Resources
Employment at Will
Employment at will is a doctrine of common law that allows either the employee or the employer to terminate an employment relationship at any time, for any reason, with or without notice, and even for a morally reprehensible reason, so long as the ending of the relationship does not fall into an exception to the employment-at-will doctrine.
Employment at will is the prevailing legal doctrine concerning employment relationship termination in 49 US states (not Montana). In the overwhelming majority of the United States, employment at will and its exceptions govern the rules by which one may legally terminate an employee.
The generally accepted exceptions to employment at will include
· express contract,
· implied contract,
· promissory estoppel,
· public policy violations, and
· good faith and fair dealing.
We discuss these five exceptions below.
Express Contract Exception
If an employer terminates an employee in violation of the terms of an express contract between the employer and employee, then the employee can sue the employer for breach of contract (and, in some states, wrongful termination).
For example, an employment contract guarantees that the employee will be employed by the employer for a definite duration of time, with cognizable boundaries, such as a “one-year period” or “for six months.” The employer terminates the employee before the stated period has expired, and that termination is not otherwise permitted by the contract.
Likewise, consider a case where an employment contract states that an employee can be terminated only “for cause” or “for just cause,” and the employee is terminated without cause.
Implied Contract Exception
Implied contracts are contracts created by the conduct of the parties, which include any representations or assurances made by the employer prior to or during the term of employment. In some states, an implied contract is an exception to the employment-at-will doctrine.
For example, if an employer provides an employee handbook to a new employee, the provisions in the handbook may be considered part of the contractual relationship. Often, such handbooks outline a procedure for performance review, discipline, and discharge of the employee. An employer who fails to live up to procedural obligations prior to discharging an employee could be liable.
Promissory Estoppel Exception
In many states, promissory estoppel acts as an exception to the employment-at-will doctrine. That is, when an employer makes a promise to an employee of employment or a period of employment, and the employee relies on that promise to his detriment, and it leads to injustice, then an employee may be able to have that promise enforced regardless of employment at will.
For example, John is offered a job with Widget Co. He discusses with Widget’s manager that, to take the job, he needs to move from California to New Jersey and give up an already lucrative position with benefits. The manager assures John that he will have gainful employment and a substantially larger income with Widget Co. for at least a year if he makes the move. In reliance on this promise, John quits his job and moves to New Jersey to begin work at Widget Co. After one week, John is laid off. Despite being an employee at will, John may be able to recover under the theory of promissory estoppel.
Public Policy Violations Exception
Most states in the United States prohibit an employer from firing an employee if the reason for the action violates some readily accepted public policy. This prohibition prevents an employer from terminating an employee for exercising a legal right, including a right contained in state and federal laws; or for failing to perform an illegal act for the employer.
Firing an employee for performing some public duty (showing up to jury duty), for exposing illegal conduct (such as reporting violation of some law to the employer or a government agency), or for exercising her rights as a US or state citizen (such as voting) are all against public policy.
This exception to employment at will encompasses the inability to terminate an employee if doing so would violate her state or federal statutory rights. If an employee is terminated because of her race, this may be a violation of Title VII of the Civil Rights Act of 1964, and so an otherwise at-will employee would have a claim against the employer for violating a federal statute.
Moreover, it is against public policy to terminate an employee for refusing to commit an illegal act, such as a crime.
Good Faith and Fair Dealing Exception
A minority of states impose upon the employer a duty to exercise good faith and fair dealing in regard to all employees. This doctrine, to varying degrees, means that an employer must treat an employee fairly in the decision to fire her. This generally means that an employer would violate these duties in firing an employee without due cause or justification.
The preceding five generally accepted exceptions to employment at will allow injured parties to seek recovery even in the face of the employment-at-will doctrine. As such, they limit the circumstances by which an employer can terminate an employee.
International Business Laws, Ethics, and Regulations
The arena of international business law is highly complex and largely polycentric in nature. Its major components are international treaties, regulations and principles of international organizations (both soft and hard laws), customary international law, and domestic laws with extraterritorial reach. The laws of other nations also come into play when one is conducting business on an international or even global scale.
Given the complexity and variety of sources of international business law, it is of particular importance for you to seek expert assistance when dealing with problems or other matters in an international context. Companies often choose to partner with local constituents when expanding internationally to gain localized knowledge and market share.
Resources
· Foreign Corrupt Practices Act
· Global Bribery
· What Are Facilitating or Expediting Payments?
· Gifts, Travel, Entertainment, and Other Things of Value
· Anti-Bribery Provision
Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§ 78dd-1, et seq. (FCPA), was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. Specifically, the antibribery provisions of the FCPA prohibit the willful use of the mails or any means of instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person.
Since 1977, the antibribery provisions of the FCPA have applied to all US persons and certain foreign issuers of securities. With the enactment of certain amendments in 1998, the antibribery provisions of the FCPA now also apply to foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States.
The FCPA also requires companies whose securities are listed in the United States to meet its accounting provisions. See 15 U.S.C. § 78m. These accounting provisions, which were designed to operate in tandem with the anti-bribery provisions of the FCPA, require corporations covered by the provisions to (1) make and keep books and records that accurately and fairly reflect the transactions of the corporation and (2) devise and maintain an adequate system of internal accounting controls.
Global Bribery
Comparing the US Foreign Corrupt Practices Act and the UK Bribery Act of 2010
The United States goes to great lengths to prevent bribery both within and outside its borders. Bribery originated as a common law criminal offense, although today many states have legislated bribery and commercial bribery statutes, so that bribing a public official is illegal as well as using a bribe to gain a commercial or business advantage. The federal government has also taken steps to prevent bribery through legislating statutes prohibiting bribery of US public officials, legislating statutes prohibiting bribery of foreign public officials, and by entering international treaties aimed at curbing corruption and bribery.
