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Alleged Microsoft FCPA violations prove anti-corruption controls vital

Microsoft this week became the latest big-name U.S. company to be investigated for bribing foreign officials and violating the Foreign Corrupt Practices Act. The U.S. Department of Justice and the SEC are investigating a whistleblower’s allegations that Microsoft illegally offered kickbacks to Chinese officials to secure software contracts, according to a report first disclosed by the Wall Street Journal.

The importance of global anti-corruption programs was the topic of a presentation at the sixth annual Marcus Evans Enterprise Risk Management Conference held in Chicago earlier this week. Presenters noted that bribery and corruption investigations have increased dramatically in recent years, with companies such as Wal-Mart and Tyson Foods being charged with FCPA violations.

With more companies expanding global operations, sweeping controls are necessary to prevent bribery and maintain ethical business practices — and avoid FCPA violations in the process, ERM conference presenters said. This can be difficult, however, especially for large corporations with numerous foreign partners.

Microsoft Vice President and Deputy General Counsel John Frank referred to this difficulty in a blogged response to Microsoft’s alleged FCPA violations. Although Frank did not comment specifically on the allegations, he said that as Microsoft continues its business expansion throughout the globe, “legal and ethical standards” are a huge priority for the company.

“Compliance is the job of every employee at the company, but we also have a group of professionals focused directly on ensuring compliance,” Frank wrote in the blog post. “We have more than 50 people whose primary role is investigating potential breaches of company policy, and an additional 120 people whose primary role is compliance.”

As Frank notes in the blog, it’s impossible to say that there will never be any wrongdoing in a company as large as Microsoft. The company’s proactive approach, however, provides a great example for other companies. Presenters at the ERM conference in Chicago said companies can at least demonstrate good faith by having an ethics and compliance program in place that allows the business to pounce on such allegations quickly with their own internal investigations. This proactive approach, as well as a cooperative and transparent relationship with regulators, proves to investigators that high-ranking members of the organization know what is going on and are taking steps to fix the problem.

In addition to potentially garnering at least some sympathy from investigators when it comes to doling out punishment, the proactive, “we will not stand for this” approach could offset reputation damage stemming from these and similar allegations. This is increasingly important as more companies expand global operations — especially when these operations are in regions with lax corruption and anti-bribery controls.

Unsavory employees, rogue third party agents and corrupt officials will always have the potential to create legal concerns for companies all over the world. As the Microsoft case shows, it’s better to be prepared rather than hoping it doesn’t happen. Your bottom line — and business reputation — could depend on it.

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