Keeping It Clean Overseas

Unethical practices such as bribery and kickbacks are business as usual in some countries, and U.S. companies are sometimes tempted to adopt a "when in Rome, do as the Romans do" mind-set. That attitude is dangerous in light of tightening laws against corruption at home and abroad. Finance executives should review their exposure and take steps to protect their company.

If you’re thinking about signing off on that unusually high commission to close a foreign deal, or hiring a new foreign agent to expedite a government contract, or doing business with an overseas company that does not have an ethics code and isn’t interested in yours, don’t. You may be putting your company — and yourself — at risk for criminal and civil prosecution under anti-corruption laws in the United States and abroad. Even when a company is cleared of corruption charges, damage to its reputation and to executives’ careers is often already done.

Lockheed Corp. learned the hard way that playing dirty in a dirty world can be an expensive way to do business. Five years ago, shortly before its merger with Martin Marietta Corp., Lockheed admitted to passing a $1 million bribe to an Egyptian official who helped sell its C-130 aircraft in that country. Charged with violating the U.S. Foreign Corrupt Practices Act (FCPA) and faced with losing all its federal contracts — worth about 70 percent of its $25 billion in annual sales — Lockheed pleaded guilty, paid a $24.8 million fine and submitted to a detailed administrative agreement designed to ensure future compliance with the FCPA. The company provided periodic ethics reports to the U.S. Air Force, vastly expanded its ethics and compliance program, and made ethics training an annual requirement for all of its 140,000 employees.

Companies that frequently deal with foreign governments face greater exposure under anti-bribery laws than most. However, all U.S. businesses selling or operating abroad, and particularly those working with foreign partners or agents, are potentially liable under the FCPA. As rapid globalization generates more cross-border transactions and complex business relationships, finance executives should carefully review their exposure under anti-bribery laws in the United States and abroad, and take steps to protect themselves and their companies.