The US Foreign Corrupt Practices Act of 1977 (FCPA) is a US federal statute aimed at preventing bribery of foreign public officials, political candidates, and political parties. For more than 30 years, the FCPA was the most forceful extraterritorial bribery statute in the world. However, in 2010 the United Kingdom promulgated its new Bribery Act, thereby creating an even stricter and more comprehensive extraterritorial bribery statute. Global businesses now have an entangled web of compliance issues arising from both US and UK laws. Although the two laws share many commonalities, differences do exist between them. The overarching commonality between the FCPA and the Bribery Act is the shared aim of preventing global corruption by extending bribery laws beyond national borders.
The FCPA prohibits certain payments or otherwise providing or promising to provide anything of value to foreign officials, a legal term broadly defined to include officers and employees of foreign governments, officers and employees of public international organizations, and anyone acting on behalf of foreign governments or public international organizations. The FCPA also prohibits such payments and promises to pay to political parties, political candidates, and anyone else when the payment or promise to pay is intended to directly or indirectly benefit foreign officials, political parties, or political candidates.
The FCPA prohibits these payments or promises to provide anything of value when they are made for the purpose of: (1) “influencing any act or decision of such party, official, or candidate in its or his official capacity”; (2) “inducing such party, official, or candidate to do or omit to do an act in violation of the lawful duty of such party, official, or candidate”; (3) “securing any improper advantage”; or (4) “inducing such party, official, or candidate to use its or his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality, in order to assist…in obtaining or retaining business for or with, or directing business to, any person” (FCPA, 15 U.S.C. 78dd-2). The violation of these FCPA provisions can result in both civil and criminal penalties.
The FCPA does have a very narrow exception for “grease” or “facilitation” payments, when the payment is made “to expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official” (FCPA, 15 U.S.C. 78dd-2). Thus, although paying for an expensive vacation for a foreign official is prohibited under the FCPA, making a minor payment to a customs official in order to expedite entry of legal goods through customs may be permitted. However, under the Bribery Act, facilitation payments are not permitted and are considered to be illegal bribes. The Bribery Act does, however, allow payment of required administrative fees and fast-track fees that may be available from some government agencies. The Bribery Act changes the traditional wisdom regarding permissible payments in the international arena. That is, if a global company is familiar with FCPA requirements, but not the Bribery Act requirements, it may proceed to pay facilitation payments, but may then be prosecuted in the United Kingdom despite compliance with US laws.
The differences between the FCPA and the Bribery Act go far beyond facilitation payments. The United Kingdom’s definition of “foreign public official” is a bit narrower than the FCPA definition, but the Bribery Act prohibits private-to-private bribery. In other words, the Bribery Act prohibits bribes to or from private persons as well as public officials. Moreover, the Bribery Act prohibits both the offering and accepting of a bribe, whereas the FCPA just prohibits the offering of a bribe. Sometimes the offering of a bribe is called “active bribery” and the taking of a bribe called “passive bribery.” Under the Bribery Act, certain companies may also be held strictly liable for failing to prevent bribes by anyone who performs services for it, whereas the FCPA imposes vicarious liability for the acts of certain agents or employees. Finally, violations of the Bribery Act may result in longer prison sentences for individuals and larger fines for individuals and companies than under the FCPA. In addition to these key differences between the US and UK laws, other nuances regarding their differing application and scope also exist. A global manager must continuously keep abreast of changes to international bribery regimes.
Defenses Under the Foreign Corrupt Practices Act
Several defenses are available to defendants that are prosecuted for violating the bribery provisions of the FCPA. These defenses include the local law defense, the promotional expense defense, the facilitation payment defense, and the statute of limitations.
The FCPA was amended in 1988 to add the local law defense and the promotional expense defense. Both are affirmative defenses, meaning that, if the facts underlying their allegation are proven by the defendant, then either defense could exculpate a defendant from liability. The local law defense requires the defendant to prove that the payment or promise to pay was permitted by the local laws where the the purported violation occurred, at the time of the purported violation. This defense requires not just an absence of laws prohibiting such payments, but actual affirmative and written laws that permit such payments. As such, it rarely is available because most countries do not have laws allowing corrupt payments. The promotional expense defense allows companies to provide reasonable and bona fide travel and lodging expenses for foreign officials. The defendant must prove that such travel and lodging were directly related to demonstration, promotion, or explanation of services or product or a legitimate contract with a foreign government. The inaccurate reporting of such expenses could be used as evidence of corrupt intent and could violate certain accounting requirements of the FCPA.
According to the Department of Justice’s FCPA Guidance (2012), the facilitation payment defense is a narrow defense that “applies only when a payment is made to further ‘routine governmental action’ that involves non discretionary acts. Examples of ‘routine governmental action’ include processing visas, providing police protection or mail service, and supplying utilities like phone service, power, and water. Routine governmental action does not include a decision to award new business or to continue business with a particular party. Nor does it include acts that are within an official’s discretion or that would constitute misuse of an official’s office. Thus, paying an official a small amount to have the power turned on at a factory might be a facilitating payment; paying an inspector to ignore the fact that the company does not have a valid permit to operate the factory would not be a facilitating payment.” Defining facilitation payments leaves a lot of gray area, so global managers should always err on the side of caution, keeping in mind the intended narrow construal of this defense.
