Are US companies at a disadvantage as a result of the Foreign Corrupt Practices Act?

Are US companies at a disadvantage as a result of the Foreign Corrupt Practices Act?

Introduction

The legislation of the Foreign Corrupt Practices Act (FCPA) in 1977 by the US government was viewed as a new start for the US towards a corrupt-free business world. It was meant to criminalize bribery on the US corporations and citizens who engaged in overseas businesses. It also provided a foundation for self-regulation in regard to the internal control systems of the affected firms. With due considerations, the US companies are not disadvantaged as a result of the enforcement of the FCPA.

How the foreign corrupt practices act has affected companies’ operations

After the enforcement of this Act, the US experienced exponential growth in international trade. This was a trend observed in all sectors of the economy. In reference to earlier reports, they showed that American exports actually increased even in those regions that are prone to corrupt practices. For instance, there was an increase in business with Africa and Asia. Deming (2011) asserts that US companies are diversifying their oil market in African countries, for example Nigeria, although operating under the regulations of the FCPA. This is a clear indicator that the Act does not affect the US companies negatively because they are still doing well in the market. These American companies are able to compete effectively in regions of the economies in markets that are said to be prone to corruption practices (Deming, 2011).

The legislation and due enforcement of the Foreign Corrupt Practices Act was meant to set high levels of conduct for the US companies. To some extent, this gives them a competitive advantage in various circumstances. For instance, governments and companies with strict and strong internal control systems to ensure that money allocated to certain projects purchase the right quality of goods and services that were specified tend to prefer companies with high integrity and good record. The US companies, having maintained high standards of conduct and transparency in executing their duties, are therefore advantaged in securing such contracts and definitely increasing their sales.

FCPA is serving as a testing basis for efforts meant to improve the general standards of conduct in the global market. With globalization and establishment of OECD, and other international organizations to fight bribery and corruption, American companies are gaining fame and preference options in international markets on the grounds that they are already established in such issues and are exhibiting high levels of conduct. In the international markets, American companies are being used as examples of corruption-free enterprises; this allows them wide coverage as it acts as a means of marketing them.

One of the requirements of FCPA is that companies must keep records and their annual accounts in detailed forms; establishing strong internal control systems had the aim of creating transparency in the companies (Koehler & Edward Elgar Publishing, 2014). This has acted as a means of strengthening these controls and identifying loopholes through which companies used to lose a lot of money. The US companies are running their business operations effectively, thereby realizing high returns that are enabling them to expand their foreign businesses to larger markets. These companies are ultimately experiencing exponential growth in their operations and markets.

US companies are also benefiting from forums and workshops organized frequently with the aim of sensitizing them with the provisions of the Act and methods to apply in complying with it. Companies acquire knowledge and new strategies on how to improve their internal accounting and control systems. This improves efficiency in their operations, thereby increasing returns.

Conclusion

The arguments above illustrate that the legislation and enforcement of FCPA has been advantageous for the US companies. The legislation is there to promote development of companies, rather than affecting them negatively. Therefore, the government should keep administering this law to promote a corruption free economy enriched with transparency.

References

Deming, S. H. (2011). The Oil Industry and Africa: The Expanding Reach of the Foreign Corrupt Practices Act.

Koehler, M., & Edward Elgar Publishing. (2014). The Foreign Corrupt Practices Act in a new era. Cheltenham: Edward Elgar Pub. Ltd.