Foreign Corrupt Practices Act-FCPA

Introduction

The FCPA or Foreign Corrupt Practices Act was enacted by the United States in 1977. This was done in response to the findings that the American companies are making millions by bribing outside the United States.  Before its introduction, it was not common for the world to consider bribery by the foreign officials of the firms to be illegal. So this act has instilled a sort of morality into business. America, being home of some of world’s largest corporations is morally bounded to ensure that its firms don’t indulge in illegal acts not only in America but also round the globe. In the recent past many large corporations are punished for such practices. However it is believed that this act has effected the ability of American firms to compete internationally in a negative way.

Literature review

According to the studies the FCPA has impacted the business world positively and raised the ethical standards by promoting the ethical business practices. MALESKE, M. (2013) says that due to the FCPA, the awareness in the world about the corrupt practices has risen and many countries has enacted similar acts as a result. Due to the recent aggressive implementation of the act, foreign countries are also aware the consequences of indulging in bribery with the American companies and the incidents are decreasing as a result. Crites, M. and Carter, M. (2011) said that the FCPA was introduces because the American companies are making millions by bribing outside the United States and so they were prohibited from such practices through this act. According to them, “The real effect of DOJ’s aggressive enforcement is that it is stifling American companies from doing business abroad and here at home.”  He thinks there need to be amendments in the FCPA to make it friendlier to the American companies that sometimes suffer due to the faults of its associates without their knowledge. Harris, A. (2011) quoted that according to a study by Hines (1995) the American firms has lost 30% of GDP due to the FCPA. Many of US firms had closed their joint ventures due to this act whereas many firms tries to find the ways and means to avoid this act.

The effect of the Foreign Corrupt Practices Act

FCPA has impacted the world positively. Due to this act, Americans shows their leadership abilities in business world and now many countries are following them to fight corruption by making similar laws. So FCPA has raised the ethical bar in business world.

On the other hand it is widely believed that this act is negatively affecting the American business and according to a study conducted by Hines (1995), due to FCPA, the American firms has lost 20% of the GDP value because of this act. This is because of the closure of many join ventures and also due to the loss of the business. Because where Americans companies don’t bribe, other companies do and thus wins the business. Some researchers also believes that FCPS is too rigid and it punishes American firms many times when they are not at fault even like when their managers or business partners violated the code without their knowledge and intention. Therefore FCPA has negatively affected the ability of American firms to compete internationally.

Conclusion

The FCPA has instilled morality into the American business practices in terms of the foreign operations as it became very common for them to bribe the foreign officials to get business. With FCPA that practice is decreased enormously. FCPA also raised awareness round the globe and many countries has made similar laws. However, as per research, the American business are effected negatively due to this act and their ability to compete in the foreign market has suffered.