Finally, the FCPA generally limits both civil and criminal violations of the bribery prohibitions by a five-year statute of limitations. In other words, in most cases, proceedings seeking civil penalties or criminal sanctions for violating the bribery provisions of the FCPA cannot be initiated more than five years after the act occurred. However, certain equitable remedies still may be sought for violations of the act beyond five years, such as injunctions or disgorgement of ill-gotten profits, and certain exceptions (e.g., an ongoing criminal conspiracy) may allow cases to be initiated more than five years after the initial prohibited act.
Penalties Under the Foreign Corrupt Practices Act
Violations of the FCPA bribery provisions may result in both civil and criminal penalties for both individuals and companies. For individuals, the criminal penalties may include up to $250,000 in fines per violation and up to 5 years in prison and civil penalties of up to $16,000 per violation. For companies, the criminal penalties may include a fine up to $2 million per violation and civil penalties up to $16,000 per violation. Moreover, employers are not permitted to pay the fines of their employees or agents. Although these are the baseline fines, the Alternative Fines Act allows for fines up to twice the amount of any benefit obtained by a defendant by making a corrupt payment, and the Federal Sentencing Guidelines are utilized to decipher appropriate fine amounts. Companies found liable under the FCPA may also be suspended or permanently prevented from contracting with the federal government and, in certain qualifying cases, could lose their export privileges. Although the FCPA provides for severe penalties, the UK Bribery Act is even more severe. It allows an individual to be imprisoned for 10 years for a violation and does not cap fines, thus permitting both companies and individuals the possibility of facing unlimited fines for violating its provisions. A global manager should be aware of the risks and potential consequences of bribery.
References
U.S. Department of Justice, Criminal Division, and U.S. Securities and Exchange Commission, Enforcement Division. (2012). A resource guide to the FCPA U.S. Foreign Corrupt Practices Act, Retrieved from: https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2015/01/16/guide.pdf
Foreign Corrupt Practices Act of 1977, Pub. L. 95-213, 91 Stat. 1494, codified as amended at 15 U.S.C. §§78dd-1 et seq. Retrieved from: https://www.gpo.gov/fdsys/pkg/STATUTE-91/pdf/STATUTE-91-Pg1494.pdf
What Are Facilitating or Expediting Payments?
The FCPA’s bribery prohibition contains a narrow exception for “facilitating or expediting payments” made in furtherance of routine governmental action. The facilitating payments exception applies only when a payment is made to further “routine governmental action” that involves non-discretionary acts. Examples of “routine governmental action” include processing visas, providing police protection or mail service, and supplying utilities like phone service, power, and water. Routine government action does not include a decision to award new business or to continue business with a particular party. Nor does it include acts that are within an official’s discretion or that would constitute misuse of an official’s office. Thus, paying an official a small amount to have the power turned on at a factory might be a facilitating payment; paying an inspector to ignore the fact that the company does not have a valid permit to operate the factory would not be a facilitating payment.
A “routine governmental action” is an action which is ordinarily and commonly performed by a foreign official in the following activities:
· obtaining permits, licenses, or other official documents to qualify a person to do business in a foreign country
· processing governmental papers, such as visas and work orders
· providing police protection, mail pickup and delivery, or scheduling inspections associated with contract performance or inspections related to transit of goods across country
· providing phone service, power and water supply, loading and unloading cargo, or protecting perishable products or commodities from deterioration
· actions of a similar nature
Whether a payment falls within the exception is not dependent on the size of the payment, though size can be telling, as a large payment is more suggestive of corrupt intent to influence a non-routine governmental action. But, like the FCPA’s antibribery provisions more generally, the facilitating payments exception focuses on the purpose of the payment rather than its value. For instance, an Oklahoma-based corporation violated the FCPA when its subsidiary paid Argentine customs officials approximately $166,000 to secure customs clearance for equipment and materials that lacked required certifications or could not be imported under local law and to pay a lower-than-applicable duty rate. The company’s Venezuelan subsidiary had also paid Venezuelan customs officials approximately $7,000 to permit the importation and exportation of equipment and materials not in compliance with local regulations and to avoid a full inspection of the imported goods. In another case, three subsidiaries of a global supplier of oil drilling products and services were criminally charged with authorizing an agent to make at least 378 corrupt payments (totaling approximately $2.1 million) to Nigerian Customs Service officials for preferential treatment during the customs process, including the reduction or elimination of customs duties.
Labeling a bribe as a “facilitating payment” in a company’s books and records does not make it one. A Swiss offshore drilling company, for example, recorded payments to its customs agent in the subsidiary’s “facilitating payment” account, even though company personnel believed the payments were, in fact, bribes. The company was charged with violating both the FCPA’s antibribery and accounting provisions.
Although true facilitating payments are not illegal under the FCPA, they may still violate local law in the countries where the company is operating, and the OECD’s Working Group on Bribery recommends that all countries encourage companies to prohibit or discourage facilitating payments, which the United States has done regularly. In addition, other countries’ foreign bribery laws, such as the United Kingdom’s, may not contain an exception for facilitating payments. Individuals and companies should therefore be aware that although true facilitating payments are permissible under the FCPA, they may still subject a company or individual to sanctions. As with any expenditure, facilitating payments may still violate the FCPA if they are not properly recorded in an issuer’s books and records.
