Former Halliburton subsidiary KBR Inc. finds the Foreign Corrupt Practices Act (FCPA) an unwelcome restriction on its ability to "compete".

We previously reported the fine reported in the company's K-10 annual disclosure form relating to the bribery of Nigerian officials, but there are a couple of other statements in the K-10 that are of interest in their own right.

Firstly:

"Limitations on our use of agents as part of our efforts to comply with applicable laws, including the FCPA, could put us at a competitive disadvantage in pursuing large-scale international projects. Most of our large-scale international projects are pursued and executed using one or more agents to assist in understanding customer needs, local content requirements, and vendor selection criteria and processes and in communicating information from us regarding our services and pricing. As a result of our settlement of the FCPA matters described below under “—Risks Relating to Investigations” and “—Risks Related to Our Relationship With Halliburton” a monitor will be appointed to review future practices for compliance with the FCPA, including with respect to the retention of agents. Our compliance procedures and our requirement to have a monitor may result in a more limited use of agents on large-scale international projects than in the past. Accordingly, we could be at a competitive disadvantage in successfully being awarded such future projects, which could have a material adverse effect on our ability to win contracts and our future revenue and business prospects."

The only way that the new compliance processes will inhibit business acquisition is where the appointment of an agent creates the risk that bribes will be paid. There are going to be contracts which can only be secured by resorting to bribery. The only way this is going to change is through a change in practice among bidders, removing incentives such that a culture of corruption among officials in such countries declines over time.

Pay-to-play is a great example of where being a responsible company will lead to lower shareholder returns. What is offensive about the KBR statement is the implied assertion that a business that can only survive by being indifferent to its role in perpetuating the problem nevertheless has a right to exist - their profits are more important than the social damage done by their way of acquiring business.

But the disclosure does not stop there. Another disclosure of interest in the K-10 comes later, on page 58:

"Bidding practices investigation

In connection with the investigation into payments relating to the Bonny Island project in Nigeria, information has been uncovered suggesting that Mr. Stanley and other former employees may have engaged in coordinated bidding with one or more competitors on certain foreign construction projects, and that such coordination possibly began as early as the mid-1980s.  In connection with KBR LLC’s agreeing to enter into the plea agreement described above, the DOJ has agreed not to pursue any further investigation or penalties relating to the coordinated bidding allegations."

So any griping about KBR being placed at a competitive disadvantage because it cannot bribe government officials with such impunity, has to be read against the background that this is a company that is used to rigging the competitive game in any event.

Instead of the implication, which we are clearly meant to take from the first quotation from the K-10, that KBR would like to behave as the American people expect but only in a more perfect world, you come away with the sense that this is a company that is never inclined to compete on a level playing field and possibly therefore could not do so even if it tried.