Auto Suppliers Beware: Bribes Are Illegal. There Is No Gray Area.

Providing new vehicle program analysis for automotive suppliers is always rewarding. It’s appealing to help suppliers understand a program’s advantages and disadvantages while providing a realistic volume potential. Fun stuff!

Writing about ethics less so—and admittedly pedantic. However, advocating for the importance of compliance with the Foreign Corrupt Practices Act (FCPA) , a federal law enacted in 1977, is appropriate for these times.  

As described in the New York Times, “The FCPA has become the global standard for fighting bribery.” Unfortunately, President Donald Trump has recently said the law is unfair to U.S. businesses and has paused new criminal investigations or enforcement for 180 days. What? This new executive order is as confusing as new tariff announcements that will come in waves over the next few months.  

In the same week, Trump also indicated that no laws are broken if he is “saving the country.”

Should U.S. executives take the same approach by telling employees, “If we are saving the company, then bribes are legal?”

Absolutely not. Toyota knows that law-breaking is costly. A recent Associated Press article explained that “scandals that involved cheating on emission certification and major recalls abroad last year forced it to dial back production.”  

Ethics Are Good Business

The views articulated by Trump are radically unethical, and counter to the operating norms of almost all U.S. businesses operating on the global stage.  My view is derived from research, teaching and automotive-industry operating experience overseas.

After retiring as a senior executive from General Motors, I taught business ethics to foreign students for two semesters at the University of Detroit. I was encouraged to see these students take extensive notes and ask all the right questions. I currently teach an ethics module in my Global Economics class at Lawrence Technological University. Students are told that this is an important chapter to learn if you are going to be global executives, advocating that ethics is not merely a set of abstract principles relegated to philosophical debate or legal constraints. It is the foundation upon which strong institutions, successful businesses and just societies are built. I ask them to use the chapter as a reference document as they move on in their careers. None of the research and coursework support the views taken by the current president.

Just the opposite, as Adam Smith said: “Ethical behavior is good business.” It can lead to a positive reputation for the company and build customer loyalty. It can also lead to a positive work environment and high employee morale. It ensures that the interests of all stakeholders are represented.

Bribery Is Forever

Importantly, I observed the importance of working in an ethical business culture before retiring. I had the privilege of working for a zero-tolerance company, GM, when I was in Russia and other developing markets. I taught my employees, both Russian and international, what zero-tolerance meant, and reinforced those principles frequently. Without going into detail, zero-tolerance for unethical behavior helped me navigate business dealings in Russia, Brazil and Poland. The support from GM upper management was unconditional.

Unfortunately, not everybody got the message, and the consequence was deadly for one of my Russian employees at the joint venture. Once a bribe is offered or received, then all the parties are on the hook for future blackmail and compromise, and you can never return from the dark side.

Global executives have complained to the press about the difficulties of complying with FCPA’s rules and regulations. My recommendation: Stop whining, please.  If you think the law is too complex or costly to implement countermeasures, it is nothing compared to potential fines and jail time.  Just ask McKinsey, SAP, Petrobras and Goldman Sachs, companies that paid millions, sometimes billions, when they were caught offering bribes.

 If you need to offer bribes, then perhaps you are just not competitive. The argument “everybody else is doing it” was one that we lost with our parents many years ago.

Trump has ordered the Justice Department to put FCPA on hold for six months. Spoiler alert: global business continues despite Trump’s pontifications. We certainly would want to prosecute any company that was bribing U.S. border officials to let fentanyl come into the country. Wouldn’t we?

A Short Checklist

The important steps for providing an ethical culture are simple. For automotive OEMs and suppliers, it is a leadership issue.  

• Adopt a zero-tolerance policy on bribes and ethical behavior if you don’t already have one. This includes a code of ethics that is prominent on the website, in all languages that the company does business in. Publicly reward ethical behavior.
• Frequently communicate the code of ethics to everyone in the organization (home market and foreign employees).
• Hire employees with high ethical standards.
• Frequently audit decisions for ethical behavior.
• When an error is uncovered: report and fix it.
• Consider an ethics officer that reports to the board of directors. Global business can present many murky decisions due to different cultures and norms. This individual can be an advisor before the decision to invest or win contracts, or a person for whistleblowers to go to.
• Be explicit on the difference between facilitating payments—small sums used to facilitate an administrative process—and a bribe to a public official. It is in the details of the FCPA.

The future business environment will reveal increasing ethical complexities, such as the use of artificial intelligence, the importance of data privacy and how companies influence public policy. President Ronald Reagan said, “America is the shining city upon the hill.” It is important that United States global executives keep those lights on.