CFO Magazine has an interesting article on China’s anti-bribery laws, entitled, Corrupt or Careless? Written by Don Durfee, its tag-line is that “Enforcement of China’s anti-bribery laws is on the rise, and foreign companies could easily be on the wrong side of Chinese law without knowing it.
The article starts out by briefly describing the Shanghai police’s recent arrests of 22 McKinsey, McDonald’s, and ABB, employees on suspicion of bribery. According to the article, the local “Chinese press reported that in one case, a local computer company had admitted bribing employees in McKinsey’s information technology department to obtain a contract to install an IT network.”
The article rightly notes that because “shady deals” are nothing new for China and because “the country’s complex anti-bribery laws are often not rigorously enforced.” The arrests “came as a shock to multinational corporations and left unanswered questions. The MNCs are asking themselves in these arrests “signal a new focus on the activities of multinationals?”
According to Lesli Ligorner, an attorney with Paul Hastings, China is stepping up its enforcement of its anti-bribery laws, throughout China, not just in Shanghai. In many respects, China’s anti-bribery laws resemble the U.S. anti-bribery law, the Foreign Corrupt Practices Act (FCPA). China outlaws bribing government officials and it also outlaws payment or acceptance of kickbacks in commercial transactions. The most a government official can accept is 200 renminbi ($25.80), “which is less than the cost of dinner at many restaurants in Shanghai.” Under China’s anti-bribery laws, a “government official” includes any employee of a state-owned enterprise (SOE).
“A foreign company could easily be on the wrong side of Chinese law without knowing it:”
In fact, the typical multinational corporation almost certainly is, says Steven Vickers, CEO of Hong Kong-based consulting firm International Risk. “Kickbacks, such as those we saw in Shanghai, are absolutely endemic,” he says. “It should come as no surprise to [multinationals] that they would be affected. Unfortunately, many of them have a veneer of legal compliance that covers a local company culture that remains very mainland-oriented.”
Ligorner urges foreign companies doing business in China “to increase compliance training and review employee handbooks in China to make sure that gift-giving limits are in line with local law.” In other words, if you are doing business in China, you must have the proper checks in place on your employees and you must be constantly training your employees on what they are not allowed to do on behalf of your business. If you do not have an anti-bribery compliance program in place at your company, you are at great risk.
Bottom Line: Familiarize yourself with China’s anti-bribery laws and follow them. Make it clear in writing to all of your employees that you expect them to abide by these laws and there will be repercussions if they do not. Tell them this again and again through regularized compliance training sessions. At minimum, your efforts to prevent corruption will help your company should it ever face corruption charges either in China or outside it.