Section A:
Bribery and Business Ethics
(Bribery and Business Ethics)
Students taking business courses are sometimes a little surprised to find that classes on business ethics have been included in their schedule. They often do not realize that bribery in various forms is on the increase in many countries and, in some, has been a way of life for centuries.
Suppose that during a negotiation with some government officials, the Minister of Trade makes it clear to you that if you offer him a substantial bribe, you will find it much easier to get an import license for your goods, and you are also likely to avoid "procedural delays", as he puts it. Now, the question is: do you pay up or stand by your principles?
It is easy to talk about having high moral standards but, in practice, what would one really do in such a situation? Some time ago a British car manufacturer was accused of operating a fund to pay bribes, and of other questionable practices such as paying agents and purchasers an exaggerated commission, offering additional discounts, and making payments to numbered bank accounts in Switzerland. The company rejected these charges and they were later withdrawn. Nevertheless, at that time, there were people in the motor industry in Britain who were prepared to say in private: "Look, we're in a very competitive business. Every year we're selling more than a £ 1,000 million worth of cars abroad. If we spend a few million pounds to keep some of the buyers happy, who's hurt? If we didn't do it, someone else would."
It is difficult to resist the impression that bribery and other questionable payments are on the increase. Indeed, they seem to have become a fact of commercial life. To take just one example, the Chrysler Corporation, third largest of the U.S. car manufacturers, revealed that it made questionable payments of more than $2.5 million between 1971 and 1976. By announcing this, it joined more than 300 other U.S. companies that had admitted to the U.S. Securities and Exchange Commission that they had made payments of one kind or another — bribes, extra discounts, etc. — in recent years. For discussion purposes, we can divide these payments into three broad categories.
The first category consists of substantial payments made for political purposes or to secure major contracts. For example, one U.S. corporation offered a large sum of money in support of a U.S. presidential candidate at a time when the company was under investigation for possible violations of U. S. business laws. This same company, it was revealed, was ready to finance secret U.S. efforts to throw out the government of Chile.
In this category, we may also include large payments made to ruling families or their close advisers in order to secure arms sales or major petroleum or construction contracts. In a court case involving an arms deal with Iran, a witness claimed that £ 1 million had been paid by a British company to a "negotiator" who helped close a deal for the supply of tanks and other military equipment to that country. Other countries have also been known to put pressure on foreign companies to make donations to party bank accounts.
The second category covers payments made to obtain quicker official approval of some project, to speed up the wheels of government. An interesting example of this kind of payment is provided by the story of a sales manager who had been trying for some months to sell road machinery to the Minister of Works of a Caribbean country. Finally, he hit upon the answer. Discovering that the minister collected rare books, he bought a rare edition of a book, slipped $20,000 within its pages, then presented it to the minister. This man examined its contents, then said: "I understand there is a two-volume edition of this work." The sales manager, who was quick-witted, replied: "My company cannot afford a two-volume edition, sir, but we could offer you a copy with a preface!" A short time later, the deal was approved.
The third category involves payments made in countries where it is traditional to pay people to help with the passage of a business deal. Some Middle East countries would be included on this list, as well as certain Asian countries.
Is it possible to devise a code of rules for companies that would prohibit bribery in all its forms? The International Chamber of Commerce (ICC) favors a code of conduct that would ban the giving and seeking of bribes. This code would try to distinguish between commissions paid for real services and exaggerated fees that really amount to bribes. A council has been proposed to manage the code.
Unfortunately, opinions differ among members of the ICC concerning how to enforce the code. The British members would like the system to have enough legal power to make companies behave themselves. However, the French delegates think it is the business of governments to make and impose law; the job of a business community like the ICC is to say what is right and wrong, but not to impose anything.
In a well-known British newspaper, a writer argued recently that "industry is caught in a web of bribery" and that everyone is "on the take";. This is probably an exaggeration. However, today's businessman, selling in overseas markets, will frequently meet situations where it is difficult to square his business interests with his moral conscience.