Business

EthicsLecture

14:

Ethics

in

internationalbusinessOutlineBribery

in

international

businessCase:

JP

Morgan

"elephant

hunting"

(video

&reading)Foreign

Corrupt

Practices

ActThe

Siemens

caseChild

labor

in

developing

countriesStep

1-2:

Q&AStep

3-5:

reading

&

quizReading

(JP

Morgan):

QuestionsWhat

does

"elephant

hunting"

mean?

Why

did

JP

Morgan

engage

in

"elephanthunting"

in

China?

What"s

the

impact

of

"elephant

hunting"

ondifferent

stakeholders?Imagine

you

were

the

chief

of

the

HRdepartment

of

a

multinational"s

Chinese

branch,your

superior,

the

regional

president,

asked

youto

hire

an

official"s

child

in

order

to

win

agovernment

contract.

Would

you

follow

the

order?Why?Foreign

Corrupt

Practices

Act(《反海外腐敗法》)Passed

in

1977,

revised

in

1988,

1994,

and1998.

Jointly

enforced

by

Securities

and

ExchangeCommission

(SEC)

and

the

Department

ofJusticeBackgroundAccording

to

SEC

investigations

in

the

mid-1970s,400+

US

companies

admitted

having

paid

$300+million

in

bribery

to

foreign

officials

and

politiciaObjective:To

bring

a

halt

to

the

bribery

of

foreign

officialsTo

restore

public

confidence

in

the

integrity

of

theAmerican

business

system.FCPA

imposes

financial

sanctions

and

criminal

penalties

on:US

citizens

or

companies

which

pay

bribery

to

foreign

officials,

Foreign

companies

listed

in

US

stock

exchanges

whose

financial

statementsinclude

dubious(可疑的)transactions,Any

other

foreign

entities

which

conduct

corrupt

practices

on

US

territory.Significance:

The

first

national

law

which

holds

accountable

corruption

in

foreigncountries.

Successor:

Canada.

Precursor

of

international

anti-corruption

treaties

(e.g.,

OECD

AntiBribery

Convention

1998,

United

Nations

Convention

Against

Corruption

2005

).Results:

157

cases

since

1977

(source:

lexisnexis),

including

GE,

IBM,

SiemensLucent

Tech.,

etc.

Siemens

(2008):

the

largest

intl.

bribery

case

to

date

(large

scale,historically

high

fines,

international

cooperation

on

law

enforcementinvolvement

of

Chinese

officials)DiscussionWhat

would

be

the

costs

and

benefits

of

FCPA

to

US?The

1988

Amendment

of

FCPA:

requires

US

president

to

urge

other

countries

to

pass

similarlaws,rules

out

the

illegality

of"lubricating

fees"(潤滑費),

allows

plea

of

not

guilty

if

bribery

is

not

outlawed

by

the

hostcountry.Do

you

understand

the

incentives

behind

these

changes?

Imagine

you

were

the

CEO

of

a

Chinese

company

andyour

company

had

two

plans

for

the

next

year:Doing

business

in

a

corrupt

African

country,Getting

listed

on

NYSE

(New

York

Stock

Exchanges)Could

you

see

any

potential

conflict

in

these

twoobjectives?

How

could

you

reconcile

them?The

Siemens

bribery

caseBackground:German

business

law

&

practice:

payment

toforeign

officials

can

be

stated

as

advertisingexpenses

and

deducted

from

corporate

taxuntil

1999

(the

enactment

of

OECD

Anti-Bribery

Convention).Subsequent

business

culture:

regardingbribery

as

a

normal

and

indispensible

part

ofinternational

business

even

after

1999

Case

description:

At

Siemens,

bribery

was

just

a

line

item,

on

NYTimes,

2008Case

Summary

Based

on

info.

provided

by

a

Greek

prosecutor,

German

police

raided

Siemens

and

arrested

Reinhard

Siekaczek,

accountant

andmidlevel

executive,

for

bribery.

Eleven

top

executives,

includingformer

president

Heinrichvon

Pierer

and

former

CEO

Klaus

Kleinfeldwere

accused

of

"failing

to

oversee

the

company"s

daily

operationsand

stop

employees"

illegal

actions".Facing

embezzlement(貪污)charges

and

harsh

penalties,Siekaczek

turned

himself

in(自首)to

the

justice

and

confessed

thathe

was

running

an

intl.bribery

network

with

annual

budget

of

$40millions

for

Siemens

from

2002

to

2006.

It

was

revealed

that

Siemens

systematically

used

bribery

to

wincontracts

overseas.

Money

was

usually

channelled

to

foreignofficials

and

politicians

in

the

name

of

consulting

fees

through

secoffshore

accounts.

US

department

of

Justice

and

SEC

stepped

in

and

imposed

a

$1.6billion

fine

on

Siemens.

Relevant

information

was

also

handled

toChinese

authorities.The

confession

of

a

tainted

witness(污點證人)

"We

all

knew

that

what

we

weredoing

was

illegal.

I

didn"t

reallylook

at

it

from

an

ethicalstandpoint.

We

did

it

for

thecompany.

It

was

about

keepingthe

business

unit

alive

and

notjeopardizing

thousands

of

jobsovernight.

We

always

thought

thetop

management

would

back

usup,

which,

unfortunately,

didn"thappen...Instead,

they

decided

topin

it

[the

crime]

on

me."-

Reinhard

SiekaczekCase

analysis:

Child

labor

in

China

Step

1:

establish

the

facts:

is

using

chillabor

a

common

practice

in

China?Case

analysis:

Child

laborStep

2:

identify

the

relevant

stakeholdersWhy

do

the

plants

hire

child

labor?

What

are

thebenefits

and

costs/risks

for

them?Why

do

the

children

accept

to

work

in

these

plantsdespite

the

bad

working

conditions?Do

the

multinationals

have

incentive(動機)andlegitimacy(合理性)to

intervene

in

their

Chinesesuppliers"decisions

to

use

childre

labor?If

theydecide

to

intervene,what

obstacles

do

they

face?What

opinions

would

workers

in

the

multinationals"home

country

hold

with

respect

to

this

case?Step

3:

recognize

the

ethical

dilemmasChinese

government:

strengthen

theenforcement

of

labor

law

or

not?CEO

of

multinational