The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

To sign-up to receive the CSR Newsletters regularly during the fall and spring academic semesters, e-mail author David Chandler at david.chandler@ucdenver.edu.

Tuesday, February 26, 2008

Strategic CSR - FCPA

The article in the url link below maps out the history behind the 1977 Foreign Corrupt Practices Act (Issues: Corruption and Bribery, p218), which, I didn’t realize, emerged as part of the fallout from the Watergate scandal and the fall of the Nixon Presidency:

“It is often forgotten that the Watergate scandal of the 1970s was not only about the misdeeds of the Nixon Administration. Investigations by the Senate and the Watergate Special Prosecutor forced companies such as 3M, American Airlines and Goodyear Tire & Rubber to admit that they or their executives had made illegal contributions to the infamous Committee to Re-Elect the President. Subsequent inquiries into illegal payments of all kinds led to revelations that companies such as Lockheed, Northrop and Gulf Oil had engaged in widespread foreign bribery. Under pressure from the SEC, more than 150 publicly traded companies admitted that they had been involved in questionable overseas payments or outright bribes to obtain contracts from foreign governments. … Congress responded to the revelations by enacting the FCPA in late 1977. For the first time, bribery of foreign government officials was a criminal offense under U.S. law, with fines up to $1 million and prison sentences of up to five years.”

In outlining how subsequent US Administrations dealt with implementing and enforcing the FCPA, the article argues that, rather than a deterrent, the legislation merely pushed bribery underground, a move that was aided by the unwillingness of successive US Administrations to ensure its adequate enforcement:

“Any illusion that commercial bribery was a rarity was dispelled in 2005, when former Federal Reserve Chairman Paul Volcker released the final results of the investigation he had been asked to conduct of the Oil-for-Food Program. Volcker’s group found that more than half of the 4,500 companies participating in the program … had paid illegal surcharges and kickbacks to the government of Saddam Hussein. Among those companies were Siemens, DaimlerChrysler and the French bank BNP Paribas.”

This has all changed in recent years, with the current Administration both pursuing investigations against US firms, as well as against foreign-based firms with a significant US presence. The author concludes, however, that the recent increase in investigations merely reflects the fact that corporate bribery continues unabated. In addition, the social stigma associate with such behavior has diminished markedly:

“Whereas the bribery revelations of the 1970s elicited a public outcry, the recent cases have generated little comment in the United States. Companies like Chevron pay their fine and go right on using their ad campaigns to present themselves as paragons of virtue.”

Take care
Dave

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006
http://www.sagepub.com/Werther

The New Business Watergate: Prosecution of International Corporate Bribery is on the Rise
by Philip Mattera
December 18th, 2007
http://www.corpwatch.org/article.php?id=14859