The Tradition of Bribery in International Business –  bribery of public officials.

The investigation by the International Olympic Committee of Salt Lake City and other venues has shed light on a very dark tradition of international business – bribery of public officials.

From our window on the world in North America, we wonder why any clear thinking businessperson would support the practice. Characteristically, we ignore the history of graft and corruption in our country.

As champions of the free market, it is imperative that we seize the moral and ethical high ground on this issue. Instinctively, we know that, even if some business people do not live up to this high standard, we will approach that ideal and be better for it. Business people of goodwill know that, at the end of the day, corrupt bureaucrats will serve their own self-interests, not the interests of their constituents.

In Arabic it is “bakshish,” in Russian it is “vzyatka.” In any language, the practice amounts to paying homage to those in power. When the Khan’s armies invaded across the great steppes of Russia and set up camp outside of what is now Moscow, Russia and Kiev, Ukraine, they did not set up factories or farms, instead, they opened ledgers and extracted payments from the local populace. After a few hundred years, tolerance for the percentage paid to the Khan became second nature.

The US Foreign Corrupt Practices Act (FCPA) establishes a clear prohibition against bribery of public officials of any country, with severe penalties. Any US business that expands into the world market must familiarize itself with the FCPA, adopt and implement a compliance policy and educate its employees.

I think most of our clients would find it mind-boggling that, in certain countries, their competitors can take a tax deduction for bribes that they pay to government officials.

Many of our clients are mortified when they learn of some of the hard realities of global businesses.  For example, they may have to compete in the marketplace with another company that gets a tax deduction for the bribe that it pays to the same public official whom they are dealing with in the bid process.

Yes, as unbelievable as it may sound, it happens!

Progressive, free-market countries have signed the OECD Convention of Combating Bribery.  This Convention requires the members adopt legislation that makes it a crime to bribe a public official of a sovereign nation. This initiative is in the neophyte stage, and must mature.

There is good news. The global economy is a huge economy and there is a tremendous amount of business available to companies that operate within the Rule of Law. There are huge opportunities for your business in countries in the emerging markets because many very bright and talented business people there can see that an ethical free market fuels success for everyone involved.