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Corruption (and compliance) start in the corner office

Company versus individual prosecution: which is effective in deterring overseas corruption? The answer  is “both” and “neither.”

The problem of “overseas corruption” is not  “overseas.” It’s in the corner office.

If a CEO and senior officers want to take on the management challenge of stopping bribery, the tools are readily available. A Walmart-size company that can run global supply chains has the know-how to prevent bribery. We may not see their names in the headlines, but companies that invest in compliance get what they are paying for.

What measures will change the mindset of senior management at companies that tolerate corruption when the risk/benefit favors it?

Enforcement actions against senior officers (not just lower level “fall guys”) and against the company are absolutely necessary. They represent American policy and the international consensus that “business by any means” (versus ethical means) is not acceptable in 2012.

However, increased prosecutions alone are not the solution. The bigger picture includes a strong, democratic, civil society and companies that value an ethical business culture for its own sake.

Looking back on where successful prosecutions come from and how they proceed, one finds:  free press, feisty blogs, protections and incentives for whistle blowers, international treaties setting global norms, the voices of advocacy groups like Transparency International, budgets for regulators and prosecutors, judicial independence and fair trials for all defendants, among other elements. These need to be strengthened.

And as to the corner office, while any laws can be “gamed” with enough legal talent and political influence, many companies have created an “identity” that rejects unethical conduct: “We don’t do that kind of business here. We are not that kind of company or global citizen. We do not sell adulterated food, medical supplies below quality standards or defective building materials because it is wrong – not only because of the risks of loss of reputation, market share, fines or prison.”

That’s business leadership — and it works as well as, if not better than, enforcement.


Michael Scher is a contributing editor of the FCPA Blog.

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1 Comment

  1. Michael,

    As you said, it is all too common for senior executives in major and small companies to game the system and create the paper illusion of a compliant company – but in fact condone and encourage bribery into further their business. The basic issue is the average US businessperson – indeed the average US citizen – does not consider it to be "wrong" to bribe a foreigner to get business. And while senior managers have been informed it is in fact "illegal" to engage in bribery in foreign business, they know the chance of bribery being detected and their company being successfully prosecuted is very remote and the chance of being punished as an individual senior manager is practically nil. There is no loss of market share or reputation – that is a strange myth. Any impact of bad publicity on a company is short lived and rarely seems to impact individuals. Is anyone who reads the Wall Street Journal shocked to learn that a US company has paid bribes to get foreign business?

    Bribery outside the US is seen by most business people as necessary and useful in business. It is not seen as morally wrong or as harming anyone in the United States. To the extent they think about it at all, they cannot understand why the US government has made foreign bribery illegal. Until that prevailing attitude in US business people changes, bribery will remain common in US international business. I have been involved in anti-corruption work for the past 8 years and have not noticed significant change in the fundamental attitude of business people toward international bribery.

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