The International Business Community and Evolving Norms regarding Foreign Bribery

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1 The International Business Community and Evolving Norms regarding Foreign Bribery Melanie Reed PhD candidate PhD seminar on Companies and Markets University of Oslo Faculty of Law 13 October 2016

2 Research Question How/why do MNEs help enlarge the foreign bribery regime? (Consciously or subconsciously)

3 What is foreign bribery?.intentionally to offer, promise or give any undue pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official, for that official or for a third party, in order that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain business or other improper advantage in the conduct of international business (OECD 1997) ü Payment of something of value ü To a foreign government official ü Directly or indirectly ü In connection with international business

4 Regimes and Normative Change Regimes are implicit or explicit principles, norms, rules, and decision-making procedures around which actors expectations converge in a given area of international relations (Krasner 1982) Regimes institutionalize both the normative and procedural expectations that states hold concerning collective behavior in a given issue area (Ruggie 1983) Norm = standard of appropriate behavior for actors with a given identity (Finnemore and Sikkink 1998) Emergence Cascade Internalization

5 2 Subquestions How did the business community help move foreign bribery from the US domestic to the international level? Strategy: Historical research Interviews with individuals involved in OECD Convention negotiations Desk research (historical documents) What is the business community doing now to continue moving the foreign bribery regime forward? Strategy: Review 2 countries that have successfully prosecuted a corporation for foreign bribery Interviews with companies in these countries Interviews with government officials, private attorneys/consultants, civil society, academics

6 A short history of the foreign bribery regime Cold War ends WB cancer of corruption speech TI set up European scandals E. Asia crisis EITI UNCAC 2009: TSKJ 2008: Siemens FCPA 12 US cases (starting 1982) FCPA amendments 25 US cases OECD Convention enters into force 212 US cases 333 individuals and 111 entities criminally sanctioned in 16/41 WGB states, 390 ongoing investigations

7 The current role of business in the foreign bribery regime Influence on businesses Corporate compliance programs Pressure on business partners, suppliers, customers (e.g., through due diligence, certification requirements) Industry initiatives Influence on governments Engagement with home government Engagement with communities/governments abroad Market withdrawal or failure to enter (indirect influence abroad)

8 Argument: 3 waves of business support to A/C regime Late Movers First Movers 1. US ties and 2. Resource capacity Midterm Movers 1. Industry enforcement risk and 2. Resource capacity 1. Business relationship w/larger firm concerned about bribery or 2. Business relationship w/gov t agency concerned about bribery Last Movers: Will not move until forced to do so (may even fight against)

9 The OECD Convention: Criminal Enforcement (only 17/41 countries) Source: OECD WGB enforcement data, 2015 Country Individuals Legal persons Belgium 4 2 Bulgaria 1 -- Canada 1 3 France 7 -- Germany 40 (+164) 11 Hungary Italy 9 4 Japan 7 1 Korea 16 4 Luxembourg 2 -- Netherlands -- 2 Norway 2 (+3) 3 Poland 1 -- Sweden 2 -- Switzerland 2 (+3) 1 (+1) UK 8 2 US 57 (+1) 35 (+57)

10 Characteristics of European Enforcers Country Perceived Corruption (rank out of 175) Adherence to Rule of Law (%) Belief that Most People Can Be Trusted Belgium Not available Germany Italy Norway Switzerland UK Sources: Transparency International Corruption Perceptions Index, 2014; Worldwide Governance Indicators, 2012; World Values Survey,

11 Timeline: Adoption of anti-bribery measures Norway updates law 2003: Statoil Norway 2001: Leg. Dec : Enel 2004: Eni Italy 1999: Convention ratification US uptick World 2009: TSKJ 2008: Siemens

12 Preliminary observations about business and the foreign bribery regime Large firms react to enforcement (or threat thereof) They then pressure other businesses in order to protect selves No significant difference between US/other companies (Siemens, Statoil, Eni) Legal changes also matter, if followed by enforcement (LD 231/2001 in Italy) Firm-to-firm pressures are key to SMEs Requesting/requiring A/C measures Helping overcome lack of resources (models, direct assistance) Some continued adherence to corporate culture idea Firm-to-government pressures not as prevalent as hoped (yet) 2 examples: Civil society work, industry pressure Lingering questions The role of individuals? (education/past work experience) Genuineness of A/C rhetoric? Underlying country norms and values?