I want to follow up on Melanie’s post last week, about the OECD’s first-ever Foreign Bribery Report, and what its findings tell us about patterns and tendencies in firms’ illegal bribe activities in foreign countries. The Report is an important and informative document that presents, as its introduction says, “an analysis of all foreign bribery enforcement actions that have been completed since the entry into force of the” OECD Anti-Bribery Convention. There’s a lot in it, and I may do another blog post at some point on some other aspect of the report. But for now I wanted to focus on one thing about the report that jumped out at me: the way in which the report’s findings seem to be in some tension with my prior beliefs/stereotypes about the contexts in which foreign bribery is most frequent.

Let me start with my prior beliefs, which are not based on much firsthand information, but which I’ve absorbed from a lot of people who work in this area, and I think are fairly widely shared. These beliefs run as follows: Whatever the world was like a decade or two ago, these days most major multinational firms recognize the seriousness of anticorruption laws like the FCPA, and most such firms have fairly robust (though often imperfect) compliance programs. When such firms run afoul of the FCPA or similar laws–which they still do, probably far too often–it is less likely these to be the deliberate policy of senior management, and more likely to be low or mid-level employees “in the field,” under pressure to increase business in high-risk emerging markets. This doesn’t mean senior managers are blameless–they may have failed to set the right “tone from the top,” or failed to implement an adequate compliance program, or looked the other way. But at major multinationals, many (including me) were of the view that bribery is usually not the firm’s policy. By contrast, the thinking often goes, small and medium-sized enterprises (SMEs), expanding in to high-risk foreign markets for perhaps the first time, are much more likely to run afoul of the FCPA. They are less likely to be familiar with the statute, less likely to have sophisticated (and expensive) compliance programs in place, and less accustomed to managing the pressures of doing business in environments where corruption is prevalent.

The OECD Report strongly implies (but does not quite say) that this is (mostly) wrong. As the report states at the outset, “[c]orporate leadership [was] involved, or at least aware, of the practice of foreign bribery in most cases, rebutting perceptions of bribery as the act of rogue employees.” More specifically, in the 427 foreign bribery enforcement actions the OECD examined, in 12% the CEO was involved, and in another 41%, “management-level employees paid or authorized the bribe.” As for the firms involved, the OECD found that “[o]nly 4% of the sanctioned companies were … SMEs,” while in 60% of cases the company had over 250 employees, and in another 36% the company size could not be determined from the case records.

So, does this mean my prior beliefs were all wrong? Are the most likely foreign bribery culprits senior executives at large multinationals, rather than lower-level employees and SMEs? Maybe. But not necessarily. Whereas Melanie treated the Report as refuting the “rogue employee myth,” and spinning out the logical consequences of that refutation, I want to take a different tack, by raising a few questions about how we should interpret the report’s findings here for the types of foreign bribery problems that are most typical. Indeed, although the OECD Report’s findings are important and ought to provoke all of us to re-examine some of our assumptions, I want to suggest a few reasons to be cautious about not drawing overly broad and unwarranted inferences on these particular points. Continue reading →