Multinational corporations and the foreign corrupt practices act

A legal look at transnational business

Abstract

Multinational Corporations (MNC) play a major role in the world economy and the Foreign Corrupt Practices Act has had a major impact on how MNC conducts business. The passage of the Foreign Corrupt Practices Act (FCPA) by the U.S. government in 1977 was a watershed event in the fight against corruption in the postwar era (Cragg 2002).  In the wake of  the Watergate investigations, which revealed extensive bribery of foreign officials by American corporations, there was a  maelstrom of moral outrage  (Brown, 1998).  The same sort of moral outrage that was heard in the wake of ENRON and more  recently in the Halliburton investigation involving Nigerian contracts. The U.S. government is bringing an increasing number of cases under the banner of the (FCPA), which is intended to curtail bribery committed by both U.S. and foreign corporations. The increase is especially worrisome for companies looking to make international acquisitions, as they face the burden of  being saddled with any liabilities under FCPA committed by the company they are buying. It should also concern foreign companies in general, as the U.S. government has shown a willingness to investigate and bring actions against corporations whose presence in the U.S. is limited only to some representation in the capital markets-for instance, a local stock market  listing in the form of an American depositary receipt (Friedlander, 2005). The FCPA is just one example of how the U.S. government has sought to regulate the conduct of American MNCs in foreign countries (Borg, 2003).  U.S. firms seeking to  do business in foreign markets must be familiar with the FCPA. This paper will review the history and parts of the FCPA, its  effectiveness, and its current and future impact on American Multinational Corporations.