A Traveler’s Guide to Gifts and Bribes

Financial Management Policy Professor Ms. Gleason A Travelers Guide to Gifts and Bribes Harvard Business Review Why energy bribery become a problem for U. S. managers working in foreign countries? The FCPA was structured to help U. S. companies understand what bribery is, and what is or is non acceptable doings at home and in other countries. The confusing issue is that even with this guidance, it is not always spend a penny what exactly is to be considered a bribe. Under the modus operandi, not all payments are deemed to be bribes.FCPA doesnt forbid payments to lesser figures, it allows bribes to facilitate ongoing business activities, as on that point is no monetary guideline it requires companies to musical accompaniment reasonable records of the transaction. Brides given to influence political decisions are banned and usually small payments that are designed to get a foreign official to behave a non-discretionary function. The distinction between the two is blurred. Confo unding this is that many U. S. business people do not know what is permitted and what is not, as there is no clear guidance.As there is no clear guidance on what you can and cant do working with foreign countries a lot of U. S. Managers could very be offering bribes that should actually be banned. This creates no equal opportunity for everyone the foreign company allow go with whomevers bribe seems to be greater. This will create a huge problem because this is where a lot of U. S. manger will cross the line just to win the business. What are the major features of the contrasted hunched Practices Act (FCPA)? The Foreign Corrupt Practices Act (FCPA) was enacted in 1977 and substantially revised in 1988.The FCPA generally prohibits corrupt payments to foreign officials. To complement this prohibition, the FCPA has accounting purvey that require maintenance of transparent and complete financial records. The Justice De let outment enforces the anti-bribery supply, while the Securit ies and Exchange Commission has jurisdiction oer the accounting requirements. The key provisions of the FCPA are as follows (Hart, 2001) * The FCPA prohibits payments (including promises to pay) of anything of value to nfluence, corruptly (with corrupt intent), the discretion of a foreign official to do something in violation of his or her official handicraft to obtain, retain, or direct business or to gain any improper advantage. * The FCPA prohibits indirect payments, as well. These provisions in like manner apply to acts of a non-U. S. representative that is credited(predicate) to the U. S. party. * The FCPA exempts facilitating payments. These are usually small payments that are designed to get a foreign official to perform a non-discretionary function. The Justice Department can postdate criminal sanctions of up to $2 million per count for legal entities, with individuals facing fines of up to $250,000 per violation and imprisonment up to five years. Civil penalties may al so apply at a rate of $10,000 per violation for an entity or individual. Additional fines by an SEC civil enforcement action may apply. * FCPA conviction can extend in the party being debarred from U. S. government contracts, prevented from participating in the securities attention, and barred from loan programs of plastered U. S. and international lenders.In addition, there may be revenue enhancement ramifications. * Compliance should be debateed in international agreements. (It is not sufficient, however, to state in an agreement that the FCPA applies and is part of the agreement). * FCPA require corporations to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Why might the Foreign Corrupt Practices Act create a competitive prejudice for U. S. firms? Many believe that the FCPA has created a competitive disadvantage for the U. S. s, historicall y, both the Europeans and Japanese have and continue to use payments to key foreign officials as a promotional device to attract and win business contracts. The U. S. Justice Department has been lobbying the Organization for Economic Cooperation and Development for greater international enforcement. When the U. S. stood completely totally in its legislative quest to curtail foreign bribery, the catastrophic scenario did not materialize. As the Government Accountability Office (GAO) noted four years afterward the implementation of the FCPA in a study called the Impact of the Foreign Corrupt Practices Act on U.S. Business claims that U. S. companies have lost salesare difficult, if not impossible, to substantiate and quantify (Graham, 1984). Further, a paper published in the Journal of International Business utilise published data to test the competitive disadvantage theory and found that the FCPA had not negatively affected the competitive position of American industry in the worl d market typeset (Graham, 1984). Even then, when the American industry was the only one worldwide facing these kinds of restrictions, anti-bribery laws did not negatively impact their export performance or market share.In todays world, several(prenominal) markets where such an act may exist may provide a competitive disadvantage include those of China, the Middle tocopherol, Africa, and other emerging markets. This is in part due to the lack of similar laws in these markets and customs duty establish business practices where bribery, gratitude, or gift given is a norm. Unfortunately, in the context of China, this has the potential to place American companies