When companies are caught paying bribes, headlines flash with sensational details: millions missing from numbered bank accounts, first class travel to exotic destinations and all-expenses-paid shopping trips. Everyone remembers the companies involved, but what about the government officials who orchestrate or benefit from these schemes?
First, there is no question that companies that pay off government officials to win business should pay the price. They should bear the increasingly severe legal penalties and suffer the reputational damage. Titan paid a US $28.5 million fine, and the remedial measures required in its settlement will amount to far more. ABB paid $16.5 million but estimates the total cost of its bribery scandal at over $300 million. Nor are the penalties limited to fines. Two former executives of American Rice are serving 37 months and 63 months, respectively, in prison.
The hidden cost to a company is hard to capture and easy to underestimate. Bribes poison community relations wherever they are paid. They buy a contract that will be unenforceable in any court, and they lead to more and greater demands once a company is marked as an easy target. And paying bribes is often the first in a string of illegal acts. Illicit payments typically require "creative bookkeeping," violating additional laws.
If bribery is illegal and the risk and penalties are increasing, why do companies participate in these schemes? Some companies still define their interests very narrowly; a "win" on a contract today is more important than the long-term improvements in international commerce that come when markets grow more transparent. Smart business leaders understand that a truly level playing field brought about by greater transparency is more valuable than any one contract won through bribery. Those who know they have a high-quality product at a competitive price choose the rational course. They make - and for reputational purposes are seen to make - a serious and sustained commitment to sound business practices. They institute written policies prohibiting bribery, they provide training for those with international responsibility, they ensure that employees know what the consequences are for violation of the anti-bribery policy, and they enforce those penalties.
All that is to the good, but it is not enough. The next step is to address the demand side of the problem. Companies describe the outstretched hands of government officials on the take. These demands are often traditional "cash-for-contract" business bribes, but may also involve requests for travel, for lavish gifts, for jobs for the official's children or for partnering with the official's brother's company. Bribe-takers tend to be lazy and risk-averse. They tend to return to the companies that pay, rather than waste their time with companies that don't. They are confident that few companies will report their extortionate demands, regardless of how egregious they are. Still, a few companies are working to shine more light on the problem.
At the request of several member companies, Trace International recently met with government officials in the Middle East and West Africa to outline the international compliance regime under which multinationals operate. Copies of local anti-bribery laws were provided, and it was clear that many government officials were seeing them for the first time and reading them with interest. Officials asked quite sophisticated questions and were surprised at just how little it takes for companies to find themselves in the enforcement cross-hairs. It was easier for them to hear this message from a neutral third party than from the companies with which they interact.
Companies have every incentive - legal, financial and reputational - to steer clear of bribery scandals. The current unbalanced approach to compliance places all of the burden and accountability on the payers and next to none on the recipients. Anything that can be done to educate government officials about the cumulative cost to their community of their graft (in missing millions, loss of competition and reduced investor confidence) and, more immediately, anything that can be done to increase the risk to them for demanding bribes will be critical steps toward greater commercial transparency.
Companies should continue the progress they've made toward transparency, but they should not be required to play center stage alone indefinitely.

Alexandra Wrage is a lawyer and the president of Trace, a non-profit business association providing companies with practical, cost-effective anti-bribery compliance tools. She can be reached at wrage@traceinternational.org.

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