The Long Arm of the FCPA

The Foreign Corrupt Practices Act (FCPA), enacted in the period of reform after Watergate and Vietnam, at first played a minor role in global business operations. But during the administrations of George W. Bush and Barack Obama, the FCPA has transformed the way many businesses approach the challenges of bribery and corruption. With a growing caseload and fines and settlements worth billions of dollars, the FCPA has put pressure not just on American and foreign companies alike. Bribery was once considered just a part of doing business, especially in developing countries marked by corrupt governments and inadequate administrative processes. But with FCPA actions in a wide range of industries, the corporate world has been served notice that bribery is a major governance issue of the 21st century. Getting prosecuted for bribery may carry not only high monetary costs, but also serious dangers for reputation.The FCPA has brought dozens of foreign firms under the standards of the U.S. In the process, it has also spurred the passage of conventions and legislation across the world. These laws and conventions have ignited a debate about the best way to confront corruption. Should the U.S. Department of Justice and Securities and Exchange Commission target companies or individuals? Should the U.S. enforcers take their cases to court or pursue out-of-court settlements? Just how far should the DOJ and SEC go to pursue foreign firms? How lenient should they be with companies earnestly developing anticorruption policies and procedures? Should enforcers use sting operations to ferret out malefactors? The bribery case of DaimlerChrysler highlights the complexity of enforcement in situations involving a company with its feet in two nations and cultures. The case of Johnson and Johnson reveals the difficulty of dealing with subsidiaries in far-flung operations. The GlaxoSmithKine case underscores the perils of getting caught in anticorruption campaigns in foreign countries. The Walmart case shows that, contrary to received wisdom, bribers do not simply respond to the corrupt governments of developing nations but may actively contribute to that culture.

This teaching case is available for purchase here.

Authored by Charles Euchner.

Published by Yale School of Management.