Are
US companies at a disadvantage as a result of the Foreign Corrupt Practices
Act?
Introduction
The legislation of the Foreign Corrupt Practices Act
(FCPA) in 1977 by the US government was viewed as a new start for the US
towards a corrupt-free business world. It was meant to criminalize bribery on
the US corporations and citizens who engaged in overseas businesses. It also
provided a foundation for self-regulation in regard to the internal control
systems of the affected firms. With due considerations, the US companies are
not disadvantaged as a result of the enforcement of the FCPA.
How the foreign corrupt
practices act has affected companies’ operations
After the enforcement of this Act, the US
experienced exponential growth in international trade. This was a trend observed
in all sectors of the economy. In reference to earlier reports, they showed
that American exports actually increased even in those regions that are prone
to corrupt practices. For instance, there was an increase in business with
Africa and Asia. Deming (2011) asserts that US companies are diversifying their
oil market in African countries, for example Nigeria, although operating under
the regulations of the FCPA. This is a clear indicator that the Act does not
affect the US companies negatively because they are still doing well in the
market. These American companies are able to compete effectively in regions of
the economies in markets that are said to be prone to corruption practices (Deming,
2011).
The legislation and due enforcement of the Foreign
Corrupt Practices Act was meant to set high levels of conduct for the US
companies. To some extent, this gives them a competitive
advantage in various circumstances. For instance, governments and companies
with strict and strong internal control systems to ensure that money allocated
to certain projects purchase the right quality of goods and services that were
specified tend to prefer companies with high integrity and good record. The US
companies, having maintained high standards of conduct and transparency in
executing their duties, are therefore advantaged in securing such contracts and
definitely increasing their sales.
FCPA is serving as a testing basis for efforts meant
to improve the general standards of conduct in the global market. With
globalization and establishment of OECD, and other international organizations
to fight bribery and corruption, American companies are gaining fame and
preference options in international markets on the grounds that they are
already established in such issues and are exhibiting high levels of conduct.
In the international markets, American companies are being used as examples of
corruption-free enterprises; this allows them wide coverage as it acts as a
means of marketing them.
One of the requirements of FCPA is that companies
must keep records and their annual accounts in detailed forms; establishing
strong internal control systems had the aim of creating transparency in the
companies (Koehler & Edward Elgar Publishing, 2014). This has acted as a
means of strengthening these controls and identifying loopholes through which
companies used to lose a lot of money. The US companies are running their
business operations effectively, thereby realizing high returns that are
enabling them to expand their foreign businesses to larger markets. These
companies are ultimately experiencing exponential growth in their operations
and markets.
US companies are also benefiting from forums and
workshops organized frequently with the aim of sensitizing them with the
provisions of the Act and methods to apply in complying with it. Companies
acquire knowledge and new strategies on how to improve their internal accounting
and control systems. This improves efficiency in their operations, thereby
increasing returns.
Conclusion
The arguments above illustrate that the legislation
and enforcement of FCPA has been advantageous for the US companies. The
legislation is there to promote development of companies, rather than affecting
them negatively. Therefore, the government should keep administering this law
to promote a corruption free economy enriched with transparency.
References
Deming, S. H.
(2011). The Oil Industry and Africa: The Expanding Reach of the Foreign Corrupt
Practices Act.
Koehler, M.,
& Edward Elgar Publishing. (2014). The Foreign Corrupt Practices
Act in a new era. Cheltenham: Edward Elgar Pub. Ltd.
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