The Foreign Corrupt Practices Act: Why It Fails to Deter Bribery as a Global Market Entry Strategy

Abstract

Recent studies (Cragg and Woof, Bus Soc Rev 107(1):98–144, 2002; Weismann, J Bus Ethics 88:615–66, 2009) revealed that in the first 28 years of its existence, the Foreign Corrupt Practices Act was not enforced by the federal government. The Weismann study further concluded that the FCPA, designed by Congress as a self-regulatory model of corporate governance, failed to achieve the regulatory goal of deterring global bribery by U.S. companies. The current article addresses the reasons that the FCPA remains an ineffective measure to control bribery as a global market entry strategy despite the highly publicized 2006 Department of Justice initiative to increase prosecutions and tighten enforcement efforts. The failure arises out of both the increased use of informal dispositions of case prosecutions, (including non-prosecution and deferred prosecution agreements), which has made “getting caught” merely an increased “cost of doing business” and the failure to close the regulatory gaps in the statute that permit violators to slip through the enforcement net. The article updates and compiles the case prosecution data for every reported case prosecuted between 1977 and 2011. That data are then compared to the results of a 2010 integrity risk survey performed by Deloitte Financial Advisory Services and Forbes which reveal a widely held global business perception that compliance and integrity risks appear to be rising sharply and that the FCPA is ineffective in deterring bribery and corruption in foreign markets. The article aims to serve as a predictive tool for policy makers and business professionals in assessing risk in the global markets, particularly as commerce intensifies in the BRIC countries, notable for bribery and corruption.