The issue of Chinese corruption has been making headlines again lately. According to Transparency International, China is seen as a moderately corrupt country compared with the likes of places like Afganistan and Paraguay. But corruption is still an issue for Westerners wanting to enter the Chinese market. Steve Barru of China Business Hand recently wrote about Xi Jinping’s Anti-Corruption Drive and that while China’s leadership will likely continue to round up various corrupt officials, corruption won’t really change since this campaign doesn’t address the root causes of the issue, including the lack of checks and balances. Steve also shared insights from his 25 years living in China about the Culture of Corruption in China. It is vital that international business professionals in all disciplines understand the complexities of corruption issues and in particular, how to handle bribe requests.
Like many American entrepreneurs, I find the U.S. Foreign Corrupt Practices Act overly stringent. I feel like my own government does not trust me to be honest and ethical. It leaves no room for cultural traditions of gift exchange in business relationships. Most cultures do not appreciate the American government judging business traditions dating back before the United States became a sovereign country. Michael Black recently wrote a blog post about Gifts, Guanxi and Corruption in China that’s definitely worth reading on this subject. Given the severe penalties, it is vital to know the FCPA and understand how to avoid any violations. Here’s what I recommend:
Expect to Hear Bribe Requests in Their Many Forms
Bribe requests come in many forms and at various points in the relationship. Oftentimes a bribe is asked for during initial negotiations. It is done normally in one-on-one conversations. It is often delivered as a strong suggestion instead of a direct request. The request could be for money or for a special favor like admissions to a prestigious school for a son or daughter. It can also come at a key point of a working relationship to help expedite a certain action. Government officials are often the most common bribe requesters, promising either a faster process, a permit, etc. or plenty of red tape if the bribe is refused. Do not be caught off guard by a request without having time to counteract. The risk is accepting the bribe request without thinking or else rejecting the bribe outright and derailing a key relationship. You can buy time with “I will consider what you ask”.
Do Not Delegate Bribing to In-Country Partners
This used to be the preferred way around direct bribing by American companies. A special “consulting fee” would be given to the local partner to carry out bribes on behalf of the American company. The American government now tracks these types of payments very closely and if caught, the American managers will serve time in prison. It’s not worth the risk.
Here’s a Way to Turn Bribing into a Legitimate Opportunity
American companies and others following stricter corruption laws are at a disadvantage in a sales process when others bribe without great risks. To successfully compete takes some creativity. Is there anything that your company can legitimately give to sweeten the deal without significant cost to your company? For instance, there may be previously developed online product training modules that you normally charge for. Could it be given away to counterbalance the bribe? Could your company donate children’s playground equipment at a nearby school in honor of your business relationship with the local Chinese government? Look for high-value/low-cost giveaways and goodwill-building opportunities that keep you free and clear of any FCPA violations. Keep in mind that the rest of the world understands American businesses’ restrictions and this may be a test to see what you will offer in lieu of the bribe.