Biting Into Bribery

When it comes to bribes, it takes two to tango. But many American companies doing business abroad had to sit out the dance starting in 1977, when the Foreign Corrupt Practices Act was enacted, prohibiting business bribes to foreign officials. It was the right thing to do, but it came with a cost: Private companies in other industrialized nations could not only bribe their way into foreign contracts but in some countries, like Germany, such bribes were tax-deductible.

Things are finally changing. Last week, the nations of the Organization for Economic Cooperation and Development--most of the world’s other industrialized nations--agreed in principle to a treaty that would outlaw private bribes to foreign government officials. Once some of the treaty’s loopholes are patched, it will help American companies that have had to watch contracts slip through their fingers due to corruption.

The new pact, to be signed by cabinet members from the OECD nations next month in Paris, is similar in its definitions and language to the U.S. Foreign Corrupt Practices Act. It imposes criminal penalties that are comparable to those for bribing public officials in each participating nation. It also contains a mechanism for confiscating the amount of the bribes and any profits attributable to them.

The treaty does have serious shortcomings. It does not define executives of state-owned or state-controlled businesses as government officials. It does not control payments to most legislators or leaders of political parties. It must be ratified and enforced by individual governments and there is some question whether Germany, a key U.S. competitor abroad, will summon the political will to approve it. And the treaty lacks requirements for the sorts of disclosure that would prevent companies from hiding bribes with clever accounting ruses.

Despite these weaknesses, it is clear that other wealthy nations and their large corporations are joining a wave of disgust with corruption and bribery, much as the World Bank and International Monetary Fund are balking at doing business in the most corrupt nations. And U.S. companies may reap the benefit of their enforced virtue when they no longer pay in lost contracts for the moral blindness of their competitors.