though, that if evidence of the latter existed, we’d know the compliance was not in good faith. So the objection really boils down to this: a compliance program would allow a company to go unpunished where the company could not conceal its bribery, but could conceal management’s authorization, knowledge, or deliberate ignorance.

Well, to be fair, we probably have to concede this point. But notice: to the extent that such hiding is possible, it is inherent in rewarding compliance and thus has likely already occurred. Who’s to say that executives of companies that DOJ has already rewarded — through declinations, reduced charges, or lighter sentences — didn’t likewise conceal their authorization or knowledge? Though the possibility of a so-called “fig leaf” compliance program would seem inescapable, we still reward compliance as a matter of principle; the DOJ has publicly endorsed its importance on many, many occasions. The defense has a down side, but we still believe in it.

And why would we want to require it by statute? Because we’ve always known, though the government has recently forgotten, that FCPA enforcement has a dangerous tendency to deter investment in developing countries; the absence of a predictable, reliable compliance defense is certainly among the biggest reasons. When a company, quite literally, can do absolutely nothing to protect itself from criminal liability, the risk of investing in developing countries frequently becomes too high. They walk away. And when that happens, when we wash our hands of corruption rather than constructively engaging, who wins? Not the companies subject to FCPA jurisdiction, and certainly not the citizens of developing countries; it’s the bribe-paying corporations beyond FCPA jurisdiction and their beloved kleptocrats. And those of us who support anti-bribery law shouldn’t align ourselves with them. Politics need not make for such strange bedfellows.

So we don’t support the compliance defense to make the FCPA less effective; we support it to make the law more effective. This isn’t about scaling back enforcement, or about pitting business against ethics in some kind of “balance.” We’re beyond that now, aren’t we?


Andy Spalding teaches international business law at the Chicago-Kent College of Law; effective June 1, he’ll be an Assistant Professor at the University of Richmond School of Law. A former Fulbright Senior Research Scholar and lawyer at a major international firm, he has lectured and conducted research on anti-corruption law throughout the developing world. He’s just returned from Beijing where he taught a two-week course on International Business Transactions to a group from the Beijing Lawyers Association. He can be contacted here.

We’re grateful to Professor Spalding for allowing us to serialize ‘Beyond Balance.’

Beyond Balance I can be viewed here, II here, III here, IV here, V here, VI here, VII here, and Beyond Balance VIII here.

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