Role of Government Policy in Curbing Bribery in Global Economy
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Government policy is a term often used to describe a course of action that is intended to help in changing a given situation. Policies play a critical role as starting points for any governments to taking course of actions that makes real life changes. These laws can be used to help in tackling wide range of policies including parking fines, taxing, environmental problems, corruption, money laundering, and corruption among other contentious ethical issues. Creation of new governmental policies leads to change of laws that may affect specific groups or even everyone in the society. Government policies can be influenced by various ways which include: political parties, individual politicians community groups, public consultations, media, voluntary organizations, public opinions as well as lobbying of decision makers. The process of policy making changes ideas into action.
Demise of the small scale face to face and high trust enterprise prompted the emergence of huge multi corporate structures that are capable of fostering drastic changes I the very days lives of the masses. This is attributed to the fact that it’s the managers and the CEOs that get paid to ensure that they deliver quality service through making of decisions as well as their implementation. The issues of business ethics started to exist way long when owners of various business commenced to hire its professional workers for money in particular are the professional workers who are tasked with the running of the business. They are the ones who put a lot of their efforts in terms time to yield benefits to the company while at same time getting remunerations which is based on their levels of performance.
The theory of firm states that problems arise whenever owners and the manager’s incentives vary or when managers are in a position to procrastinate. The business ethics is greatly affected by bribes and inside trading. Corruption, bribes as well as money laundering form one the most critical problems at macro level leading to financial institution to fail thus becoming unable to handle growing foreign debt. Also the business investors are subjected to dealing with stringent limitations pertaining to Foreign Corrupt Act which stipulates the possibility of fining or imprisonment of anyone who employs corrupt practices to obtain or advancement business with foreign governments. United States enforces FCPA on global scale but most countries tend to ignore corruption that most American companies are expected to avoid. In fact, some countries offer a quasi-endorsement by allowing bribes to be tax deductions. The World Bank broadly defines corruption as an abuse of public office for personal gain.
In general terms corruption is described as an activity that demonstrates bending of rules and entails favoritism whether to gain a simple confirmation of personal benefits including friend or family member or even making of immediate financial payments or gain. Basically corruption and taking of bribes comprise of deviating from normal rules resulting to individuals to take advantage of some opportunists that others are shut out.
Corruption is considered as a worldwide problem that it has in the past been very difficult to curb. The vice afflicts both economies of industrialized countries as well as the developing economies, government controlled economies, states with democratic regimes, states in transition to democracy, states with authorization regimes as well as the market economies. In the past, corruption was considered as a disease of developing economies but scandals in countries like Japan, South Korea and Europe has altered the perception. Corruptions yield huge benefits to the participant’s thus corrupt officials amass vast wealth through taking of bribes through dishonest avenues.
Also corrupt companies win orders through payment of bribes thus acts a an easy opportunity for the participating companies to beats its competitors who have lower costs or better technology. Cost of bribes amounts to selling prices especially in countries that treat the vice as tax deductible expenses. Chances of getting caught engaging in corruption has been generally especially considering the fact that in most case bribes get channeled through middle men. It has also been very difficult to fight corruption as most governments whose officials take bribes rarely prosecute those who pay such bribes. In addition to that some countries who host bribe paying companies disregard what their own companies do in foreign countries especially those with secrecy laws or those with ill equipped legal systems to help in combating the vice.
One of the ways that can help in curbing of corruption by the business community is through the accounting, auditing and disclosure requirements. Given the fact that bribery is conducted in secrecy the rules of accounting can play a critical role in curbing the vice. For instance under the United states law, failure by any business enterprise to maintain proper records as well as control can serve as a basis for prosecution.
International Chamber of Commerce rules stipulates that each an every financial transaction should be recoded properly and should prohibit secret accounts and this has been boosted by the mounting pressure from the cooperate governance groups to allow for independent auditing which serve to improving public disclosure. Financial recording as well as reporting requirements by organizations play a critical role in curbing cases of corruption as it affects the equation of corruption on the supply side by causing the corporate auditors and accountants to exercise greater organization discipline while at same time making prosecutions to be much easier through provision of accounting tracks
The government procurement policies also play a significant role when it pertains to curbing of corruption in the global economy. This is attained through the existence of reciprocal relationship between government procurement policies and the codes of conduct as use of compliance programs and the corporate codes serve to reduce cases of corruption consequently resulting in acquisition of better products and services as well as cost savings. Government procurement agencies increase the opportunities of reducing corruption through its compliance programs by ensuring that they are used as one of the condition for bidding.
An idea proposed by the former president of the World Bank McNamara suggested the use of ‘anti-bribery pacts’ which each bidder has to play by with no rewards and serious risks for those who pay bribes. Some of the elements included in this pact entail the following: establishment of monitoring procedures with sanctions that include debarment, only companies that have signed the anti bribery pact to be allowed to bid, commitment by bidders to avoid paying of bribes while at same time adopting compliance programs that cover both their agents and employees and finally procurement agencies to commit themselves to transparent procurement procedures and adopt strict measures that serve in preventing extortion by governmental officials.
Tax deductibility means that foreign bribes are taken as legitimate business thus meaning that that bribery is subsidized by the government. It therefore means that then end of bribes deductibility begins the internal constraints whereby the company’s financial officer is the one tasked with signing of the corporate tax returns where by false return serve to expose the company and the company financial officer to liabilities or the tax fraud. This therefore means that the financial people the company must therefore differentiate between the company’s proper business and bribes. This is exemplified by the fact that company’s financial people must therefore scrutinize the payments that are made to foreign sale representatives to help in determining of the legitimacy of the company’s business expenses.
