by CIO Staff

Bribes and Payoffs: Repression, Censorship and Corruption are Facts of Life in China

Oct 15, 20052 mins

Repression, censorship and corruption are facts of life in China; for Americans doing business there, this can come as something of a shock.

Chinese officials, for instance, may expect money—or, at the very least, noncash favors—to make things happen. Yet U.S. citizens can be severely penalized for offering bribes. The Foreign Corrupt Practices Act (FCPA) calls for corporate fines of up to $2 million and up to five years in jail for individuals who make a corrupt payment directly or through a third party to a foreign official to get or keep business. And the feds are getting tougher. According to Shearman & Sterling, an international law firm, in 2002 there were seven reported investigations for potential FCPA violations by the Department of Justice or the Securities and Exchange Commission. In 2004, there were 18 new investigations.

While the U.S. law is tougher than those in other industrialized countries, Oded Shenkar, professor of management and human resources at Ohio State’s Fisher College of Business, says it contains a loophole big enough to drive a truck through. According to the Department of Justice, bribes are, in fact, legal in order to facilitate or expedite performance of a “routine governmental action,” such as obtaining permits and licenses, moving goods through customs, arranging for police protection, ensuring the pickup and delivery of mail, getting your phones hooked up, electricity turned on and water supplied, and loading and unloading cargo.

Even so, U.S. prosecutors seem to be more willing to go after miscreants. “I don’t see European countries prosecuting people under their new [antibribery] laws,” Shenkar says. “If everybody else is paying, but you aren’t, what’s the probability you’ll get the bid?”

All of which leaves American executives in a bit of fix. Shenkar advises CIOs doing business in China to read up on the laws in the United States and abroad pertaining to bribery and work hard at building trusting relationships with local Chinese companies. –C.K.