Hypothetical: Facilitating Payments
Company A is a large multinational mining company with operations in Foreign Country, where it recently identified a significant new ore deposit. It has ready buyers for the new ore but has limited capacity to get it to market. In order to increase the size and speed of its ore export, Company A will need to build a new road from its facility to the port that can accommodate larger trucks. Company A retains an agent in Foreign Country to assist it in obtaining the required permits, including an environmental permit, to build the road. The agent informs Company A’s vice president for international operations that he plans to make a one-time small cash payment to a clerk in the relevant government office to ensure that the clerk files and stamps the permit applications expeditiously, as the agent has experienced delays of three months when he has not made this “grease” payment. The clerk has no discretion about whether to file and stamp the permit applications once the requisite filing fee has been paid. The vice president authorizes the payment.
A few months later, the agent tells the vice president that he has run into a problem obtaining a necessary environmental permit. It turns out that the planned road construction would adversely impact an environmentally sensitive and protected local wetland. While the problem could be overcome by rerouting the road, such rerouting would cost Company A $1 million more and would slow down construction by six months. It would also increase the transit time for the ore and reduce the number of monthly shipments. The agent tells the vice president that he is good friends with the director of Foreign Country’s Department of Natural Resources and that it would only take a modest cash payment to the director and the “problem would go away.” The vice president authorizes the payment, and the agent makes it. After receiving the payment, the director issues the permit, and Company A constructs its new road through the wetlands.
Was the payment to the clerk a violation of the FCPA?
No. Under these circumstances, the payment to the clerk would qualify as a facilitating payment, since it is a one-time, small payment to obtain a routine, nondiscretionary governmental service that Company A is entitled to receive (i e , the stamping and filing of the permit application) However, while the payment may qualify as an exception to the FCPA’s antibribery provisions, it may violate other laws, both in Foreign Country and elsewhere. In addition, if the payment is not accurately recorded, it could violate the FCPA’s books and records provision.
Was the payment to the director a violation of the FCPA?
Yes. The payment to the director of the Department of Natural Resources was in clear violation of the FCPA, since it was designed to corruptly influence a foreign official into improperly approving a permit. The issuance of the environmental permit was a discretionary act, and indeed, Company A should not have received it. Company A, its vice president, and the local agent may all be prosecuted for authorizing and paying the bribe.
What Are Facilitating or Expediting Payments? from A Resource Guide to the U.S. Foreign Corrupt Practices Act comprises public domain material from the U.S. Department of Justice and the Enforcement Division, U.S. Securities and Exchange Commission.
Gifts, Travel, Entertainment, and Other Things of Value
A small gift or token of esteem or gratitude is often an appropriate way for business people to display respect for each other. Some hallmarks of appropriate gift giving are when the gift is given openly and transparently, properly recorded in the giver’s books and records, provided only to reflect esteem or gratitude, and permitted under local law.
Items of nominal value, such as cab fare, reasonable meals and entertainment expenses, or company promotional items, are unlikely to improperly influence an official, and, as a result, are not items that have resulted in enforcement action by the Department of Justice (DOJ) or Securities and Exchange Commission (SEC). The larger or more extravagant the gift, however, the more likely it was given with an improper purpose. DOJ and SEC enforcement cases thus have involved single instances of large, extravagant gift giving (such as sports cars, fur coats, and other luxury items) as well as widespread gifts of smaller items as part of a pattern of bribes. For example, in one case brought by DOJ and SEC, a defendant gave a government official a country club membership fee and a generator, as well as household maintenance expenses, payment of cell phone bills, an automobile worth $20,000, and limousine services. The same official also received $250,000 through a third-party agent.
In addition, a number of Foreign Corrupt Practices Act (FCPA) enforcement actions have involved the corrupt payment of travel and entertainment expenses. Both DOJ and SEC have brought cases where these types of expenditures occurred in conjunction with other conduct reflecting systemic bribery or other clear indication of corrupt intent.
A case involving a California-based telecommunications company illustrates the types of improper travel and entertainment expenses that may violate the FCPA. Between 2002 and 2007, the company spent nearly $7 million on approximately 225 trips for its customers in order to obtain systems contracts in China, including for employees of Chinese state-owned companies to travel to popular tourist destinations in the United States. Although the trips were purportedly for the individuals to conduct training at the company’s facilities, in reality, no training occurred on many of these trips and the company had no facilities at those locations. Approximately $670,000 of the $7 million was falsely recorded as “training” expenses.
Examples of Improper Travel and Entertainment
· a $12,000 birthday trip for a government decision maker from Mexico that included visits to wineries and dinners
· $10,000 spent on dinners, drinks, and entertainment for a government official
· a trip to Italy for eight Iraqi government officials that consisted primarily of sightseeing and included $1,000 in “pocket money” for each official
· a trip to Paris for a government official and his wife that consisted primarily of touring activities via a chauffeur-driven vehicle
Likewise, a New Jersey–based telecommunications company spent millions of dollars on approximately 315 trips for Chinese government officials, ostensibly to inspect factories and train the officials in using the company’s equipment. In reality, during many of these trips, the officials spent little or no time visiting the company’s facilities, but instead visited tourist destinations such as Hawaii, Las Vegas, the Grand Canyon, Niagara Falls, Disney World, Universal Studios, and New York City. Some of the trips were characterized as “factory inspections” or “training” with government customers but consisted primarily or entirely of sightseeing to locations chosen by the officials, typically lasting two weeks and costing between $25,000 and $55,000 per trip. In some instances, the company gave the government officials $500 to $1,000 per day in spending money and paid all lodging, transportation, food, and entertainment expenses. The company either failed to record these expenses or improperly recorded them as “consulting fees” in its corporate books and records. The company also failed to implement appropriate internal controls to monitor the provision of travel and other things of value to Chinese government officials.
