Essay Example on FCPA of 1977: Prohibiting Bribery Among Individuals & Companies

Introduction

The Foreign Corrupt Practices Act (FCPA) of 1977 is an act that prohibits companies, individuals, or agents from making payments or bribes to foreign officials or other recipients to facilitate certain transactions. Fundamentally, the statute criminalizes any act that involves bribery among individuals or companies. As part of the amendment, it is evident that FCPA applies to all the companies or businesses under United States law. Additionally, any foreign companies operating within the U.S. market are also obliged to comply with these restrictions. The activities that issue securities are also targeted under this law (Jorgensen, 2018). Notably, the FCPA further amended the Security Exchange Act of1934 and thus subjected all the businesses and domestic companies to the FCPA accountable to the accurate records and financial statements.

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It is important to note that the purpose and goal of the FCPA remain as true and essential today in the same way they were 30 years ago (Sartor & Beamish, 2018). Ideally, federal legislations need to prevent and restrict the unethical bribes paid to foreign officials. Few changes have taken place in the past few years. For example, the Department of Justice (DOJ) has raised the number of investigations as well as the enforcement under the FCPA. The entire process has developed into a system described as the 'new era of FCPA enforcement (Koehler, 2009). However, such legislation would be rational in case the bribery activity was on the rise. The rise of the FCPA is based on the DOJ's newly found broad interpretation of the law beyond the FCPA's original intentions.

Impact of FCPA in U.S. commerce

One significant effect of the FCPA is that it provides an extreme penalty to companies and individuals who violate the anti-bribery and accounting legislations. Individuals caught violating the provisions can receive prison sentences. Ever since the passage of the FCPA, the U.S. has increased the number of enforcements that have to succeed in initiating and overseeing both the national and foreign bribery claims. The impact of the FCPA at the national level is determined by the degree of internationalization of the FCPA (Jorgensen, 2018). Ideally, the companies that must comply with the FCPA provisions may be subjected to a competitive disadvantage to those that do not. The companies that operate in the international levels are also affected. Undeniably, the multinational companies frequently navigate a hazardous business when dealing with foreign nations. Based on the fact that the bribery constitutes a considerably smaller percentage of the corrupt activities of the American companies abroad, it may be ineffective to control corruption without additional support for fighting crime (Jorgensen, 2018).

Following the passage of the FCPA, there was a rising concern among the American policymakers and the business owners regarding its negative impacts. According to this group, the decision to force the U.S. companies to embrace strict compliance and restriction would hurt them compared to their international counterparts. In this regard, Boedecker reported that American companies would suffer from a severe competitive advantage. This means that the foreign companies would benefit tremendously within the markets and industry they were sharing with their U.S. rivals (Sartor & Beamish, 2018). The situation prompted the federal government of the U.S. to seek the agreement from other nations, to urge them to pass similar legislation. The creation of the Organisation for Economic Co-operation and Development (OECD) in 1997 saw the establishment of the same act. This further prevented those organizations from engaging in bribery.

While it is evident the FCPA has continued to impose strict measures both to the local and international organizations, many researchers have reported that FCPA should be reformed either part or wholly to suit the needs of current companies in line with the current business environment. Primarily, they suggest that adding a corporate willingness requirement to comply with the FCPA can be a significant step. To find an individual guilty for the violation of the FCPA, the court must be able to see that the individual acted willfully. However, there are no similar requirements for determining that the companies were liable under the FCPA. As a result, the companies that lacked knowledge about the actions of their employees were directly responsible for their actions. In the same way, the parent companies are automatically liable for the actions of its subsidiary, especially in cases where the parent as no exclusive knowledge about their activities. Broadly, the changes directed to the FCPA must offer a clarification that a parent corporation that looks the other way or ignores the actions of their subsidiaries wilfully must be held accountable.

There has been another recommendation for the addition of a compliance defense is an approach to enhance reform in FCPA (Sartor & Beamish, 2018). The majority of the companies apply to utilize reasonable faith efforts to comply with the FCPA. In most cases, this involves the dedication of resources intending to implement the appropriate controls, conduct trainings programs, and evaluate compliance. Sadly, these firms lack the affirmative defense to criminal charges against them under the FCPA when an employee violates the law and the executed standards of business. Instead, the compliance programs might be considered, particularly if a company has legal procedures in place to stop any actions involving foreign bribery. Such a company has an affirmative defense (Krever, 2007).

Multinational companies face enormous challenges when navigating through global markets and industries (Jorgensen, 2018). It is undeniable that corruption forms an integral component of their activities. However, there are steps that multinational companies must undertake to ensure that they comply with the FCPA provision and that they comply with their requirements. The primary way to fight corruption and bribery is to set up an ethics and compliance programs through the appropriate zero-tolerance policies. Additionally, these companies can publicize anti-corruption programs to establish an excellent reputation for honesty and trust. Studies have shown that offering the employees training opportunities and teaching them about gifts, charitable and political contributions can be used to trick individuals for bribery. Moreover, they should be exposed to various laws and regulations that are associated with any bribery action and the risks of criminal prosecution for those who are involved.

Conclusion

The FCPA criminalizes any act that involves bribery among individuals or companies. The regulation has been critical in promoting integrity and honesty within the global sphere of trade through ensuring that companies do not engage in bribery. While FCPA's impacts have been harmful to U.S. business and commerce, the companies should ensure that they do everything within their capacities to avoid risks of being prosecuted. They should publicize the anti-corruption programs to establish an excellent reputation for honesty and trust. They should ensure their employees are exposed to various laws and regulations associated with any bribery action and the risks of criminal prosecution for those who are involved.

References

Jorgensen, J. T. (2018). The Foreign Corrupt Practices Act Turns 40:" Reflections on Walmart's Enhanced Ethics & Compliance Program". Texas A&M Law Review, 5(1), 237-252. https://scholarship.law.tamu.edu/cgi/viewcontent.cgi?article=1121&context=lawreview

Koehler, M. (2009). The Foreign Corrupt Practices Act in the ultimate year of its decade of resurgence. Ind. L. Rev., 43, 389. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/indilr43&section=22

Krever, T. (2007). Curbing Corruption-The Efficacy of the Foreign Corrupt Practice Act. NCJ Int'l L. & Com. Reg., 33, 83. http://scholarship.law.unc.edu/cgi/viewcontent.cgi?article=1858&context=ncilj

Sartor, M. A., & Beamish, P. W. (2018). Host market government corruption and the equity-based foreign entry strategies of multinational enterprises. Journal of International Business Studies, 49(3), 346-370. https://link.springer.com/article/10.1057/s41267-017-0115-7