It has been argued that bribery pays for bribe-giving companies. But from a corporation's perspective, corruption exposes the company to financial, legal, and public relations risk. Excessive bribe-giving by a company's employees or financial manipulation exposes the corporation to unnecessary costs that could quickly pile up, and the market distortions that corruption causes could impede a company's ability to grow or move into new markets. It was a desire to explore these costs that led to a 2007 survey by PricewaterhouseCoopers with the Economist Intelligence Unit to analyze the case for combating corruption from a business perspective by surveying 390 senior level executives. The responses indicated that many companies do not believe that bribery pays.

For corruption to be a serious risk to businesses, they need to be exposed to it. The PwC survey found that 63% of respondents had experienced attempted or actual corruption. This is disheartening but not surprising. It is also logical that corporations are exposed to corruption as new markets such as the BRIC countries become more important. Corruption is much more widespread in the developing world and as multinational corporations seek to move into these markets, and corporations from these markets become more important globally, the chance a business is exposed to corruption may increase.

This increased exposure to and opportunities for corruption carries certain risks. The first of these comes from the US Foreign Corruption Practices Act. This covers exactly what you would expect it to and makes it illegal for any US citizen or company with securities listed in the US to bribe a foreign official. Under this law, Siemens, Wal-Mart, BAE Systems, Halliburton, and others have all been charged and had to pay fines as a result of their settlements. Siemens is probably the most famous of these cases, as the company ended up paying $1.6 billion in fines in an agreement with German and American authorities; criminal and civil charges were also brought against former executives. On top of this, Siemens paid nearly $1 billion in legal, accounting, and compliance costs. That is $2.6 billion on top of the $1.4 billion in illegal payments Siemens made over 6 years. 

Wal-Mart has spent $439 million on costs related to investigating violations of the FCPA. This investigation kicked off as a result of at least $24 million in bribes given to Mexican government officials. Wal-Mart already suffers from a reputation that is less than sterling; adding these costs with the reputation blow makes this quite a sum to pay just to open new stores. While these are exceptional cases, engaging in bribery clearly comes at a high cost.

Unfortunately, to date there have not been systematic studies in the prevalence of foreign bribery and its exact costs to companies. However, there is a working paper from three scholars that has looked into the exact costs of FCPA enforcement. These researchers estimated that firms that are investigated under the FCPA face an average direct cost 3.3% as measured in market capitalization and an additional 1% cost from reputational losses. If financial fraud charges accompany an FCPA settlement the reputational costs are much higher, with these firms experiencing a loss in share value that is 12 times higher if they were just tried with bribery. This may not appear as much of a cost, and certainly companies are not going bankrupt as a result of FCPA settlements, but with enforcement actions increasing the costs of paying a bribe will only increase. It may be better, both ethically and financially, to pursue foreign business ventures honestly.

Despite the potential high costs of an FCPA investigation, the most severe risk identified by most of the survey respondents in the PwC survey was the risk to reputation. Of those business executives surveyed, 55% identified the blow to the corporation's reputation as being more severe than the financial, legal, or regulatory impact of being caught engaging in corruption. Much as all individuals safeguard their reputation, being labeled as corrupt can have negative impacts on a company. It could dissuade potential business partners or result in a loss of customers. No company wants to appear dishonest.

Corruption not only causes widespread societal harm in much of the world, but it also harms businesses and corporations. The market distortion caused by corruption dampens competition. This dampened competition can lessen the ability of companies to innovate and grow, which will have wider economic effects. Engaging in corruption opens businesses to financial, legal, and reputation risks. To combat this, countries need to engage in more strident anti-corruption and bribery efforts. This needs to be complemented by corporations strengthening, or implementing, internal anti-corruption programs. These programs would work to create an environment where engaging in bribery is perceived as taboo, that investigates and identifies potential corrupt business partners, and conducts monitoring to stop bribery and corruption before it starts or becomes rampant. Doing so will help companies appear to be honest and forthright in their business dealings, give them the level playing that is important for growth, and ensure they do not lose customers do to reputation blows.