Introduction
There’s no doubt that corruption, endemic in emerging economies around the world, throws economic development into chaos. It affects decisions made by bureaucrats, degrades the quality of those in power, and discourages foreign investment. It’s also an increasingly hot business topic, with a growing number of influential business and political leaders from around the globe regularly pinpointing corruption as one of the greatest threats to global economic development. “Corruption and bribery have moved to the forefront in discussions about business,” says Wharton legal studies Professor Philip M. Nichols. “The list of countries that have been politically or economically crippled by corruption continues to grow, and businesses with long-term interests abroad will ultimately be harmed by any plans that include bribery.”
Background
When your company is charged with corruption in China, you have to worry about not only bad publicity but also running afoul of America’s Foreign Corruption Practices Act and a Chinese government that is increasingly clamping down on the corrupt activities of foreigners. How big a problem is corruption in China? It’s serious. Corruption is on the rise in China, where the country’s press frequently has detailed cases of corruption and of campaigns to crack down on it.
The articles primarily have focused on domestic economic crimes among Chinese citizens, and on local officials who have been fired or assessed other penalties. Indeed, China has been rated by Transparency International as number 79 of the 180 countries the German organization rates on its “Corruption Perception Index.” New Zealand is rated the least corrupt at number 1, the United States at 19, and Somalia the most corrupt at number 180. Corruption’s long arm now is reaching out to touch China’s foreign business community. Traders, trade consultants, and analysts have said that foreign firms are vulnerable to a variety of corrupt practices. Although some of...