CASE ANALYSIS I

ALEXANDER GAVIN’S DILEMMA: CULTURAL

RELATIVISM AND BUSINESS AS USUAL
CASE 1: ALEXANDER GAVIN’S DILEMMA: CULTURAL RELATIVISM AND BUSINESS AS
USUAL

April 10, 1983

Dear Professor Hennessey:

I have not talked with you since my participation in The Executive Program at Tuck School in the summer
of 1978. Many times I’ve hoped I might come back to visit but my life has been one surprise after the other,
and I have been too busy to take any vacations in recent years. I want to tell you about a situation that
happened to me recently. I know you will be interested in it, and if you have time, I would like you to tell
me what you would have done had you been in my position.

As I think you know, I am a Senior Project Manager for the El Sahd Construction Company in Kuwait. The
company is a prosperous one, with an excellent reputation for producing in a timely and cost-effective way
on major construction projects in the Middle East. The Chairman and Chief Executive Officer is a well
known Kuwaiti and my direct boss is another American expatriate who is Senior Vice President for urban
construction projects. Two months ago, we put in a bid to be the principal subcontractor on a project in
Iran. Our bid was $30 million, and we expected to bargain with Ajax, Ltd., the British-based company
asking for the bids. We had built a heavy profit into the $30 million. I was asked to go to Tehran on March
3rd to talk with the Ajax manager of the major project. That manager told me that we were going to get the
job. I was delighted. The job meant a lot to us. We had put a great deal of planning into it, and it was exactly
the kind of work that we do best. Then came the surprise. I was told our bid had to be $33 million.

My response was that we can always raise our price but that 1 would like to know why we were being asked
to do so. The reply was, “Our way of doing business requires that because $1 million will go directly to the
Managing Director of our Company in London. I will get Si million and you, Alexander, will get $1 million
in a numbered Swiss account.” “Why me?” I asked. “Because we need to have you on the hook as insurance
that you will never talk about this with anybody else.” I went back to Kuwait to ponder the matter. I was
particularly disturbed because I had heard of cases like this in which, should the bidder fail to cooperate,
the next message was that physical harm might be part of the exchange. I had been involved in “payoffs”
before. They are a common part of doing business in the Middle East, but I had never been in a situation
where I was being coerced into taking a “cut” myself. I didn’t like that. It went against my ethics. At that
point, I really didn’t know what to do. I thought, among other things, how helpful it would have been to put
my dilemma before a Tuck class and listen to the discussion.

Sincerely,
Alexander Gavin
 I. POINT OF VIEW
The analysts take the point of view of Mr. Alexander Gavin, the Senior Project Manager
of El Sahd Construction Company (herein referred to as the “Company”) in Kuwait.

II. STATEMENT OF THE PROBLEM

Mr. Alexander Gavin is faced with a dilemma on accepting a certain offer that may have
an ethical implication to him personally and to the company. He was offered by Ajax Ltd, a British-
based company who is also a potential bidder, to let them be the principal subcontractor of a project
in Iran but that they have to increase the bidding price by three million from their original bidding
price and such increase shall go directly to Mr. Alexander, the Manager and Managing Director of
Ajax.

III. OBJECTIVES
To come up with a decision pertaining to the offer that would create a win-win situation
for the company without ignoring Alexander Gavin’s ethics.

IV. AREAS OF CONSIDERATION

1. Original bidding price of the company is $30 million for the project in Iran.
2. The undertaking with Ajax Ltd is extremely profitable to the company.
3. Manager of Ajax Ltd told Mr. Gavin that they are going to get the job but the price has to
be $33 million, $1 million each goes directly to Mr. Gavin, the Manager and Managing
Director of Ajax Ltd.
4. Culture in the Middle East wherein pay-offs are very common.
5. Mr. Gavin heard of cases where physical harm might be part of the exchange if he fails to
cooperate.
6. The company might lose this great opportunity to competitors or other bidders and to get
the job means a lot to their company.
7. Alexander Gavin’s ethics is at stake in doing business.

V. ALTERNATIVE COURSES OF ACTION

1. He will follow his ethics and reject the proposal and just wait for the consequences.
2. He will try to contact with other manager from Ajax Ltd to make them aware of the
corruption existing in their company.
3. He will ignore his ethics and accept the proposal of Ajax Ltd.
4. He will elevate his concern to his superiors regarding the proposal of Ajax Ltd. discreetly
so all of them can weigh the ups and downs of accepting or rejecting the proposal.

VI. CONCLUSION AND RECOMMENDATION

Mr. Alexander Gavin must address the problem to his superiors firsthand regarding the
proposal of the manager of Ajax Ltd.. Mr. Gavin cannot just decide this to himself because the
project is very crucial to the company. However, it is very important for him to inform his superiors
discreetly because of the physical harm he might face if the managers of Ajax Ltd. knew that he
told his superiors. At the time when top management of El Sahd Construction Company gets to be
notified about the problem, the superiors should then weigh the ups and downs of accepting or
rejecting the proposal.
One of the areas which the top management need to consider is the common culture in the
Middle East regarding pay-offs. In cultural relativism, it tells us to understand the customs of a
given society and not to judge the morality of a particular culture. With this, accepting the proposal
might be in conflict with their ethical beliefs, however, it would be beneficial to the overall interest
of the company. It was also mentioned in the case that the company does not mind to raise their
price, which means, an additional $3 Million does not really give an impact compared to the heavy
profit from their bid of $30 Million which they may lose if they decide to reject the proposal. And
if they come to a decision to reject the proposal just because it is unethical, then the company may
unreasonably lose this opportunity to their competitors.
Thus, considering the cost-benefit analysis of the situation, it is best for the company to
accept the proposal. The company must look into the overall interest of the company, especially to
its employees. As for the $1 Million that is supposed to be the share of Alexander Gavin, it should
not be given to him but instead, treat it as additional income for the company.