Corruption or the Cost of Doing Business? Cultural Factors and the Foreign Corrupt Practices Act

July 2010

IN THIS ISSUE

— It’s All Relative(s): Business Practices in Developing Nations
— One World, Many Priorities: Doing Business in a Global Marketplace
— In the next issue

GREETINGS!

Welcome to the July edition of our newsletter! In this issue, we’ll examine the issue of how differing cultural norms, values and definitions of “business ethics” affect the investigation and prosecution of corruption inquiries in various nations throughout the world.

IT’S ALL RELATIVE(S): BUSINESS PRACTICES IN DEVELOPING NATIONS

Corruption is one of the world’s oldest practices, and whether you’re discussing rights to oil fields offshore of Ghana or defense contracts in San Diego, the possibility of bribery or some other undue influence entering into the transaction is always present. Much has been done to attempt to curb these occurrences, given the bad outcomes they can create for companies and burden they can place on law enforcement or regulators (assuming, of course, they’re not the recipients of the largesse.) But what can be done when different cultural ethos and business norms around the globe’s 196 nations are taken into account?

It’s a common refrain among the recipients of kickbacks or other inducements: “That’s how we do business around here.” The World Bank simply defines good governance practices as “the traditions and institutions by which authority in a country is exercised for the common good.” Yet each nation’s elected government, and the people it represents, is distinct — the values and priorities of the voters in the Palestinian Authority who voted Hamas into office in 2005 are vastly different from the British voters who voted a coalition government into power this year. So how does a globalized business community reconcile these intrinsically differing values?

ONE WORLD, MANY PRIORITIES: DOING BUSINESS IN A GLOBAL MARKETPLACE

Many non-profit groups measure corruption, such as Transparency International, and others like Global Integrity (staffed by a few former colleagues of the author) aim to use the work on-site researchers to quantify corruption via numerical data and interviews with local businesspeople and activists to develop a Global Integrity index. The sunlight of such exposure of activities, and the news media attention it generates, is undoubtedly a worthwhile effort. For the businesses seeking to work with the public officials or other business under such scrutiny, more is required.

We have considerable experience helping clients navigate the Foreign Corrupt Practices Act (FCPA) within this globalized marketplace, and draw upon our own experience as well as regional experts to ascertain what “corruption” really means not only in the legal sense, which can occasionally cross borders, but also in the context of where business is conducted. Although a universal standard of business conduct and governance is ideal, it’s just an ideal as long as humanity’s instinct for self-preservation is the motivating factor. That is why the experience of a seasoned investigator well versed in the differing business ethics used across this globe is essentially to protecting your company and its most valued relationships.

IN THE NEXT ISSUE

In the August issue, as the “Dodd-Frank” financial regulation bill moves through Congress, we’ll look at the provisions to fight fraud, and examine attempts by some to get around the government’s programs put in place after the financial collapse.