You Manage It! 4: Ethics/Social Responsibility When in Rome Do as the Romans Do? The Case of Foreign Bribes
According to the anticorruption watchdog Transparency International, senior business executives around the world believe Russia is the country where companies are most likely to pay bribes, followed by China and Mexico. The list of countries with firms least likely to pay bribes begins with Belgium, Canada, and the Netherlands. The United States ranks ninth on the list of countries least likely to pay bribes.
Let’s take one example. Titan Corporation, based in San Diego, California, has about 12,000 employees dispersed across 60 countries. It was found guilty of bribing the president of Benin. The combined penalties of $28.5 million are the largest imposed on a company in the history of the Foreign Corrupt Practices Act. Titan, with $2 billion in annual sales, mainly from military, intelligence, and homeland security contracts with the U.S. government, pleaded guilty to three felonies before a federal judge in San Diego. According to the Securities and Exchange Commission (SEC), Titan’s misconduct was global. Though Titan does business in more than 60 countries, the company has no policy on overseas bribery and failed to monitor its 120 international agents. The SEC said Titan underreported commission payments in its business dealings in France, Japan, Nepal, Bangladesh, and Sri Lanka.
Paul R. Berger, an associate director at the SEC’s enforcement division, said that the evidence in the case showed “the virtually complete lack of internal controls” at Titan, along with the company’s inability to operate with policies and procedures that would help them detect and deter such problems.
Critical Thinking Questions
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17-32. Do you think that Titan is an isolated example or that many companies engage in similar behaviors overseas but are never caught? Do you think it is acceptable for a firm to take the risk and pay a bribe if the firm believes that the chances of getting caught are small and that in the worst-case scenario the fine imposed will be an insignificant fraction of total operating costs? Explain.
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17-33. Shortly after Titan pleaded guilty to the bribery charges, it hired Daniel W. Danjczek under a new position title of “vice president for compliance and ethics.” Danjczek’s job is to “instill ethical behavior at the company.” Do you think this is a wise and sincere attempt to redress the company’s ethical problems or a public relations gimmick? What would you do to ensure that such an appointment is not perceived by employees as a superficial “quick fix” to improve the firm’s ethical reputation? Explain.
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17-34. When a company operates in many different countries with widely diverse legal systems and ethical standards, how can it develop and enforce a global set of criteria as to what is right and wrong? Explain.
Team Exercise
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17-35. The class is divided into groups of five. Each team will provide Mr. Danjczek with a set of recommendations as to what he should do in his new job to improve the ethical climate at Titan. Depending on class size, each team will present its recommendations to the entire class for approximately 10 minutes, to be followed by open class discussion moderated by the instructor.
Experiential Exercise: Team
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17-36. One student will role-play Mr. Danjczek; five other students will role-play international agents of Titan at five different locations (Brazil, Bermuda, Saudi Arabia, Nigeria, and Rumania). Mr. Danjczek is trying to convey the message that the company is serious about its ethical turnabout and that “the old chapter in the company’s history of lax ethical standards has come to a close.” Local agents believe that this is a wonderful thing to say from a public relations perspective, but that Titan cannot be competitive against other foreign firms that have no qualms about doing whatever they have to do to secure contracts. Role-play should last for about 15 to 20 minutes, after which the instructor will moderate open class discussion of the issues raised.
Experiential Exercise: Individual
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17-37. Develop a set of policies to discourage corruption in an organization such as Titan. What are the major challenges in trying to enforce such a policy? What steps would you recommend to increase the probabilities that such a policy will be effectively implemented?