Companies also may violate the FCPA if they give payments or gifts to third parties, like an official’s family members, as an indirect way of corruptly influencing a foreign official. For example, one defendant paid personal bills and provided airline tickets to a cousin and close friend of the foreign official whose influence the defendant sought in obtaining contracts. The defendant was convicted at trial and received a prison sentence.
As part of an effective compliance program, a company should have clear and easily accessible guidelines and processes in place for gift giving by the company’s directors, officers, employees, and agents. Though not necessarily appropriate for every business, many larger companies have automated gift giving clearance processes and have set clear monetary thresholds for gifts along with annual limitations, with limited exceptions for gifts approved by appropriate management. Clear guidelines and processes can be an effective and efficient means for controlling gift giving, deterring improper gifts, and protecting corporate assets.
The FCPA does not prohibit gift giving. Rather, just like its domestic bribery counterparts, the FCPA prohibits the payments of bribes, including those disguised as gifts.
Hypothetical: Gifts, Travel, and Entertainment
Company A is a large US engineering company with global operations in more than 50 countries, including a number that have a high risk of corruption, such as Foreign Country. Company A’s stock is listed on a national US stock exchange. In conducting its business internationally, Company A’s officers and employees come into regular contact with foreign officials, including officials in various ministries and state-owned entities. At a trade show, Company A has a booth at which it offers free pens, hats, T-shirts, and other similar promotional items with Company A’s logo. Company A also serves free coffee, other beverages, and snacks at the booth. Some of the visitors to the booth are foreign officials.
Is Company A in violation of the FCPA?
No. These are legitimate, bona fide expenditures made in connection with the promotion, demonstration, or explanation of Company A’s products or services. There is nothing to suggest corrupt intent here. The FCPA does not prevent companies from promoting their businesses in this way or providing legitimate hospitality, including to foreign officials. Providing promotional items with company logos or free snacks as set forth above is an appropriate means of providing hospitality and promoting business. Such conduct has never formed the basis for an FCPA enforcement action.
At the trade show, Company A invites a dozen current and prospective customers out for drinks, and pays the moderate bar tab. Some of the current and prospective customers are foreign officials under the FCPA. Is Company A in violation of the FCPA?
No. Again, the FCPA was not designed to prohibit all forms of hospitality to foreign officials. While the cost here may be more substantial than the beverages, snacks, and promotional items provided at the booth, and the invitees specifically selected, there is still nothing to suggest corrupt intent.
Two years ago, Company A won a long-term contract to supply goods and services to the state-owned Electricity Commission in Foreign Country. The Electricity Commission is 100 percent owned, controlled, and operated by the government of Foreign Country, and employees of the Electricity Commission are subject to Foreign Country’s domestic bribery laws. Some Company A executives are in Foreign Country for meetings with officials of the Electricity Commission. The General Manager of the Electricity Commission was recently married, and during the trip Company A executives present a moderately priced crystal vase to the General Manager as a wedding gift and token of esteem. Is Company A in violation of the FCPA?
No. It is appropriate to provide reasonable gifts to foreign officials as tokens of esteem or gratitude. It is important that such gifts be made openly and transparently, properly recorded in a company’s books and records, and given only where appropriate under local law, customary where given, and reasonable for the occasion.
During the course of the contract described above, Company A periodically provides training to Electricity Commission employees at its facilities in Michigan. The training is paid for by the Electricity Commission as part of the contract. Senior officials of the Electricity Commission inform Company A that they want to inspect the facilities and ensure that the training is working well. Company A pays for the airfare, hotel, and transportation for the Electricity Commission senior officials to travel to Michigan to inspect Company A’s facilities. Because it is a lengthy international flight, Company A agrees to pay for business class airfare, to which its own employees are entitled for lengthy flights. The foreign officials visit Michigan for several days, during which the senior officials perform an appropriate inspection. Company A executives take the officials to a moderately priced dinner, a baseball game, and a play. Do any of these actions violate the FCPA?
No. Neither the costs associated with training the employees nor the trip for the senior officials to the Company’s facilities in order to inspect them violates the FCPA. Reasonable and bona fide promotional expenditures do not violate the FCPA. Here, Company A is providing training to the Electricity Commission’s employees and is hosting the Electricity Commission senior officials. Their review of the execution and performance of the contract is a legitimate business purpose. Even the provision of business class airfare is reasonable under the circumstances, as are the meals and entertainment, which are only a small component of the business trip.
Would this analysis be different if Company A instead paid for the senior officials to travel first-class with their spouses for an all-expenses-paid, week-long trip to Las Vegas, where Company A has no facilities?
Yes. This conduct almost certainly violates the FCPA because it evinces a corrupt intent. Here, the trip does not appear to be designed for any legitimate business purpose, is extravagant, includes expenses for the officials’ spouses, and therefore appears to be designed to corruptly curry favor with the foreign government officials. Moreover, if the trip were booked as a legitimate business expense—such as the provision of training at its facilities—Company A would also be in violation of the FCPA’s accounting provisions. Furthermore, this conduct suggests deficiencies in Company A’s internal controls.
Company A’s contract with the Electricity Commission is going to expire, and the Electricity Commission is offering the next contract through its tender process. An employee of the Electricity Commission contacts Company A and offers to provide Company A with confidential, nonpublic bid information from Company A’s competitors if Company A will pay for a vacation to Paris for him and his girlfriend. Employees of Company A accede to the official’s request, pay for the vacation, receive the confidential bid information, and yet still do not win the contract. Has Company A violated the FCPA?
