To Pay or Not to Pay – Overseas Business Ethics and the Reality of Bribery

Bribery

       I recall vividly the global climate of suspense and worry at the end of the Cold War.  Despite being nestled in my high school melodrama in a small Midwestern city, I was nevertheless exposed to terms of “corruption” and “bribery” as it related to the new global business landscape.  Every media type reported on the cost of blue jeans and American music in the new Russia.  When the superpower that was the Soviet Union fell, the creation of new governments and new business opportunities brought the reality of the cost of bribery home.

        The U.S. government had been actively involved in the reduction of foreign corruption in business practices since the passage of the Foreign Corrupt Policies Act of 1977.  This legislation put in punitive measures for companies operating in the United States.  This put US manufacturers at a competitive disadvantage in the global marketplace where they were competing with countries and companies without such restrictions.  Even if restrictions were in place, most governments around the world were hard-pressed to enforce them due to the nature of the practice as well as the financial backing of such enforcement.  It became quickly evident that this could only be combated on a global scale, with corporations, governments and civilians working together.

The escalation of the problem following the Cold War finally brought in support from 35 other industrialized nations in 1988 with the Organization for Economic Cooperation and Development (OECD) Convention (aka Bribery convention).  This brought many trading nations together for the purpose of transparent evaluations of each other’s policies in regards to business corruption and successfully prosecuting those who do not comply with fair business standards.   This program has been hampered with the problems of the lack of finance, transparency, and political and social climates of participating countries.  Also, China and India are not signatory to the convention, so fall outside of its parameters.  These two economic powerhouses still include opportunities for bribery with officials making lower wages and lax enforcement.

What this means for the average consumer is that the costs associated with bribery and corruption would be considered the cost of goods sold.  Companies that engage in these practices gain an unfair advantage over those who do not.  Certainly not all of the “bad” companies are bringing forth products that are entirely beneficial to society.  I’m certain most will recall the lead paint in Chinese toys attempting to spoil last year’s Christmas season.  As more information becomes readily available for consumers, the good economic citizen would take care in discovering where the goods they are purchasing are coming from.  Is that company one with integrity and a realistic approach to fight corruption?  Is it a company that ships in containers full of “who-knows”?  National security issues aside, you pay for the corrupt practices in every purchase you make whether it is in taxes that go to help ferret it out and prosecute it, or in the bottom line price of that “must-have” toy of the year, imported by the boatload from countries that could care less about it’s safety or what laws are broken to get it there.

by Joe Hemmelgarn, Business Major – IUPUC

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