The Foreign Corrupt Practices Act (FCPA) was put in place in the United States to prohibit bribes from American firms to foreign officials. This begs the question, is this policy good or bad for American businesses? The argument against the policy has a good point. Those against argue that bribes are just a part of doing business and it puts American firms at a disadvantage against firms that are willing to bribe. American firms have lost a lot of projects by not choosing to use bribes, but the alternative brings a much higher cost than just the bribe. I've been learning a lot about ethics and integrity in my classes this semester and this topic on bribes just solidifies how important it is to be ethical. If a company chooses to use bribes as a business strategy, it creates an environment where corrupt behavior is more likely to appear, which will create agency problems. Does the end justify the means?
To get a perspective on the rampant bribes these days, "the World bank estimates that more than $ 1 trillion dollars are paid each year-roughly three percent of the world economy." How terrible is that number?
Bribes are a way for less competitive companies to gain projects and other incentives. Going with this thought, the FCPA has been good for American firms because it has forced them to become more efficient, more competitive and find new ways of doing things. All of which has a major impact on the global economy.
I believe the FCPA to be a good policy. Is it perfect? Probably not, but at least it is something. It is a step in the right direction to make that business practices and strategies are fair.
Foreign Corrupt Practices Act