Yes. Company A has provided things of value to a foreign official for the purpose of inducing the official to misuse his office and to gain an improper advantage. It does not matter that it was the foreign official who first suggested the illegal conduct or that Company A ultimately was not successful in winning the contract. This conduct would also violate the FCPA’s accounting provisions if the trip were booked as a legitimate business expense and suggests deficiencies in Company A’s internal controls.
Licenses and Attributions
Gifts, Travel, Entertainment, and Other Things of Value from A Resource Guide to the U.S. Foreign Corrupt Practices Act comprises public domain material from the U.S. Department of Justice and the Enforcement Division, U.S. Securities and Exchange Commission.
Anti‐Bribery Provision
§30A of the Securities Exchange Act of 1934
[15 U.S.C. §78dd‐1]
§30A ‐ Prohibited Foreign Trade Practices by Issuers
(a) Prohibition
It shall be unlawful for any issuer which has a class of securities registered pursuant to section 78l of this title or
which is required to file reports under section 78o(d) of this title, or for any officer, director, employee, or agent of
such issuer or any stockholder thereof acting on behalf of such issuer, to make use of the mails or any means or
instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay, or
authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of
anything of value to—
(1) any foreign official for purposes of—
(A)(i) influencing any act or decision of such foreign official in his official capacity, (ii) inducing
such foreign official to do or omit to do any act in violation of the lawful duty of such official, or
(iii) securing any improper advantage; or
(B) inducing such foreign official to use his influence with a foreign government or
instrumentality thereof to affect or influence any act or decision of such government or
instrumentality,
in order to assist such issuer in obtaining or retaining business for or with, or directing business to, any person;
(2) any foreign political party or official thereof or any candidate for foreign political office for purposes of—
(A)(i) influencing any act or decision of such party, official, or candidate in its or his official
capacity, (ii) inducing such party, official, or candidate to do or omit to do an act in violation of
the lawful duty of such party, official, or candidate, or (iii) securing any improper advantage; or
(B) inducing such party, official, or candidate to use its or his influence with a foreign government
or instrumentality thereof to affect or influence any act or decision of such government or
instrumentality,
in order to assist such issuer in obtaining or retaining business for or with, or directing business to, any person; or
(3) any person, while knowing that all or a portion of such money or thing of value will be offered, given, or
promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof, or to
any candidate for foreign political office, for purposes of—
(A)(i) influencing any act or decision of such foreign official, political party, party official, or
candidate in his or its official capacity, (ii) inducing such foreign official, political party, party
official, or candidate to do or omit to do any act in violation of the lawful duty of such foreign
official, political party, party official, or candidate, or (iii) securing any improper advantage; or
(B) inducing such foreign official, political party, party official, or candidate to use his or its
influence with a foreign government or instrumentality thereof to affect or influence any act or
decision of such government or instrumentality,
in order to assist such issuer in obtaining or retaining business for or with, or directing business to, any person.
(b) Exception for Routine Governmental Action
Subsections (a) and (g) of this section shall not apply to any facilitating or expediting payment to a foreign official,
political party, or party official the purpose of which is to expedite or to secure the performance of a routine
governmental action by a foreign official, political party, or party official.
(c) Affirmative defenses
It shall be an affirmative defense to actions under subsection (a) or (g) of this section that—
(1) the payment, gift, offer, or promise of anything of value that was made, was lawful under the written
laws and regulations of the foreign official’s, political party’s, party official’s, or candidate’s country; or
(2) the payment, gift, offer, or promise of anything of value that was made, was a reasonable and bona fide
expenditure, such as travel and lodging expenses, incurred by or on behalf of a foreign official, party, party
official, or candidate and was directly relatedto—
(A) the promotion, demonstration, or explanation of products or services; or
(B) the execution or performance of a contract with a foreign government or agency thereof.
(f) Definitions
For purposes of this section:
(1)(A) The term “foreign official” means any officer or employee of a foreign government or any
department, agency, or instrumentality thereof, or of a public international organization, or any person
acting in an official capacity for or on behalf of any such government or department, agency, or
instrumentality, or for or on behalf of any such public international organization.
(B) For purposes of subparagraph (A), the term “public international organization” means—
(i) an organization that is designated by Executive order pursuant to section 288 of title 22; or
(ii) any other international organization that is designated by the President by Executive order
for the purposes of this section, effective as of the date of publication of such order in the
Federal Register.
(2)(A) A person’s state of mind is “knowing” with respect to conduct, a circumstance, or a result if—
(i) such person is aware that such person is engaging in such conduct, that such circumstance
exists, or that such result is substantially certain to occur; or
(ii) such person has a firm belief that such circumstance exists or that such result is substantially
certain to occur.
(B) When knowledge of the existence of a particular circumstance is required for an offense, such
knowledge is established if a person is aware of a high probability of the existence of such
circumstance, unless the person actually believesthat such circumstance does not exist.
(3)(A) The term “routine governmental action” means only an action which is ordinarily and commonly
performed by a foreign official in—
(i) obtaining permits, licenses, or other official documents to qualify a person to do business in a
foreign country;
(ii) processing governmental papers, such as visas and workorders;
(iii) providing police protection, mail pick‐up and delivery, or scheduling inspections associated
with contract performance or inspections related to transit of goods across country;
(iv) providing phone service, power and water supply, loading and unloading cargo, or
protecting perishable products or commodities from deterioration; or
(v) actions of a similar nature.
(B) The term “routine governmental action” does not include any decision by a foreign official
whether, or on what terms, to award new business to or to continue business with a particular party,
or any action taken by a foreign official involved in the decision making process to encourage a decision to award new business to or continue business with a particular party.
