Bribery

To bribe or not to bribe – it is a difficult decision for many business leaders today as they expand their market and operations to other countries for efficiency and more business opportunities. In many developing countries, bribery is an effective means for a new market entry to gain favorable treatment from the local government, or a business in general to win new contracts. Although bribery is prohibited in the law book of virtually every country, many international organizations still directly or indirectly engage in bribing local authorities where they operate, and suffering severe financial and reputation damage as a result.
This paper will, using the model based approaches, focus on discussing ethical aspects of the problem. First, we take a look at a recent example of corruption and bribery:
SNC-Lavalin Group Inc, (“Reuters.com,” 2012) the largest engineering and construction company in Canada and top five Global Design firms in the world, has since early this year been under police investigation for $56 million in mysterious payments that were wrongly assigned to certain construction projects. SNC-Lavalin CEO stepped down in March 2012 after an internal investigation found he had authorized these payments. In May, the company was also alleged to have offered “huge bribes” to obtain a consulting contract overseeing the construction of a
6.5-kilometre bridge over the Padma River in Bangladesh.
Ethical issues identified in this case are the paying/taking of bribery and government neglect of control over the situation in foreign developing markets.
Agents
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There are two active agents in a bribery transaction: the bribe payer - decision maker(s) of the business, and the bribe taker - often government officials or decision makers at client companies. Local governments can also be considered as active agents in bribery.
Passive agents of bribery are the organizations which the payer and taker work for, other companies who pursue the same business, and the larger community in which the business operates in.
In our example we have SNC-Lavalin as the active agent, the Bangladeshi government officials as active agents, the two companies’ shareholders as passive agents, and the two economies/communities as passive agents.
Choices
The decision makers at SNC-Lavalin had the choice of paying or refusing to pay bribes for favours in return from the Bangladeshi government officials. Another choice that they had, as mentioned in class material, is to forge an industry agreement with their competitor not to pay bribes, creating a level playing field for everyone.
The bribe takers had the choice of receiving or rejecting the bribe. The Bangladeshi government could choose to turn a blind eye on or strictly punish bribery.
Payoffs
The most obvious payoffs of bribery is perhaps the economic benefits for the bribe payer which are increased revenue, positive change in market capitalization and increased shareholders’ benefits. On the side of the bribe takers, I can agree with the idea discussed in class that bribery can help attracting talents to work in government sectors where compensations is commonly low by compensating low salary with possible income from bribes.
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In a sense, bribery can also promote efficiency and growth “by removing bureaucratic rigidities and greasing the wheels of bureaucracy” (Cheung, Rau and Stouraitis, 2012). By paying bribes, companies lower the costs they would bear if they choose to comply with bureaucratic regulations in their target markets.
Consequences
Negative outcomes of bribery includes injustice for those who cannot afford or refuse to pay bribes, corrupting people and promoting corruption in that country, allowing inferior products and services to enter the marketplace (because responsible people have been paid to "turn a blind eye" to problems). In addition, positions and contracts can also be bought by the unqualified, “leading to massive waste” (csthmbestpractices.org, 2012). All of these negative outcomes will hold back the local economic development.
A model based approach – Utilitarianism
Under Utilitarianism (collective utility resulted from an action), bribery is wrong because it only benefits one organization (the bribe payer) and a certain number of individuals (who take the bribe) while it puts all other players who refuse to pay bribes in disadvantage, and hinder the economy development as a whole.
A model based approach – Deontology
Under Deontology (to choose only actions that embody universal norms): bribery is prohibited by law in virtually all countries in the world and, in SNC-Lavalin’s case, by their own company’s code of conduct, paying/taking bribes therefore definitely goes against universal norms.
From a personal standpoint
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“Do as the Romans do” - It was raised during class discussion that bribery is indeed a culture in some countries, and that it is wrong to impose Western culture (of anti-bribe) on these foreign markets. I think it would be wrong to consider bribery a culture because no government in the world officially allows it, no business would publicly acknowledge it, no individual would proudly list it and no nation would prohibit their own culture.
Some companies would argue that their operations, including making ‘facilitation payments’, is for the greater good of the local communities as they create jobs, bring in foreign investment capital, transfer technology and skills etc. In my opinion these companies have ignored the fact that if not for their bribes, the local communities might have enjoyed greater benefits because their decision makers, without bias, could have chosen the even better business partner.
In the end, bribery, no matter how beneficial it was to the company who facilitated it, once exposed, is a hard blow to any company’s reputation and causes severe consequences, including senior executive exits, loss of business, market devaluation and questioning of past operations. In SNC-Lavalin’s case, although the investigation is still ongoing, the company CEO had to step down in March. The accusations of bribery also prompted the World Bank to suspend a US$1.2 billion loan and temporarily barred the SNC-Lavalin subsidiary from bidding on other contracts in Bangladesh (“Calgary Herald”, June 22, 2012).
Also in legal and reputation crisis there are the cases of Walmart who is now facing a multibillion penalty for bribery in Mexico ( "NYTimes.com,” April 2012, ), or Siemens AG whose bribing activities in China has led to the company being under investigation by SEC and the death sentence for a Chinese senior executive (“Caixin.com,” June 2011). With no exception, all bribery cases and their damages are strong evidences of how consequences of bribery could totally out-weight the economic benefits it brings. Bribery can and should be resisted.