The ban on any US company from paying bribes to foreign officials is enacted thr
ID: 442732 • Letter: T
Question
The ban on any US company from paying bribes to foreign officials is enacted through Foreign Corrupt Practices Act in 1977. The reasons for enactment of this law were
No record of these payments made by companies in the books and the shareholders have a right to know how company funds are being used
Use of offshore corporate subsidiary as a cover for cash fund which may be diverted back to onshore for domestic bribing
Will impact foreign relations once these countries come to know if the policy is driven with the help of illegal kickbacks provided by American corporations
It was the period when Watergate scandal hit the country. This led to lawmakers to discuss these practices and ensure that United States lead the way in establishing best practices in dealing with foreign governments.
In 1997, after years of lobbying by the United States, the world's 29 industrialized countries formally agreed to a treaty that would outlaw the practice of bribing foreign government officials. This treaty was signed in Frankfurt by countries belonging to Organization for Economic Cooperation and Development
US companies can follow these ethical practices to reduce bribery in foreign countries
Inform the US embassy if they are facing issues in doing business with particular agency or official. Embassy can resolve this issue diplomatically
If the payment is legal, it needs to be written down in book and take the approval of Board and investors
Legal payments can be made through US Foreign Assistance program if it exists for that country
Take the above knowledge and apply it to a small business. Assume the role of a small business owner in a town with numerous small businesses of all kinds. How would you be able to take the global idea and scale it down to fit your needs?
Explanation / Answer
Given Information :
Facts of the case:
1 ) Ban on any US company :
From paying bribes to foreign officials is enacted through Foreign Corrupt Practices Act in 1977.
Following were the reasons for enactment of this law :
a ) No record of these payments made by companies in the books
b) Shareholders have a right to know how company funds are being used
c) Use of offshore corporate subsidiary as a cover for cash fund which may be diverted back to onshore for domestic bribing
d ) This impact on foreign relations once these countries come to know if the policy is driven with the help of illegal kickbacks provided by American corporations
This issue was started with : Watergate scandal
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See in above case this law is specially designed for the companies who are doing a business at international level.What happens when the companies are doing a International business at various location.That company has financial consequences to respective location.In reality if any financial transactions takes place as a bribe that are not taken into account at a international level.& Thats a fraud.This law resist to that.
Here questions is being asked to apply this law to small scale sector.
But in small scale sector the international association or operations are very less.So we can not apply this law directly to small business.Here what we can do is we can amend the law as for small scale .That law will regulate all the financial matters of small scale companies.That will have scope of only domestic boundaries.If requires international association can be considered.
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