Cross-Cultural Ethical Business Decision Making
Management in the global arena involves addressing unique and difficult issues of culture and morality. Although general ethical frameworks may help you to assess management decisions in a cross-cultural context, there are unique questions that arise in global settings. The resources below provide guidance for situations involving conflicting ethical norms and customs of different cultures within the business context.
How an organization addresses unique situations involving ethics and customs will impact its success in the global arena. The first subtopic examines the role of ethical theory in global business. The second subtopic examines the role of cultural theory in global business.
Resources
Ethical Theory in Global Business
· Global Business Ethics
· Corruption in International Business
· Major Ethical Perspectives
Cultural Theory in Global Business
· Introduction to Culture and Business
· What is Culture, Anyhow? Values, Customs, and Language
· Understanding How Culture Impacts Local Business Practice
· Ethical and Cross-Cultural Negotiations
· Cultural Diversity
Country Cultural Differences
In workplaces, as in communities and nations, people spending time together are likely to share certain values, attitudes, and beliefs. Because of this established culture, people at work may have developed certain preferences or orientations in the following situations:
· interacting and communicating with others
· working in teams
· making decisions
· responding to and evaluating risks and opportunities
· managing or attempting to resolve disagreements and conflicts
· interacting with those at different levels in the organization
· engaging in numerous other workplace activities
Those who have studied and compared societal cultures and their possible implications for the workplace have identified some differences that can be important for success.
Perhaps the leading expert on cultural differences and their potential implications for business is Geert Hofstede, a Dutch scholar who worked for IBM in the late 1960s. Hofstede’s early research (1980) examined, compared, and categorized the culturally derived preferences of IBM employees in many countries. He, and other scholars who have followed in his path, created a classification scheme that differentiates country cultures across what were originally four dimensions, though they have since been expanded to include six.
In what is probably his best-known book, Cultures and Organizations: Software of the Mind (published first in 1991 and revised and republished in 2010 with his son Gert Jan and Michael Minkov), Hofstede presents a careful explanation of his work and its implications. Hofstede reminds his readers that “culture is learned, not innate” (p.6), and introduces the analogy of culture as “software of the mind.”
Hofstede uses the layers of an onion to help convey the way culture manifests itself. Values are deep at the core or center of the onion and are very slow to change compared with the other manifestations of culture. Examples of common core values in US businesses include integrity, accountability, fairness, and excellence. Other layers of culture include our rituals (e.g., greeting with a firm handshake and direct eye contact), the heroes we honor (examples include Warren Buffett and Steve Jobs), and on the outside of the onion, the symbols that have special meaning for societal members.
Examples of U.S. Business Cultural Manifestations
Created by Christina Hannah
Using an analogy of culture as mental programming, Hofstede explains that we are each conditioned (or programmed) by multiple societal levels: national, regional, ethnic, religious, linguistic, gender-oriented, generational, socioeconomic, and professional. Values associated with these levels may or may not be in harmony. One consequence of these multiple sources of programming is that it can be difficult to predict what will influence a person’s response or behavior in particular situations.
Our present interest is not in delving deeply into the causes and consequences of individual differences in values, attitudes, and beliefs, but rather to learn about those shared at a societal level. Hofstede explains that his extensive research, and that of others who have studied culture, make it possible to differentiate between and among national cultures using a set of dimensions. He originally proposed the first four dimensions in the list below, then added a fifth—long-term orientation (Moskowitz, 2009)—and later added indulgence as a result of further research by and insights from collaborators.
Here is a simple explanation of Hofstede’s current six dimensions:
· Power distance (PDI)—In countries with a high power distance dimension score, we can expect those in lower level positions to respect or defer to those who outrank them. In other words, power is thought to come with position. In such cultures, employees may expect managers and leaders to make decisions and might be surprised or uncomfortable when asked for input. In countries with a low power distance score, we are likely to find that employees treat those they report to more as colleagues and hold the view that respect must be earned. There may, of course, be exceptions to this model (for example in military and paramilitary organizations). Not surprisingly, the United States’s score on this dimension is relatively low at 40. The score for France is is 69. In comparison, the scores for Malaysia, Slovakia, Guatemala, Panama, the Philippines, and Russia are all above 93 (Hofstede, Hofstede, & Minkov, 2010, pp. 57-58). This means that, in general, we can expect employees in the United States to expect a more egalitarian workplace than may be true in other societies.
· Individualism or collectivism (IDV)—In countries with high scores for individualism (like the United States), you are likely to find a shared belief in developing strong individuals who are comfortable working and making decisions on their own. In such workplaces, you will probably find an emphasis on the importance of developing, recognizing, and rewarding individual contributions. In countries that score low on the individualism dimension, you are likely to find an emphasis on the community, team, group, or department (i.e., the collective). People may be embarrassed if they are singled out publicly for praise or recognition, because they strongly believe their success depends upon the support and work of others. For this dimension, the US score is the highest, at 91. The score for France is 71. The country with the lowest score is Guatemala, with a score of 6 (Hofstede, Hofstede, & Minkov, 2010, pp. 95-97).
· Masculinity and femininity (MAS)—The label used for this dimension may not be the best. The basic idea is that some country cultures place a relatively high value on competitiveness, assertiveness, achievement, etc. Such countries are given a high score for masculinity because these preferences and traits were historically associated with men more than women. Other country cultures place greater value on caring for others, cooperation, quality of life, etc. Such countries are given a high score for femininity on this dimension. Despite the problems with these unfortunate gender-based labels, when you step back and compare countries you will probably recognize that there are some where businesses seem to value competition over cooperation, achievement and success over quality of life, and so on. Japan has a masculinity (MAS) score of 95. The US score is moderate at 62. The score for France is 43. Sweden has the lowest score for this dimension, with a 5 (Hofstede, Hofstede, & Minkov, 20110, pp. 141-143).
