Fitch Provides Private-Sector Incentive for FCPA Compliance

June 7th, 2010

Last week, we saw some very heartening news from Fitch Ratings. The powerful credit-rating agency announced on Tuesday that it would consider violations of the Foreign Corrupt Practices Act (FCPA) a credit liability for corporations.

According to Reuters:

“Companies that violate FCPA or other anti-bribery conventions have committed a criminal act that makes them potentially subject to indictment,” Fitch said. “Criminal indictment can be hazardous to the financial health and existence of corporations.”

Indictment alone can trigger onerous reporting requirements, civil lawsuits, business losses and reputational risks, Fitch said. Violations of the act can also become a sticking point in acquisitions or dispositions of businesses, Fitch added.

It only makes sense, then, that a violation of the act would lead to a potential credit downgrading.

This is also good news for good-governance advocates, as corporations now have another reason—indeed, a private-sector reason—to practice good corporate governance.

Kudos to Fitch for upping the CSR pressure on corporations.  Now, let’s hope that Moody’s and Standard & Poor’s follow suit.

Written by Clark Gascoigne

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