Cultural Barriers to Effective Enforcement of the Foreign Corrupt Practices in China

Abstract

Many multinational companies (MNCs) doing business in China find that issues of corruption in business are common and dangerous problems. Such problems can expose MNCs to liability under the U.S. Foreign Corrupt Practices Act (FCPA) with all of its attendant serious consequences. MNCs need to realize that certain cultural elements -- respect for authority and a gift giving tradition -- create special pressures on their local employees to submit to requests for cash and non-cash benefits from government officials. It is not enough for MNCs to acknowledge that there may be cultural issues, but it is necessary for MNCs to understand, in detail, the common scenarios in which these cultural elements create social pressures on their employees to comply with requests from Chinese officials for payments. Only by understanding these common scenarios and implementing guidelines on how to respond in these specific situations, can the MNC implement an FCPA compliance program designed to effectively address these problems.

Keywords: Multinational Companies, Corruption, Bribes, Government Officials

JEL Classification: K14, K20, K33