When conducting business in the developing world, multinational corporations sometimes play by local rules.
Often, that means spreading out gifts and payments to local officials in order to secure big contracts. Case in point: Today, the Securities and Exchange Commission announced that Norwegian oil firm Statoil, which is listed on the New York Stock Exchange, had agreed to pay $21 million to settle allegations that a company bribed an Iranian government official.
That may seem like spare change for a company that had $58 billion in revenues last year. It was one of the largest fines ever for violations of the Foreign Corrupt Practices Act, which was passed in 1977 but has recently seen unprecedented levels of enforcement.
- Slideshow: Companies That Have Been Fined For Foreign Bribery
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In one high-profile case, defense firm Titan, which has since been acquired by L-3 Communications, plead guilty to paying $3.5 million to government officials in Benin. In 2005, the company agreed to pay more than $28 million in fines and disgorged profits.
But the U.S. is still largely alone in its fight against foreign bribery. Until recently, some developed countries, including Germany, actually allowed their companies to deduct bribes as a business expense, according to Matt Morley, an expert in bribery law, and a partner at law firm Fried, Frank, Harris, Shriver & Jacobson.
That started to change in 1997 when, under pressure from the U.S., the Organization for Economic Cooperation and Development (OECD) passed an anti-bribery convention. Since then, more rich countries have passed anti-bribery laws.
But enforcement is still sluggish. "We have yet to see much in the way of enforcement, even from places like the United Kingdom, France and Italy," says Morley. "Those are some of the major economies where it might make a difference."
As a result of lackluster enforcement, many business leaders see the problem getting worse. According to a survey from Control Risks, a consulting firm, and the law firm Simmons & Simmons. Over 40% of the respondents said they had lost business in the last five years because a competitor paid a bribe.
Almost a third of the respondents think that corruption will increase by the end of the decade, while only 20% predict a decline. Control Risks and Simmons & Simmons surveyed 350 senior business leaders worldwide.
That's a problem for companies in the U.S., who have to compete with firms based in countries that lack serious enforcement regimes. In the Control Risks survey, 44% of American respondents said they had lost contracts because they wouldn't pay a bribe. That's up from 32% in 2002. U.S. companies may be losing more contracts simply because they're less likely to offer bribes.
The SEC's stepped-up enforcement also applies to companies like Statoil, because they are traded in the U.S. and are subject to American securities laws.
Executives in the Netherlands and Hong Kong also perceived that they were losing more contracts due to corruption, says John Bray, a consultant at Control Risks. Hong Kong companies may suffer disproportionately because they do a lot of business in Asia, he says.
Other nations -- particularly the United Kingdom -- avoid corruption simply by staying out of countries where bribery is rampant.
India is the most corrupt country, according to Transparency International's Bribe Payers Index, but it's closely followed by China, Russia and Turkey. "Corruption does deter good companies from going to certain markets," says Bray. "It seems to deter the British the most."
There are signs of change. The United Nations passed an anti-bribery convention in 2005, and the African Union followed suit earlier this year. But that won't matter unless laws are followed by enforcement, says Alexandra Wrage, president of TRACE, a consulting group that helps companies develop anti-bribery programs.
"We have plenty of conventions. We don't need any more international conventions," Wrage says. "Now we need to see countries implementing laws and taking them seriously."
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