A Traveler’s Guide to Gifts and Bribes

Financial Management Policy Professor Ms. Gleason A Travelers convey to endows and Bribes Harvard melody Re catch Why might bribery become a problem for U. S. managers working in exotic countries? The FCPA was structured to help U. S. companies take out shape upd what bribery is, and what is or is not acceptable behavior at kin and in other countries. The confusing issue is that even with this focus, it is not unceasingly clear what exactly is to be considered a bribe. Under the accomplishment, not each(prenominal) payments argon deemed to be bribes.FCPA doesnt forbid payments to lesser figures, it al first-class honours degrees bribes to facilitate on-going business activities, as thither is no monetary guide verge it considers companies to respect reasonable records of the transaction. Brides effrontery to influence political decisions are banned and usually small payments that are intentional to get a foreign functionary to perform a non-discretionary function. The distinction between the two is blurred. Confounding this is that galore(postnominal) 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 actually be offering bribes that should actually be banned. This develops no equal opportunity for everyone the foreign comp both will go with whomevers bribe seems to be great. This will create a bulky 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 Foreign Corrupt 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 ordaineds. To complement this prohibition, the FCPA has accounting edible that require maintenance of transparent and complete financial records. The jurist Department enforces the anti-bribery provisions, slice the Securities and Exchange Commission has jurisdiction over the accounting requirements. The samara 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 nearlything in trespass of his or her official duty to obtain, retain, or direct business or to gain any improper advantage. * The FCPA prohibits indirect payments, as well. These provisions also fancy to acts of a non-U. S. representative that is attributable to the U. S. companionship. * 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 pursue criminal sanctions of up to $2 one thousand million per count for legal entities, with individuals facing fines of up to $250,000 pe r violation and imprisonment up to five years. Civil penalties whitethorn also apply at a rate of $10,000 per violation for an entity or individual. Additional fines by an SEC obliging enforcement action may apply. * FCPA conviction can result in the party being debarred from U. S. government contracts, prevented from participating in the securities application, and barred from loan programs of legitimate U. S. and transnational lenders.In addition, there may be tax ramifications. * form should be take a hoped in international capital of invigorated Hampshires. (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 inner(a) accounting controls. Why might the Foreign Corrupt Practices Act create a private-enterprise(a) disadvantage for U. S. firms? Many believe that the FCPA has created a competitive disadvantage for the U. S. s, historically, 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 alone in its legislative quest to snip off foreign bribery, the catastrophic scenario did not materialize. As the Government Accountability contribution (GAO) noted four years after the implementation of the FCPA in a study called the Impact of the Foreign Corrupt Practices Act on U.S. work claims that U. S. companies have lost salesare difficult, if not impossible, to substantiate and assess (Graham, 1984). Further, a paper published in the Journal of International Business utilize published data to test the competitive disadvantage possibility an d found that the FCPA had not negatively affected the competitive bit of American industry in the world marketplace (Graham, 1984). Even then, when the American industry was the just one worldwide facing these kinds of restrictions, anti-bribery laws did not negatively clashing their export performance or market share.In todays world, several markets where such an act may exist may set up a competitive disadvantage include those of China, the Middle eastmost, Africa, and other emerge markets. This is in part due to the lack of similar laws in these markets and custom ground 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 implemented and are routinely violated by Chinese a nd foreign companies. The confide to increase a companys competitiveness in the compositors showcase of such adversity may be tempting. disdain criticism of it, FCPA has benefitted fair(a) U. S. firms by reducing unfair competition among other American firms which establish 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 gap 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 grafting Act of 2010. Describe the three non-Western traditions that can lead to confusion regarding gifts vs. bribes. terzetto non-Western traditions that can be cause for confusion are the inner circle, future day estimations, and the gift exchange. The inner circle refers to the persuasion in developing nations of strainifying 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 ad hominem connections. Future favors relates to the notion of relationships within the inner circle here it is assumed that any individual under(a) obligation to another has entered a relationship in which the first 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 never-ending exchange of gifts. In many non-Western commercial circles, particularly Moslem and Asiatic countries, the tradition of gift giving has evolved into a modern business animate being 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? iodin suggestion I found interesting is based on an interpreting 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 trying 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 exam ple), its a facilitation payment. However, even facilitation payments are considered bribes, for though one part of the FCPA exempts such payments the control and record keeping provisions do not.The fact of the reckon 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. whatever 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 measurable? I believe is the thorough sense 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 taking into consideration. unrivalled 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 technical relations is to use a donation strategy. That is to appeal to the national component by offering to assist for example an orphanage, or provide topical anesthetic 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 whitethorn 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. h ollandhart. 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/