75 pivotal public policies: the foreign corrupt practices act

Over 400 American public companies paid bribes to foreign officials to “grease the wheels” of business, according to investigations in the early 1970s by the Securities and Exchange Commission. Notable offenders included aerospace giant Lockheed.

These bribes were not always illegal in the countries in question, where often they were regarded simply as a cost of doing business and could even be tax deductible in some circumstances.Yet these revelations shook the American public’s confidence in their companies, prompting Congress to adopt the Foreign Corrupt Practices Act in 1977. This made it a crime for any employee of a company doing business in America to bribe a foreign government official in an effort to secure preferential treatment.

For many years, enforcement was half-hearted, not least because of efforts by corporate leaders to paint it as hurting corporate America, because their rivals in foreign markets remained free to pay bribes. But in the past decade or so, things have started to change significantly as other countries have joined the fight against bribery and corruption. Britain’s Bribery Act of 2010 was followed by several other similar laws in other countries, along with more coordinated international efforts at enforcement and stiffer punishments, including serious time in jail. (In 2011, for instance, a US court handed down an unprecedented 15 year sentence to a top telecoms executive involved in a bribery scandal in Haiti).

These legal moves have been reinforced by various civil society efforts. Transparency International, a non-profit that fights corruption not least by ranking countries on the extent of corruption, was formed in 1993. The Extractive Industries Transparency Initiative, launched in 2002, encourages businesses operating in the notoriously corrupt mineral, oil and gas industries to “publish what you pay” to foreign governments—a requirement made law, but not yet enforced, in America’s Dodd-Frank Act.

There has also been a growing international effort to confiscate money obtained through corrupt business practices. A notable example is Britain’s creation in 2017 of Unexplained Wealth Orders, by which courts can confiscate money from people who cannot come up with convincing evidence that they obtained it legally.


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