Skip to: Content
Skip to: Site Navigation
Skip to: Search

Corruption and its American response are both on the spot

By Clayton JonesStaff correspondent of The Christian Science Monitor / April 28, 1981


* Over lunch in Bangkok, a Thai official and a US businessman negotiate a milliondollar sales contract. Suddenly the Thai gives an indirect cue for a kickback: "I believe you just dropped your wallet with $20,000 in it."

Skip to next paragraph

How should the American respond?

* In the Philippines, a famous US blue jean manufacturer hires a detective to uncover illegal use of the company label. But when police are asked to arrest the culprits, some "grease" (cash) is requested.

Should the company make the payoff, keeping it off the books by having the detective do the dirty work?

* A machine part imported for a US-owned factory is delayed at the Jakarta airport.An executive feels compelled to pay "tea money" (a term implying extra cash for tea) to custom officials.

Has he broken a US law, as would he if the bribe were paid in the United States?

Such unsettling dilemmas of graft are nothing new to US firms doing business abroad, especially in Asia. But in the three years since the US Congress passed a Foreign Corrupt Practice Act, business wrong-doing in all its shades has become a hot topic among American multinationals.

"The anxieties created by the Foreign Corrupt Practices Act -- among men and women of utmost good faith -- have been, in my experience, without equal," states Harold Williams, chairman of the US Securities and Exchange Commission (SEC), the agency that administers the controversial law.

The act's apparent ambiguities, pitfalls, and alleged misunderstandings of how other cultures conduct business are now under attack.A revision is expected by a pro-business Reagan administration and a new Congress.

"It's fine to set the standards of morality for the world, but no one is listening," says George Sutur, director of the American Chamber of Commerce in the Philippines.

The act was not passed in 1977 without reason.In the early 1970s, disclosures showed that more than 400 US corporations had made illegal, or at least questional, payments totaling over $300 million to foreign agents, officials, or politicians. Not only was such corruption considered immoral and embarrassing, but Congress felt it warped the free-market system by directing business to companies too inefficient to compete on price or quality.

The act threatens jail sentences for US corporate officials who have "reason to know" of either direct or indirect giving to government officials of "anything of value" by workers -- or even third-party agents.

In addition to not needing actual knowledge of a payoff to be prosecuted, company officials must follow new standards of recordkeeping and control of agents which, if not followed, can result in SEC action. Ironically, the act's most immediate effect has been to impose a national system of internal accounting controls.

"Most people outside the US believe we shot ourselves in the foot," says Wallace Timmery, a New York lawyer who advises companies on the antibribery act. Unencumbered by such a law, European and Japanese competitors have filled the vacuum left by restricted US companies.

In Asia, American businessmen point to many Japanese companies which still eagerly provide "rebates" even when they are not asked for one. "The Japanese have bred graft throughout Asia," Mr. sutur says.

If the act is weakened, the question still remains whether corruption in international business can ever be lessened.