Analysis Of Kwok And Tadesse 's Regulatory Pressure Effect

In today’s ever changing and competitive modern world of business, it is critical for the companies to have activities internationally. In order to prohibit frauds and illegal activities, several acts and documents have been elaborated. One of the documents is Foreign Corrupt Practices Act that has been enacted in the 1970’s, as a result of SEC investigation of several U.S. companies that made illegal payments to foreign governmental officials, politicians, and political parties (Barnes 73). The FCPA had a critical impact on the way U.S. firms do business. Companies that did not comply with FCPA have been subject of criminal and civil enforcement actions that later resulted in huge fines and sentences for

When the U.S. stood completely alone in its legislative quest to curtail foreign bribery, the catastrophic scenario did not materialize. “As the Government Accountability Office (GAO) noted four years after the implementation of the FCPA in a study called the Impact of the Foreign Corrupt Practices Act on U.S. Business; claims that U.S. companies have lost sales…are difficult, if not impossible, to substantiate and quantify” (Graham, 1984).   Further, a paper published in the Journal of International Business used published data to test the competitive disadvantage theory and found that “the FCPA had not negatively affected the competitive position of American industry in the world marketplace” (Graham, 1984).   Even then, when the American industry was the only one worldwide facing these kinds of restrictions, anti-bribery laws did not negatively impact their export performance or market share.

This case portrays the widely propagated and accepted phenomena of bribes and corruption in developing countries. Specifically how it affects every sector of the Ukrainian society, therefore making it difficult for the American investors to establish companies there and to prosper solely on doing good business. The case describes the types of obstacles and ethical dilemmas being created for the investors as a result of bribery and extortion.

OECD published Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and Related Documents to prevent bribery and corruption. The aim of this convention was making the bribery of a foreign public official a crime under their laws (International Monetary Fund, OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, 2001). This document recommends to member countries that:

The impact the Foreign Corrupt Practices Act had on society was pleasant since it restored buyer confidence in the United States and restored the integrity of the United States market by implementing honesty in transactions. Yet it imposed too many disadvantages for the economy and corporations. The Foreign Corrupt Practices Act focuses on large fraudulent payments made by a business, therefore anyone involved in the financial, accounting, and executive department are impacted the most. Other major stakeholders affected include the board of directors, shareholders, employees, government officials involved, and foreign officials or foreign companies involved. Everyone is affected because the codes of conduct, and the companies’ values needed

On one hand, it is obviously unethical to break the law and bribe but more importantly from a utilitarian perspective, this action will hurt the greater good or “stakeholders” who are the whole society. Bribing corrupt authorities will only perpetuate the corruption in those countries and once a company or individual has gone down that road it is very difficult to return. Bribery also encourages unfair competition that hurts the economy which eventually affects the whole

India’s domestic business has seen high levels of corruption; more commonly the fraudulent behaviours and bribery of government officials and civil servants. This creates an unlevel playing field between domestic business and foreign business. Evidently this seemingly small issue of corruption could potentially tarnish India’s position as favoured destination of foreign investment (Mendiolaza, 2012).

The United States Department of Justice and the Securities and Exchange Commission rarely enforced the Foreign Corrupt Practices Act, enacted in 1977, until 2010— over a decade since its modern reform in 1998. This surge in penalization of unethical acts such as bribery and other methods used to ensure foreign business ventures has been called a “new era of FCPA enforcement” by the DOJ, resulting in $1.8 billion in payments accrued from domestic firms and their foreign partners, compared to $300,000 in 2000 (Kohler). Because of ambiguity within the legislation, especially the undefined terms “foreign official” and “obtain or retain business,” the U.S. government is able to manipulate the FCPA for monetary gain, as well as shape foreign economies based upon their own values.

It would be convenient to start this research paper by stating that corruption is a challenge mainly for businesses in developing countries and that it is unrelated to the current affliction of the economy in the United States. It would also be convenient to claim corruption has declined in America as a result of awareness raising campaigns and the numerous anti-corruption laws. But none of those aforementioned statements would be true. Corruption is not the exception, but rather the rule in today’s business practices. In 2004, Daniel Kaufmann, a senior fellow at Brookings Institution and former director at the World Bank, calculated an index of "legally corrupt" manifestations which is defined as the extent of undue influence

This suggests that a different management ought to be applied because the likeliness of cultural/ethical issues is very high. In addition, many researchers (Nwabuzor, 2005; Olaya, 2006 cited in Baughn et a.l, 2009) indicate that bribery is more apparent in developing economies, such as Senegal, where legal system has not been fully established, leaving gaps for illegal activity. Moreover, low-income societies are more likely to perceive bribery as “a necessary means of supplementing low income” (Baughn et al., 2009, p. 16). Unlike the US, Senegal scores very low in the IDV variable, suggesting that they are a highly collectivistic society. Hofested (1999) emphasises that high power distance societies often present a paternalistic approach, in which loyalty and favours are perceived as a norm. Moreover, a paternalistic approach is correlated with collectivistic societies, in which the power of group and a group’s interest is more important that written laws. Hence, individuals will make decisions that will not necessarily be socially acceptable but will benefit the group (cited in Baughn et al., 2009).

Since the phenomenon of globalization, companies that decided to broaden their horizons have to face multiple challenges and their management functions need some adaptations. While going abroad, companies may become concerned with the subject of corruption that makes the business with foreign countries even more complicated. Even if there is a willingness to fight and reduce the corruption across the world, companies must be aware that this subject exists and must take it into account while dealing with foreign companies, their efforts to understand and adapt to local corruption influencing their success of

Corruption is a complex political, social, and economic anomaly that negatively affects developing and developed countries. It weakens democratic institutions, holds economic development, widening the rich-poor gap and certainly leads to governmental instability. The World Bank definition of corruption states that “…the abuse of public office for private gain”.

Paying bribes to the right officials can provide deprived groups access to political markets hence improving their ability to participate in governance. As argued by Leff (1964:8) and the other scholars (e.g. Byley: 1966), corruption can be utilized to enhance the potential of entrepreneurs to gain access to government regulators and participate fully and effectively in public policy formulation and implementation.

To further study the anti-corruption mechanisms in the country, we will look into the legal as well as institutional frameworks:

The Republic of the Philippines suffers from widespread corruption (Jurado, 2010). This involves different forms of dishonesty such as graft, bribery, embezzlement, backdoor deals, and patronage. According to Iskyan (2013), even though the current Aquino Administration continues to exert effort in dealing with this, challenges such as inadequate infrastructure, corruption and inefficient budgetary procedures are still present. Based on the report of the US Department of State Investment Climate Statement (2013), corruption exists in almost all levels of the government, especially among high-level civil servants. As an effect, companies generally have little confidence in the Philippine government. Its people are also hesitant to pay their