The Chinese government had been reluctant to scrutinize foreign multinationals for bribery. That changed on January 19, when a government investigative unit detained 22 employees at seven multinationals for taking bribes worth a total of $515,000, all in Shanghai. The companies included McKinsey, ABB and McDonald's.
Risk-management advisers to foreign companies say the sweep was a warning. Steven Vickers, CEO of Hong Kong--based consulting firm International Risk, sees it as a signal that multinationals won't be exempt from any crackdown. But staying clean won't be easy. The open secret is that it is extremely difficult to control the illegal payoffs that are common currency of business in the People's Republic.
Even if U.S. companies strictly comply with the Foreign Corrupt Practices Act (FCPA), it may not be enough. Long-standing (but rarely enforced) Chinese anti-bribery laws establish a lower threshold for amounts considered bribes than the already stringent FCPA. This gives authorities great leeway to charge companies with bribery should they choose to investigate.
Unfortunately, multinationals have been lulled into a false sense of security because bribery is so common.
Source: CFO, http://www.cfo.com
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