It is then fundamental that governmental policy pertaining to the tax treatment of bribes have a very significant effect when it comes to corporate conduct as the issues of deductibility serve to encourage bribery and opposite is true that non deductibility helps in discouraging cases of bribery. It’s then very crucial that national government’s implements the laws regarding denial of bribes that are paid to foreign public officials .
In response to increasing cases of bribery scandals in the global economy in early 1990’s prompted the international chamber of commerce established a committee that was tasked to conducting a review of the initial report and make recommendations which were later adopted but the international chamber of commerce in 1996. The contribution ICC to curbing is evident by its recommendations which among them calls for transparent government procurement procedures that must include disclosure of payments made to the agents. It further suggests that contracts must avail undertakings that will help in making organizations to refrain from bribery activities through strict adherence to corporate codes that bar bribery. More over, governments should be able to regulate prevailing conditions that allows making of political legislations such that it facilitates public recording of payments by the payers while at same time being accounted for by the recipients.
The ICC rules of conduct reading global economy prohibits bribery and extortion for any purpose including all payments made in connection activities entailing obtaining as well as retention of business. These rules of conduct therefore means that corruption in proceedings of the judiciary regarding environmental matters, tax matters among others are fully covered. The rules prohibits bribery in business activities including kick backs, consulting and subcontracts agreements that are used to channel payments to the government officials, business associates and even the officials’ relatives. Provisions have been devised such that it provides limited payments made to agents only for legitimate services. This restriction on the compensation made to agents is very significant in curbing bribery cases because agents receive large payments which can act as an avenue to channel bribes to officials.
In addition to the ICC provisions of the stipulated rules is approves of the use of ‘off the books’ as well as the secret accounts by businesses encouraging for establishment of independent auditing system that plays a critical role in exposing transactions that contravenes the stated rules of conduct. These rule also ensures that governments maintains appropriate system of control, conducts periods reviews of compliance while also taking proper actions against those who contravenes the set rules. These rules also help in curbing bribery by specifying political contributions to be made in accordance to the applicable law that mandates that all the essential requirements of public disclosure are adhered to the latter and that all political contributions are reported to senor corporate management.
The standing committee established by ICC ensures a widespread promotion of the rules of conduct thus serving to stimulating cooperation between world businesses and the involved governments. The committee also works in collaboration with national governments in encouraging companies to adopt the rules of conduct and it serves as information clearing house through conducting of seminars. It therefore works with national chatters and national governments in enacting and strengthening of legislation that combats bribery and extortion.
Bribery in global economy especially foreign bribery has been found to contradicts the best interests of the corporation thus plays an important role in insinuation of the company’s moral environment and this is regardless of whether bribery is considered illegal in host countries or not. Bribe is therefore a kept secret prompting use of subterfuges like ’slush funds’ or off the books as well as masking of book entries to limit exposure. This implies that to curb corruption there must be a corporate interest at all levels of its operations as bribery needs deception and moral compromise regarding those involved in corporate decision making process, amount of information shared ot top officials, corporate lawyers, accountants as well as the external auditors. The fact that the normal corporate controls are by passed its likely that abuse occurs pertaining to diversion of funds my company employees or even the middlemen.
More over in addition to the risk that are including in certain tractions, there exists the unpleasant aftereffects to the company including threats and blackmail. In recent past, there has been an increased publication of bribery scandals thus increasing chances of being caught engaging in the epidemic vice. Therefore this has made it possible for corporate political as well as corporate leaders who previously seemed above the law to be exposed prompting their resignations. This has served to justify that engaging in corrupt activities doesn’t pay any longer consequently behooving all the responsible companies to adopting as well as enforce codes of conduct that prohibits bribery and corruption.
Bribery in global economy can also be prevented by ensuring that a synergy between corporate codes and the government programs exist. This is attributed the fact that corporate codes serve to reinforcing the govern programs targeted at bribery while at same time the governmental governance helps the effectiveness of the corporate codes. Some of the relevant programs that help in curbing bribery in corporations include measures that end tax deductibility of bribes, procurement reforms as well as criminalization of bribery of the foreign officials. In addition to that measures taken by the media, international financing institutions and the accounting reforms goes a long way to ensuring that bribery in global economy is maintained.
Existence of criminal laws against corruption and bribery of foreign officials is one of the most effective government policies that curbs bribery. For instance in United States, as a result of enactment of FCPA, there is a widespread adoption of the corporate codes of conducts that prohibits bribery. The corporate compliance programs have then had multiple effects on the criminal law enforcement and this evident as employees from justice department who are involved in enforcement of FCPA has laws scores of financial and corporate lawyers also working on such compliance programs. This has therefore made those entire familiar with compliance programs to be wary of the threats of the criminal penalties involved and this has made even the most cynical managers to be very concerned of their exposure to possible prison terms and larger fines. Existence of criminal sanctions protects those who are tasked with protecting the organizations from taking of unreasonable risks.
Finally the synergy of the corporate compliance programs withes of the government enforces is also enhanced by the justice department that give sentencing guidelines which provides a lenient handling of company’s’ that are engaged in condition of proper compliance programs. This has therefore helped a great deal in curbing bribery as it provides strong incentives to help companies in establishment of compliance programs which are very significant.
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