International Bribery

When twenty years ago Senator William Proxmire (D—WI) was championing the Foreign Corrupt Practices Act (FCPA) that prohibited U.S. companies from bribing their way to sales in foreign countries, many large U.S. corporations were outraged and opposed. Unfair, they cried; other western countries allow foreign bribes (in fact, such bribes were deductible in some countries) and that will take business away from U.S. shores.

Senator Proxmire would then challenge them to cite any examples where U.S. companies lost contracts overseas because a European or Japanese company bribed their way to a deal. Tellingly, U.S. companies could not supply the Senator with any evidence.

Although the anti-bribery law was rarely enforced by the Justice Department, the Act established a standard of business practices on merits instead of on greased money in the hand. U.S. businesses managed to survive, while the pressure rose on the European nations to pass legislation that would outlaw such foreign bribes as well.

Well, last year 34 countries agreed to an OECD Anti-Bribery Convention that makes the bribery of foreign officials a criminal offense. The U.S. exerted an upward pull by not joining the race to the bottom of its legal barrel.

These laws are still largely lip-service. Their enforcement is not a high priority and naturally evidence is hard to obtain for prosecution. But lip-service is a start and encourages action.

And, according to the business-oriented Transparency International (TI), which, on January 20, 2000, issued an unprecedented Bribe Payers Survey, action is indeed needed. Peter Eigen, TI’s chairman, introduced the survey with these words:

“The scale of bribe-paying by international corporations in the developing countries of the world is massive. Actions by the majority of governments of the leading industrial countries to curb international corruption are modest. The results include growing poverty in poor countries, persistent undermining of the institutions of democracy, and mounting distortions in fair international commerce.”

The survey itself was quite ingenious. It was based on 779 lengthy interviews with business leaders in 14 mostly Third World countries, from Indonesia, India, to Argentina, Brazil to Morocco, Nigeria and South Africa. Many of these interviewed represented major foreign companies or national companies, along with executives at accounting and law firms and chambers of commerce.

Among the more interesting questions are those relating to perceptions of bribe-paying in these Third World countries by companies from the 19 leading exporting companies, mostly in the industrialized West.

Those interviewed were asked to rank companies from these exporting countries on how likely they would bribe to win or retain business. The U.S. did not fare that well, ranking number 9, below Sweden, Australia, Canada, Austria, Switzerland, Netherlands, United Kingdom, Belgium and tied with Germany.

The survey showed that the industries more likely to bribe or be extorted to bribe by senior public officials were, in declining order of corruption levels, (1) public works contracts and construction, (2) arms and defense industry, (3) power (including petroleum and energy), (4) industry (including mining), (5) healthcare, (6) Telecommunications (equipment and services),(7) civilian aerospace, (8) banking and finance and (9) agriculture.

To illustrate how much more work needs to be done by international companies, TI’s interviews found that most of these executives either had not heard of or were only dimly aware of the OECD anti-bribery Convention. Their companies were likewise lagging behind in their compliance plans. For more information, log into www.transparency.org.