26. What is the “Foreign Corrupt Practices Act” (FCPA) and how does it affect corporate governance?
The Foreign Corrupt Practices Act (FCPA) places limitations on the ability of the corporation to pay incentives or bribes to foreign governments and corporate officials to secure business advantages.The regulations place specific requirements on corporate accounting departments to account for foreign payments and on corporate directors and managers to adequately disclose those payments to regulators and shareholders. Failure to do so may result in criminal and civil penalties.
• Discussion: How do you think the FCPA affects decision making and actions by officers and directors of corporations seeking to do business internationally?
• Practice Question: What are the primary corporate governance issues implicated by the Foreign Corrupt Practices Act?