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

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Monday, September 19, 2011

Strategic CSR - FCPA

The article in the url below reports a recent bribery conviction for Tyson Foods. Following a series of mistakes over a number of years (where the firm ignored several opportunities to start correcting its behavior and, instead, continued to dig itself into a bigger and bigger hole), the SEC charged the firm in February this year with:

… conspiracy and violating the Foreign Corrupt Practices Act. Tyson agreed to resolve the charges with a deferred prosecution agreement in which it “admits, accepts and acknowledges” the government’s statement of facts, and paid a $4 million criminal penalty. The company paid an additional $1.2 million and settled related S.E.C. charges that it maintained false books and records and lacked the controls to prevent payments to phantom employees and government officials.

The article is interesting because, beyond the litany of irresponsible behavior exhibited by Tyson Foods (“What were these Tyson officials thinking?”), the author discusses the deeper issue of personal liability for corporate criminal behavior within the FCPA framework:

It would seem self-evident that if Tyson engaged in a conspiracy and violated the Foreign Corrupt Practices Act, then someone at Tyson did so as well. The statute specifically provides for fines of up to $5 million and a prison term of up to 20 years for individuals, as well as fines of up to $25 million for companies.

In spite of this provision, individuals rarely get charged under the FCPA legislation, or, for that matter, in relation to white-collar corporate crime in general:

The Justice Department … points out that in 2009 and 2010 it filed charges against 50 individuals under the Foreign Corrupt Practices Act, up from just two in 2004. This is surely progress, but the Tyson case suggests the problem persists, and not just in bribery cases: witness the widespread public frustration that so few people, as opposed to impersonal financial institutions, have faced criminal charges for actions that contributed to the financial crisis.

This is no doubt due to the complexity of the issues that are often involved in these crimes, as well as the difficulty in proving guilt beyond a reasonable doubt for a jury without expertise in the nuances of corporate and financial law. Equally, however, it is a result of the lack of resources government agencies have to regulate adequately the laws over which they have jurisdiction. Firms, on the other hand, have far greater resources to protect their executives. In redressing the balance somewhat, the article names the three executives at Tyson most closely involved in the crimes, whereas the SEC letter detailing the settlement with Tyson only mentions their titles. Unsurprisingly:

None of the three former Tyson executives responded to messages asking for comment.

Take care
David