The fine line between lobbying and bribery
My attention was drawn to an obscure article on the BuffaloNews.com website linking Verizon’s sizable lobbying budget ($9.3/€6.8 million from 2006 -2009 to State and local government) to considerable subsidies ($614 million or $3.1 million per job) that the company is poised to receive in exchange for building a proposed data center in Niagara County. The publication points out, rather sensibly, that the two could just be coincidental.
In recent years, Verizon has employed anywhere from seven to fourteen in-house lobbyists in addition to retaining outside lobbying firms - fourteen last year - to make sure lawmakers understand the ‘company’s point of view.’ Most of $1.2 million donated in the past five years has gone to Republican and Democratic campaign committees whose main task is to re-elect incumbents to the State Senate and Assembly.
Of course, it would be wrong to single out Verizon as the only telco that engages in lobbying – the practice is endemic and, it seems, a ‘necessary’ cost of doing business in the USA. But Verizon’s activities are dwarfed by Google that ‘invested’ $5.16 billion on lobbyists in 2010, according to the Lobbying Disclosure Act Database.
With issues like net neutrality, online privacy and online tracking getting legislative attention, it’s no surprise that the company’s lobbying budget continued to increase throughout the year. Google spent more money on lobbyists in 2010 than Yahoo, Facebook and Apple combined.
Allow me to digress for just a moment to mention the case where US regulators fined Alcatel-Lucent $137 million and savaged the telecom equipment manufacturer for fostering a corporate culture that allowed millions of dollars in ‘bribes’ to be paid to foreign officials to win contracts.
The bribery affair, which extended to Alcatel-Lucent’s operations in Asia and Central America, is alleged to have taken place between 2001 and 2006. The US Securities and Exchange Commission alleged Alcatel-Lucent’s subsidiaries used sham consulting agreements to funnel more than $US8 million in bribes to government officials in order to obtain or retain lucrative contracts.
Before I am accused of drawing unfair comparisons I will admit publicly that I am not up there with the intelligentsia and, for the life of me, cannot see a clear distinction between the activities of both companies. Yet one is viewed as the bastion of all things that corporate America should aspire to and the other vilified for what is deemed to be evil corruption. Both activities appear to involve money or gifts being offered to influence a decision.
Authorities have even linked payments to foreign officials as potential funding of terrorist organizations to give even more gravitas. Through the US Foreign Corrupt Practices Act, directives have gone out to all firms doing business with the USA that it will not condone these types of activities under any circumstances and, as Alcatel-Lucent and Siemens before them have discovered, the investigations and penalties can be extreme.
As one senior official in Asia once explained to me, what the West sees as graft is left-over from a traditional feudal system that has operated in many Asian countries since well before the USA was even colonized. Without wishing to simplify matters too much, land was owned by chiefs, lords, princes, etc. and the peasants allowed to farm the land in return for giving the top man his share of the harvest. Those that produced the most were rewarded with greater resources in order to produce even more.
In more recent times, the tradition has carried on with loyal associates being granted jobs and repaying the favor by ‘donating’ part of their salary to the one responsible for getting them in. Not unlike today’s employment headhunters, I guess.
You can see a natural progression to today’s situation where the winning of contracts is influenced by the ability to pay the facilitator some compensation for his contact base and position. The practice is endemic across many parts of Asia, Africa and South America and is not likely to be stamped out by Western-based morality rules in the short term.
Of course, none of this makes it any less savory in people’s eyes and it has reached the point in many countries where national development is being severely hampered because resources are going to the wrong places and those in power are simply getting richer and more powerful.
It is not uncommon to have to pay government officials and public service staff ‘special’ cash fees to get things done. One excuse given is that they are so poorly paid they have to do resort to these practices to survive. Of course, if the money was going into government coffers then it might be able to pay staff more. So the cycle continues.
If the USA and other superpowers want to change things radically, they may wish to check their own yard first. If I am having trouble differentiating between lobbying and unacceptable business practices, then how can we expect others to?