Laying down the law on Lockheed: how an aviation and defense giant inspired the promulgation of the Foreign Corrupt Practices Act of 1977

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Author: Frank Badua
Date: June 2015
From: Accounting Historians Journal(Vol. 42, Issue 1)
Publisher: Academy of Accounting Historians
Document Type: Article
Length: 8,475 words

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Abstract: This paper examines the events that led to the passage of the Foreign Corrupt Practices Act of 1977 (FCPA 1977, or simply, the Act). Central to the narrative are the actions undertaken by Lockheed Corporation, the politico-economic context in which it operated, the international scandals that resulted from its practices, and the landmark law that resulted from these events. The paper concludes with an analysis of dramatic changes in the subsequent enforcement of FCPA 1977, and a consideration of the efficacy of this reform as viewed from various lenses provided by economics, law, philosophy, and political science.


The entity that eventually became known as Lockheed Corporation originated as the Alco Hydro Aeroplane Company, founded in 1912 by brothers Allan and Malcolm Lockheed. The firm has undergone numerous reincarnations, and currently exists as a merged entity, Lockheed Martin Corporation, that continues to be a leading arms manufacturer responsible for a variety of weapons systems and platforms [Girard, 2005]. In the late 1970's, reports of numerous bribery payments made to foreign governments by Lockheed and other US corporations surfaced, and the resulting scandal culminated in the passage of FCPA 1977, a law which pervades the study and practice of accounting. Although Lockheed was not alone among the bribe-payers, it was documented to have been the biggest contributor. Furthermore, so notorious were Lockheed's corrupt activities that contemporary accounts of similar bribery came to be referred to as "based on the Lockheed model [Noonan, 1987]." William Hartnung, author and head of the Arms and Security Initiative at the New America Foundation referred to Lockheed as being "at the cutting edge of corruption" because of its practices in the prelude to FCPA [Hartnung, 2011], Many of the techniques by which the bribes were made and hidden by Lockheed were specifically proscribed in the provisions of the FCPA.

The events that surrounded these briberies, the promulgation and implementation of FCPA 1977, the evolution in the law's enforcement, and various theoretical and empirical perspectives that explain this evolution are the subject of this paper. The events leading up to and following the Act, as well as its impact on accounting in general, and financial reporting, auditing, and accounting information systems, in particular are described. Additionally, various analyses grounded in economics, law, philosophy, and political science are undertaken to reveal the significance of these events, and offer a prognosis of the future of FCPA 1977 and its effect on business practices. By recounting the history of the Act and the different ways in which it has since been applied, the paper attempts to elucidate the interplay of geo-political context, prevailing business practices, and accounting and business regulation in the light of a multidisciplinary theoretical framework.

The remainder of this paper discusses the significance of FCPA 1977 to accounting faculty and practitioners, describes the various theoretical frameworks used in analyzing how the Act has been enforced, and recounts its origin, enactment, and implementation. The paper concludes with an analysis of the evolution in the Act's enforcement and...

Source Citation

Source Citation
Badua, Frank. "Laying down the law on Lockheed: how an aviation and defense giant inspired the promulgation of the Foreign Corrupt Practices Act of 1977." Accounting Historians Journal, vol. 42, no. 1, June 2015, p. 105+. Accessed 17 Apr. 2021.

Gale Document Number: GALE|A421212843