in a position where they must decide between violating the FCPA and losing Chinese business (Shira, 2010).Even though China does have written anti-bribery laws on the books these laws are poorly enforced and are routinely violated by Chinese and foreign companies. The desire to increase a companys fighting in the face of such adversity may be tempting. Despite criticism of it, FCPA has benefitted honest U. S. firms by reducing unfair competition among other American firms which comprise about 80 percent of the worlds true multinationals. Despite original reluctance, the current trend among nations appears to be to follow the U. S. ead in picnic down on corrupt dealings between firms and governments in international trade. In the spring of last year, the United Kingdom passed its own act, the Bribery Act of 2010. Describe the three non-Western traditions that can lead to confusion regarding gifts vs. bribes. Three non-Western traditions that can be cause for confusion are the informal circle, future favors, and the gift exchange. The inner circle refers to the notion in developing nations of classifying outsiders into some form of ins and outs (Fadiman, 1986).For example in the Middle East, Central and South American, as well as, African countries there is a tendency for the upper class to view itself as the Elites of the society and often times take the view that they are above the law (or certain laws do not apply to them). They retain the view that certain procedures are not applicable to them and are entitled to circumvent these via their stature, position, or personal connections. futurity favors relates to the notion of relationships within the inner circle here it is assumed that any individual under obligation to another has entered a relationship in which the eldest favor must be repaid in the future (Fadiman, 1986). Again this can notion relates to many countries within the Middle East, as well as, Far East countries such as Japan, India, and Indonesia. Gift given relates to payoffs as a continuous exchange of gifts. In many non-Western commercial circles, particularly Moslem and Asian countries, the tradition of gift giving has evolved into a modern business tool intended to create obligation as well as affection. Gift giving in these cultures may therefore operate in two dimensions one meant to provide short-term pleasure the other, long-range bonds (Fadiman, 1986). Through personal observation, for example, company executives may be presented with an invitation to a traditional banquet. This not only is intended as an ice breaker, but also serves as a sense of pride on the part of the giver and may be viewed negatively if rejected. What are some suggestions for managers who want to give bribes without violating the FCPA?One suggestion I found interesting is based on an interpretation of facilitation given by Howard Sklar (2011) When someone asks me whether a payment is a facilitation payment, I ask only one question what are you difficult to get? If what youre trying to get is a decision, its a bribe. If youre trying to get something youre legally entitled to (processing an application, for example), its a facilitation payment. However, even facilitation payments are considered bribes, for though one part of the FCPA exempts such payments t he control and record keeping provisions do not.The fact of the matter is, that corporations should not be engaged in bribery, facilitation payments, or gift given but rather concentrate on the merits of their product or services. Any company that wishes to do so can attempt to hide these within discretionary funds. This not only would still be in violation of the law, but also in breach of their responsibility to their stakeholders. What is more important? I believe is the thorough understanding of your markets culture, language, and traditions.A better understanding of these provides a competitive advantage over others. While there may exist some gray areas here, for instance, paying a gratuity to low level government workers in some countries who rely on such payments as part of their salary. Reciprocating in kind to a gift based on cultural norms, the dollar value has to be winning into consideration. One has to consider what is minimal and what could be construed as excessive . As Fadiman (1986), describes in the case study, corporations should device appropriate responses to pay-off requests.One method that can be used as means to bypass such requests and also to promote good relations is to use a donation strategy. That is to appeal to the national element by offering to assist for example an orphanage, or provide local schools with supplies, or help built a hospital. References Fadiman, J. A. (July-august, 1986) A Travelers Guide to Gifts and Bribes Retrieved May 3, 2011 from Harvard Business Review, Graham, J. L (Winter, 1984) The Foreign Corrupt Practices Act A New Perspective Retrieved May 3, 2011 from http//www. jstor. org/pss/154278Hart, H. (July 31, 2001) Anti-Corruption Provisions of the U. S. Foreign Corrupt Practices Act Retrieved May 3, 2011 from http//www. hollandhart. com/articles/FCPA. pdf Shira, D. (October 14, 2010) U. S. Business, China and the Foreign Corrupt Practices Act Retrieved May 4, 2011 from http//www. china-briefing. com/news /2010/10/14/u-s-business-china-and-the-foreign-corrupt-practices-act. htm Sklar, H. M. (February 07, 2011) On Facilitation Payments Retrieved May 5, 2011 from http//openairblog. wordpress. com/2011/02/07/on-facilitation-payments/