The Economist August 29th 2020 pp51 |Bribery| “A closer look at greasy palms” “Bribery pays-if you don’t get caught”
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Facts presented in the article
Enforcement actions under the 42-year-old-United States Foreign Corrupt Practices Act (FCPA) started ramping up after 2000 peaking in 2010 at about 55 actions, then fell progressively until 2014 and peaking again in 2019 at about 50 actions. The cost of sanctions peaked in 2016 at about $6B or nearly 50-fold the 2007 level. Trump has criticized the FCPA, as “hobbling American firms overseas", but sanctions nontheless have totaled more than $2B since 2017. With 80 FCPA cases prosecuted Oil & Gas as an industry leads in declining order Health Care, Industrials, Technology, Aerospace & Defense, Consumer Goods, Financial Services, Basic Materials, Communications, Transport and Utilities.
Summary
It’s hard to rely on anecdotal information in trying to understand the effectiveness of bribes so it is with interest that a recent formal study has been reported. The study by Raghavendra Rau (Cambridge), Yan-Leung Cheung (Education University of Hong Kong) and Aris Stouraitis (Hong Kong Baptist University) report on 200 “prominent bribery cases” from 60 countries between 1975 and 2015. They find that each dollar of bribery returned $6-$9 “increase in excess returns, relative to the overall stock market.” They tested 11 hypotheses regarding bribes and confirmed that; companies pay larger bribes when they expect larger returns, bribe benefits are lower in locales that have more “public disclosure of politicians’ source of income and surprisingly they didn’t find a “link between democracy and graft.”
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