A specific ethical issue for managers in the international arena is that of questionable payments. These are business payments that raise significant questions of appropriate moral behavior either in the host nation or in other nations. Such questions arise out of differences in laws, customs, and ethics in various countries, whether the payments in question are political payments, extortion, bribes, sales commissions, or grease money (payments to expedite routine transactions).31 Other common types are payments to speed the clearance of goods at ports of entry and to obtain required certifications. They are called different names: tokens of appreciation, la mordida (the bite, in Mexico), bastarella (little envelope in Italy), pot-de-vin (jug of wine in France). For the sake of simplicity, we will categorize all these different types of questionable payments as some form of bribery.
In South Korea, for example, the bribery scandal that put former President Roh Tae Woo behind bars in 1996 spread to the top 30 chaebol (which account for 14 percent of gross domestic product). Any ensuing changes to the close relationship between politics and business in South Korea are likely to reshape, and perhaps slow down, the Korean economy. But executives in those chaebols say they still expect to pay the Huk Kab, or rice-cake expenses, which run thousands of dollars, as holiday gifts to cabinet ministers as a hedge against disadvantageous treatment.
The dilemma for Americans operating abroad is how much to adhere to their own ethical standards in the face of foreign customs, or how much to follow local ways to be competitive. Certainly, in some societies, gift giving is common to bind social and familial ties, and such gifts incur obligation. However, Americans must be able to distinguish between harmless practices and actual bribery, between genuine relationships and those used as a cover-up. To help them distinguish, the Foreign Corrupt Practices Act (FCPA) of 1977 was established, which prohibits U.S. companies from making illegal payments or other gifts or political contributions to foreign govetnment officials for the purposes of influencing them in business transactions. The goal was to stop MNCs from contributing to corruption in foreign government and to upgrade the image of the United States and its companies operating overseas. The penalties include severe fines and sometimes imprisonment. Many managers feel the law has given them a more even playing field, and they have been more willing to do business in certain countries where before it seemed impossible to do business without bribery and kickbacks. Unfortunately, bribery still continues, mostly on a small scale, where it often goes undetected. But, the U.S. Government does vigorously pursue and prosecute bribery cases. Even the mighty IBM's Argentine subsidiary has been accused of paying a bribe of $249 million to get the contract to install computers at all the branches of Argentina's largest commercial bank, Banco de la Nacion.32 Companies from the U.S. claim that they are placed at a competitive disadvantage in Latin America and elsewhere because their competitors overseas do not face the same home- country restrictions on bribery.
If we agree with Carson that accepting a bribe involves the violation of an implicit or explicit promise or understanding associated with one's office or role, and that, therefore, accepting (or giving) a bribe is always prima facie wrong, then our decisions as a manager, salesperson, or whatever are always clear, no matter where we are.33
However, if we accept that in some cases-in morally corrupt contexts, as Philips calls them-there may be no prima facie duty to adhere to the agreements implicit in one's role or position, then the issue becomes situational and a matter of judgment, with few consistent guidelines.34 If our perspective, continues Philips, is that the action purchased from the relevant official does not count as a violation of his [or her] duty, then the American managers or other foreign managers involved are actually victims of extortion rather than guilty of bribery.35 That is the position taken by Gene Laczniak of Marquette Company, who says that it is just part of the cost of doing business in many countries to pay small bribes to get people just to do their jobs; but he is against paying bribes to persuade people to make a decision that they would not otherwise have made.36
Whatever their professed beliefs, many businesspeople are willing to engage in bribery as an everyday part of meeting their business objectives. Many corporate officials, in fact, avoid any moral issue by simply turning a blind eye to what goes on in subsidiaries. Some companies avoid these issues by hiring a local agent who takes care of the paperwork and pays all the so-called fees in return for a salary or consultant's fee.37 However, while the FCPA does allow grease payments to facilitate business in a foreign country, if those payments are lawful there, other payments prohibited by the FCPA are still subject to prosecution even if the company says it did not know that its agents or subsidiaries were making such payments-the reason to know provision.38'39
Critics of the FCPA contend that the law represents an ethnocentric attempt to impose U.S. standards on the rest of the world and puts American firms at a competitive disadvantage.40 In fact, the United States is the only country prohibiting firms from making payments to secure contracts overseas.41 In any event, business activities that cannot stand scrutiny, many feel, are clearly unethical, corrupt, and, in the long run, corrupting. 1ribery fails three important tests of ethical corporate actions: (1. Is it legal? (2. Does it work (in the long run)? (3. Can it be talked about?43
Many MNCs have decided to confront concerns about ethical behavior and social responsibility by developing worldwide practices that represent the company's posture. Among those policies are the following:
Develop worldwide codes of ethics.
Consider ethical issues in strategy development.
Given major, unsolvable, ethical problems, consider withdrawal from the problem market.
Develop periodic ethical impact statements.
Most of the leadership in developing ethical postures in international activities comes from the United States. Although this move toward ethics and social responsibility is spreading, both in the United States and around the world, problems still abound in many countries.
Heightened global competition encourages companies to seek advantages through questionable tactics. A 1995 Commerce Department study revealed many incidents of improper inducements by companies and governments around the world (such as Germany's Siemens and the European airframe consortium Airbus Industrie) which undercut U.S. companies. Indeed, American companies are not all clean. In October 1995, Lockheed Martin Corporation's former vice-president was sentenced to 18 months in prison and a $125,000 fine for bribing a member of the Egyptian Parliament to win an order for three C-130 cargo planes. So much for Lockheed's consent decree to refrain from corrupt practices, which they signed 20 years ago following their bribery scandal in Japan.
Japan also continues to have its share of internal problems regarding the ethical behavior of its officials and businesspeople. In the scandal involving Nippon Telephone and Telegraph Company (NH), the chairman of the board of NTT was involved in obtaining cut-rate stock in a real estate subsidiary of the Recruit Company in exchange for helping the company obtain two U.S. supercomputers. When the stock went public, the chairman and other NH executives made a lot of money. They were later arrested and charged with acceptirg bribes.As the scandal unfolded, it appeared that government members were involved, including the prime minister, Noboru Takeshita, who had received $1.4 million in questionable, albeit legal, donations from the Recruit Company. Takeshita subsequently resigned, as did other government officials, and the incident became known as Recruitgate, in reference to the Watergate scandal that forced President Nixon to resign.
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