Moral Hazard

By Cox, Rob | Newsweek, May 7, 2012 | Go to article overview

Moral Hazard


Cox, Rob, Newsweek


Byline: Rob Cox

Can American companies compete abroad without bribing?

National Notebook: How to succeed in emerging markets without really bribing is not the title of a new Broadway musical but the vexing question du jour in the boardrooms of multinational corporations. Companies are wrangling like mad with how to effectively push their wares abroad without running afoul of the Foreign Corrupt Practices Act. This 35-year-old legislation was designed to prohibit firms operating in the United States from bribing government officials around the world to win business. From a strictly moral perspective, it's hard to argue with holding companies to a code of proper conduct wherever they operate. But as the act has been given new oomph by the Justice Department and the Securities and Exchange Commission under the Obama administration, the bright line between what is acceptable behavior and what is not has become muddled. Ironically the law itself, and the way the government enforces the rules, has made matters worse. It may be time to give the FCPA a revamp.

Consider last week's Walmart shocker. According to The New York Times, the mega-retailer's Mexican unit sprinkled some $24 million of baksheesh into the pockets of local worthies to enable its store expansion. The alleged cover-up of its own 2005 investigation into the matter suggests a deceptive corporate culture at Bentonville HQ. What Walmart actually did in Mexico, though, may not have been illegal. The Justice Department says the law aims to make "it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. …

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