· Uncertainty avoidance (UAI)—This dimension recognizes that there are differences among countries, which results in differences among the leaders of businesses that operate therein and the extent to which they are willing to take risks. In countries that are low in the uncertainty avoidance dimension, business leaders might be very comfortable exploring new opportunities and see this as the likely path to success. In other countries, this may not be the case. Sometimes those in country cultures that are highly risk averse (with high uncertainty avoidance scores) have a very good reason for their responses. There may be, for example, significant legal penalties for failure, including the possibility of being sent to jail in the event of bankruptcy or reneging on debts. The country with the highest score for uncertainty avoidance (UAI) is Greece at 112. France is relatively high, with a score of 86, and the US score is 46, indicating a tolerance for uncertainty and acceptance of risk-taking to achieve success (Hofstede, Hofstede, & Minkov, 2010, pp. 192-194).
· Long-term versus short-term orientation (LTO)—In countries with a high long-term orientation score, shared work values emphasize learning, accountability, and self-discipline. Patience and waiting to make a profit are acceptable. Creating and nurturing lifelong networks is valued. In contrast, those favoring a shorter-term orientation tend to focus on “the bottom line” and value achievement, freedom, and independent thinking. Quarterly and annual profitability are important. Korea, Japan, and China have high long-term orientation scores (100, 88, and 87, respectively). France has a moderate score of 63. In contrast, the US LTO score is low, at 26 (Hofstede, Hofstede, & Minkov, 2010, pp. 255-257).
· Indulgence versus restraint (IVR)—In countries with high scores on indulgence, you are likely to find people who value having fun and enjoying life. In the United States, for example, it is common to find that employees emphasize the importance of a good work-life balance and quality of life. The IVR score for the United States is relatively high (68) and for France is moderate (48). Pakistan has the lowest score (0) among the countries studied. Territories with the highest indulgence scores are Venezuela (100), Mexico (97), and Puerto Rico (90) (Hofstede, Hofstede, & Minkov, 2010, pp. 282 – 285).
A very important caveat when reading and thinking about Hofstede’s work is to remember that the comparisons are at the societal level, rather than the individual level. In other words, in any country you will find individuals who are different from what you see suggested as the norm for the country culture. In fact, for any given dimension you may find yourself thinking “but this isn’t what I’m like” or “this doesn’t explain what happens in my organization.” Those who have studied and compared country cultures ask you to suspend these responses temporarily and to try instead to look at a country as a whole, and then consider how it compares on these dimensions with other countries. When you adjust your imaginary lens to consider cultural differences from a broader perspective, you are able to discover things that may be helpful when explaining what happens when companies do business abroad, when people work together on country teams, and when they work together in multicultural, multinational organizations.
One challenge is that we are often less knowledgeable about our own shared country culture than we are about the cultures of others (Hofstede, 1980). This is because our culturally derived values and preferences are so deeply embedded that we may not be aware of how they influence our decisions and behaviors. Those who have worked or studied in a country other than their own are likely to have developed higher levels of cultural intelligence than those who have not had this experience.
The United States has traditionally tended to place strong emphasis on equality, individualism, risk-taking, assertiveness, achievement, and the opportunity to enjoy life (pursuit of happiness).
This brief introduction to the comparative work on country cultures and their potential consequences for individuals and their organizations, along with the Resources below, should help you understand the possible sources of confusion or conflict that could, if not anticipated and well-managed, result when multinational and multicultural team members work together. These issues may include training, coaching, mentoring, and effective leadership. Remember to consider as well the possible advantages associated with building and using teams with members who bring different country cultural perspectives to their work (Chakrabarti, Gupta-Mukherjee, & Jayaraman, 2009).
References
Chakrabarti, R., Gupta-Mukherjee, S., & Jayaraman, N. (2009). Mars-Venus marriages: Culture and cross-border M&A. Journal Of International Business Studies, 40(2), 216-236 http://ezproxy.umgc.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=36587323&site=eds-live&scope=site
Hofstede, G., Hofstede, G.J., & Minkov, M. (2010). Cultures and Organizations: Software of the Mind (3rd. ed.). New York: McGraw Hill.
Hofstede, G. (1980). Motivation, leadership, and organization: Do American theories apply abroad?. Organizational Dynamics,9(1), 42-63. Retrieved from http://ezproxy.umgc.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=pbh&AN=5143098&site=ehost-live&scope=site
Resources
Hofstede shares some of his insights in An Interview with Geert Hofstede, while Hofstede’s Five Dimensions of Culture covers similar points addressed above. You might also want to read Does Culture Matter? Refresher on Hofstede, Trompenaars, and Gesteland.
Although Hofstede is probably the most frequently cited theorist, there are substantial criticisms of his work such as Mirror, mirror on the wall: Culture’s consequences in a value test of its own design. Hofstede responds to criticism in Who is the fairest of them all? Galit Ailon’s mirror?
There are also alternative models to Hofstede’s; the GLOBE project is one such alternative, explained in GLOBE: A twenty year journey into the intriguing world of culture and leadership.
Cultural Intelligence explains a model for understanding how well individuals might perform in cross-cultural settings. Examples of effective methods of success for cross-cultural teams are covered in Teams, Cross-Cultural.
