The Soul of the World vs. Cold Cash
A lot of American business people are going to loathe this column. And it’s not because they are personally corrupt or approve of corruption. It’s because they are simply trying to do business abroad. And if you’re a U.S. entrepreneur in a foreign land, life can be very difficult in cultures where the bribe is king.
Recently, yet another of these American businessmen called me to moan about the U.S. Foreign Corrupt Practices Act, the law that requires Americans abroad to do business without bribing foreign officials. “Please take a look at it,” a Los Angeles import/exporter begged me, “It’s really hurting us over there. Why do we have to be saints when no one else is practicing the Ten Commandments?” I could feel his pain. Let’s look at the situation.
I don’t question that the federal law, passed in 1977, can be absolute torture for many American business people operating abroad, especially in Asia and Latin America. In some places the bribery of government officials is so commonplace that any U.S. firm obeying the law has to fight for foreign government contracts with one hand tied behind its back. A recent study out of Harvard concluded that the law has in fact weakened the competitive advantage of U.S. firms without reducing overall international trafficking in bribes. Commerce Secretary Mickey Kantor, the former U.S. trade representative, often claimed that bribery by foreign rivals overseas costs U.S. companies $45 billion a year in lost contracts. Well, maybe.
It certainly is true that, despite extremely rare prosecutions--about one a year, and all are settled out of court--the mere shadow of federal prosecution cools the ardor of many U.S. firms for bribing foreign officials. Some U.S. companies have adopted even stricter standards than the law requires in order to steer clear of possible violations. Los Angeles attorney Barry Sanders, of Latham & Watkins, a firm whose practice includes helping U.S. companies abide by the antibribery statute, believes there are powerful reasons that the law should not be gutted, as many business people urge Congress to do. “There is a rot that begins to infect an American company when everyone knows that you are willing to pay bribes,” he says. “It’s a dishonesty that goes through the entire organization. An environment is created--of payoffs, or a lack of honesty that goes right to the top. But this American act says: Our companies don’t cheat, our companies don’t lie, they don’t pay off. And that’s good for American companies and for the American image abroad.”
Sanders also argues that America’s ethical leadership overseas just might rub off on others: “On balance, a lot of our foreign competitors wish they had such an act, so that they wouldn’t have to pay bribes.” Indeed, the American Bar Assn. last year adopted a resolution recommending that the business community work together to expand the international influence of the Corrupt Practices Act rather than undermine or eliminate it. What a powerful theme for America: world leadership in improving the ethical business climate of a world economy that has become increasingly interdependent--and increasingly needful of a uniform ethical code. But wouldn’t such an effort prove futile? I’m not so sure.
In South Korea, where the bribe has been as commonplace as kimchi at lunchtime, the government of President Kim Young Sam has been taking a stab at corruption-fighting. Last week a senior finance ministry official was arrested in the country’s stock market bribery scandal. In Beijing, in what is said to be the biggest anti-corruption case in modern Chinese history, 18 former members of the city government have been hit with bribery and skimming charges. One of the accused, the former deputy mayor, committed suicide rather than face the music. In Taiwan, the leader of the three-year-old anti-corruption campaign says he wants to reduce corruption to merely “a fact of life, not a way of life.” In Japan, continuing corruption worries were, I would argue, a major motive behind the 1993 revamping of the electoral system. Elsewhere on the Pac Rim horizon, Ecuador, notably, has taken measures and, at a recent Group of Rio meeting, the Venezuelan government proposed international cooperation in combatting “crimes against the public trust.” Nice phrase, actually. The bribe really is antieconomic as well as unethical. It does not reward the contract to the best, brightest and most efficient firm; that’s why eliminating it would almost certainly advance efficiency, productivity and growth.
But as it stands now, there still is far more talk than action about fighting corruption. Does the fact that so few foreign countries to date have rushed to emulate America’s virtue make us Uncle Sap--once again--or something special? I prefer to think the latter. Better to exercise some clear-eyed moral leadership to the benefit of the world economy--not to mention the world’s soul--than settle to the lowest common denominator of ethical behavior. Who in America really has the appetite to campaign openly in favor of bribery?
