The Hydra-Headed Monster of International Business

Allegations of bribery and corruption are a deadly threat to any company regardless of size, and knowing the reach of the law and how it can affect your business is a must. Unfortunately, the Foreign Corrupt Practices Act (FCPA) is not on the radar of many companies who do business overseas, and the authorities can relentlessly prosecuting at even the slightest hint of violation. Simply having a formal policy will not protect CEOs and business owners from prosecution or absolve them of their employees’ actions. Companies must take the FCPA serious and company leaders must actively involve themselves in complying with the law.

Bruce Alan Johnson is the foremost expert when it comes to spotting FCPA violations and when recently asked, he said that FCPA is especially tricky, for two reasons. First (as if this is going to surprise you), lawyers have leapt forward to claim the territory and convince companies that they need to hire them for FCPA protection. This is like hiring an arsonist to teach you fire safety. With very few exceptions, lawyers have little experience in the international arena, and they usually do not have the required first-hand experience to understand how foreign business operations lead to FCPA violations.

Just as it takes a very skilled diagnostician to find a small tumor, it takes someone who has decades of on-the-ground experience in the international arena to know what to look for in terms of FCPA violations or how to even spot the yellow flags when present. Mr. Johnson calls FCPA a “hydra-headed monster,” and most lawyers do not know how to spot a phony invoice or a ‘referred’ consulting fee—or a quiet relationship between the CEO’s driver and the daughter of the Minister of Defense (a red flag if there ever was one).

The second reason that the FCPA violations can seek up on companies is because most companies are thoroughly self-deluded when it comes to compliance. When speaking of FCPA compliance the most common responses Mr. Johnson hears from a CEO is “Our VP of international business assures me we’re compliant…” or “Our general counsel says we’re covered…”  I’m sure Mr. Johnson would love telling them how many CEOs have gone to prison in the past 24 months or had their companies fined into insolvency after making those statements!

Let’s add one more common response from CEOs: “Oh, we’re fine—we’ve got a compliance policy, and we’ve made every employee sign it.” Just ask the Department of Justice and the SEC about that line! A case in point is the recent indictment of ITT (once the world’s largest conglomerate) who were fined for numerous FCPA violations. The comments from the SEC during prosecution included, “ITT has one of the finest, most comprehensive FCPA compliance policies we have ever seen.” I’m sure it was a wonderful ‘policy’ that lawyers and HR professionals put together, but it did not save the company from FCPA prosecution.

Just as none of us are qualified to diagnose our own bodily crises, most executives from inside a company are not equipped to diagnose their own FCPA compliance issues.

The only way for a company today to know if it is complying thoroughly with the FCPA is to have a seasoned expert with carte blanche authority from the CEO or board to examine, roam through, and probe everything from supply chains to billings. That may not seem easy to swallow, but neither is prison or a hundred-million-dollar fine, not to mention the destroyed reputations that are now crippling companies like Eli Lily, Pfizer, Avon, and Smith & Wesson. Just ask those companies how they feel for deciding that everything was “just fine…”

Sending the “Right” People Overseas

One of Country Intelligence Group’s goals is to make American companies more competitive against foreign businesses in the international realm while minimizing their risk.

Lately, we have been doing a lot of research on why companies of all different sizes fail when they do business overseas. There are myriad of factors that impact the outcome of an overseas business venture, but there is one thing that is always present in each case. Business decisions are always made by people. Therefore, the people sent to conduct your business overseas matters just as much as, if not more than, all of the other factors in play. This conclusion is one of the main premises of Bruce “Baj” Johnson’s and R. William Ayres book titled, Carry a Chicken in Your Lap: Or Whatever it Takes to Globalize Your Business.” Below is a cliff notes tribute to their book’s conclusion of what a company should (and should not consider) when they select people to do their business abroad.

People are considered a company’s greatest asset, but a star performer can quickly turn into your company’s biggest liability when you send them abroad. In addition to logistics, finance, currency conversion, strategic planning, and compliance, choosing the right person to conduct your overseas business should also be at the top of the list for things to consider when opening a new office overseas. All of the time spent conducting market analysis and formulating a strategic plan will be for naught if the “right” person is not sent to look after your company’s best interest overseas.

There are a few guidelines that you can follow to make sure your company is sending the right person overseas:

  • Know that operating in a foreign culture is NOT for everybody. Do not assume that anyone can be successful overseas if they simply get the right training or are properly briefed. Although extremely important, there is much more to setting your employees up for overseas success than giving them a thorough briefing. If the person you select to send overseas is not cut out for the demands of operating in a foreign culture, no amount of training or briefing will make a difference.
  • Know your employees. You must get to know your employees beyond what is on their resume before you can determine if an overseas assignment is a good idea for them. Are they flexible? Are they tolerant of differences? Do they have an aptitude for foreign languages or are they at least able to pick up a few basic phrases? Can they deal with time zone differences effectively? Also, consider the impact to their families. If they are bringing their spouse with them on an extended assignment, is the spouse able to cope with the cultural differences too?
  • Know the subtleties of the culture your employee is entering. Some people will excel in one foreign culture and fail miserably in another simply because of cultural bias and discrimination on the part of the host country. For example, many countries in Latin America, Asia, and especially in the Middle East may exclude women from business entirely while countries in Western Europe welcome women in business with open arms. Unfortunately, many countries do not have the same anti-discrimination laws that the United States has, and an employee could be doomed as soon as they board a plane to leave on their business trip. In “Baj” Johnson and Dr. Ayres’ book, they give a first-hand account of an American businesswoman en route to an unnamed Muslim Country who was asked by the flight crew to put on a Burqa before landing. She adamantly refused, and when the plane landed she was quickly detained, received a lashing on the backs of her legs while the authorities shoved her along, and was put on the next flight out of the country. Obviously she was not the right person to send to that country.
  • Do not send idealists who want to change the world. Make sure the people you send overseas do not have ulterior motives for going abroad. When you pay an employee to represent your company overseas, they should keep the company’s best interest in mind at all times—period. Sending someone overseas who has a personal agenda to change the world or to impart the “American way” on their foreign counterparts will at best make the locals suspicious of your company’s true intentions. This is especially true if your expatriates will be supervising foreign employees of your company.
  • Do not build overseas assignments into your company’s career path. Making a foreign assignment part of the process to get promoted is a horrible idea because your employees will volunteer to work overseas for the sole purpose of getting promoted and not because they truly want to work and live abroad. Overseas positions should be coveted by employees who have the qualities to be successful in a foreign culture and who have a true desire to work overseas.
  • Do not reward good performance at home with overseas assignments. Your best employees may excel at what they do because they are great communicators, have great charisma, have deep understanding about what motivates your domestic customers, or maybe they have name recognition and a large network of old friends, former colleagues, and fellow alumni. Maybe they also know your product and business processes so well that they are the expert in their functional area. However, none of these factors can guarantee success when you put this person in a foreign culture. The worst thing you can do to reward a star performer is to set them up for failure by sending them overseas without considering whether the overseas assignment is a good fit for them.

As you begin to think about whom should represent your company overseas keep the above guidelines in mind, but above all remember that going overseas is not for everyone. Some people should simply not be sent overseas, no matter how well they perform at home. Remembering this one simple fact can help prevent foreign business disasters and can make sure you are not setting up your best employees for failure.