KPMG International in a survey report in late 2015 identified the three major corruption concerns that 89% of multinational company executives agreed keep them up at night:
- Variations in Anti-Bribery and Corruption (ABC) laws across different emerging market countries have made it difficult to tailor compliance training;
- Among their workers, there is still a low level of ABC requirements;
- There is a need for more and better training and communication, which is tough as oil and gas companies, in particular, are seeing their revenues halved or worse.
But in my view the biggest concern is how the executives highlighted the risks posed by third-party workers. Some 80% of the executives said that too few of these workers had received even rudimentary compliance training, and yet the U.S. Foreign Corrupt Practices Act (FCPA) holds parent energy companies responsible for their actions. They said it’s tough enough to train their own in-country workers, but to be responsible for third-party workers is nearly impossible. More than “one-third of the respondents do not formally identify high-risk third parties.”
The executives said bribery and corruption were most apparent in a countries’ seaports, border crossings, and airports, where their freight forwarders and shipping agents face customs officers who demand money to release their cargo in a timely manner. For the third-party workers, oblivious to the FCPA, it’s nothing out of the ordinary — simply the price of doing business.
This is how the FCPA makes it difficult for U.S. companies to compete, especially in Africa. Chinese, Russian, Turkish, and Indian investors, who have no such ABC restrictions or little threat of prosecution, can resort to corruption to win contracts. I recall in Guinea during the brief reign of Captain Dadis, there were rumors that the then-Chinese Ambassador had actually begun working out of the Ministry of Mines offices. Fortunately, the incoming president turned around the most egregious deals, but nevertheless, it was impossible for a U.S. firm to do business during the lawless days of Dadis and his coup makers.
Most American businessmen and women don’t want to resort to corrupt acts to get a leg up on a deal. In fact, the majority of Americans simply want the playing field to be level; that is, where a deal is struck by the quality of your skills, service, and equipment, not by the amount of cash you pass under the table. Today, as foreign investors grease the palms of corrupt local officials, the FCPA threat keeps U.S. investors and executives blocked from the competition. So, at least in many parts of Africa, the playing fields remain off balance, U.S. firms lose out on contracts or just don’t compete.
KPMG International surveyed 659 expatriate executives around the world, of which 54 were working for energy companies.