Business Ethics Case Studies and

Selected Readings 8th Edition Jennings

Solutions Manual
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Business Ethics, 8e Jennings

UNIT SIX – ETHICS IN INTERNATIONAL BUSINESS

SECTION 6A – CONFLICTS BETWEEN THE CORPORATION’S ETHICS

AND BUSINESS PRACTICES IN FOREIGN COUNTRIES

READING 6.1 – WHY AN INTERNATIONAL CODE OF ETHICS WOULD BE GOOD

FOR BUSINESS
Use PowerPoint Slide 245 (Figure 6.1) – “The Interdependence of Trust, Business, and Government”.

Also use PowerPoint Slides 246 - 254 to show corruption indexes.

Use PowerPoint Slides 255 - 258 to show universality of a simple ethical test.

Answers and Key Discussion Items

1. We may have more universal values then we realize. This categorical imperative/Golden Rule test
runs throughout religions and philosophy.

2. Without ethical standards, the nation becomes amoral and lawless. Murder in Brazil was not the
issue; the courage to do your own killing was.

3. Corruption benefits the few at the expense of many. Economic development cannot occur in
corruption, so everyone suffers.

4. Many companies use one standard internationally so that employees are clear on what to do. Some
feel “when in Rome” is correct, but the problems of corruption reveal its inherent injustice. Refer to the
December 2007 issue of the European Business Review for a discussion of whether a universal code
of ethics is possible for businesses involved in international commerce. There are dangers in having
differing standards because in the international market place these standards can get confusing for
managers so that they unwittingly violate the law as they move through country assignments.

CASE 6.2 – CHIQUITA BANANA AND MERCENARY PROTECTION

Use PowerPoint Slide 259 for summary of issues in case.

Answers and Key Discussion Items

1. The Laura Nash question is so important here because Chiquita failed to realize that while there was
money to be made in the Colombian operation, there were also risks. The risks were political and,
just generally, safety risks in a country that had civil wars and terrorist organizations that were thriving
from protection money. One of those organizations demanded protection money. Immediately,
Chiquita was cast into the either/or conundrum. Either we pay the protection money or our
employees are not safe. The bigger issue (and the overarching ethical one) is whether Chiquita
should be doing business in a country at all when the payment of protection money to terrorist groups
is necessary in order to conduct that business. And the question is fairly basic because the payments
were a violation of the law. The end result was in no one’s best interest – the sale of a profitable arm
of the company.

2. “Technical violation” may be another one of those labels that helps us to justify conduct. We are not

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Business Ethics, 8e Jennings

really in violation of the law – ‘tis but a mere technical violation, something that makes it seem as if
the rule is not well grounded and that we have the judgment to step outside the rule. While Mr. Hills
did report the conduct to law enforcement officials, he was also given advice by those officials about
not continuing the conduct, advice he and the board and the company chose to ignore. If you know
the law and have been warned but continue to violate the law after you self-report, there is still a
violation of the law.

3. Companies need policies that constitute a form of a credo for them: we do not pay protection money.
We have private security as a safety precaution, but we do not pay protection money. We also do not
violate the law, technically or otherwise. “I would never use my position in a company to contribute to
political unrest in a country.” “I would not use company funds to support terrorist organizations.”
Friedman may or may not support individual contributions to terrorist groups (Economist humor).

4. Through its sustainability initiative, Chiquita was exercising its social responsibility on safety for its
employees as well as education and quality of life issues. The initiative was a way of providing basic
human rights and dignity for those who were employed at Chiquita. One benefit companies gain from
social responsibility is that they are not subjected to the protests and boycotts heaped upon
companies that do not follow these progressive types of behaviors and policies for their international
operations. Another benefit is generally thought to be productivity of employees – without the cares
and worries of family support, safety, housing, etc., they can focus on their work. The other benefit is
seeing the economic development that comes with helping the community grow and adjust to the
newfound income sources that are available thanks to the workers.

Compare & Contrast

The clear position of the Justice Department is no payments, but the department also provides some
insight for companies that think they are indeed facing an either/or conundrum (either pay the money for
protection or do not do business in that country). The Justice Department explains that, as they always
have, U.S. businesses will find a way to accomplish what needs to be done without violating the law.

There is also a social responsibility issue here. Funding terrorist organizations allows them to plot and
plan attacks that can kill locally and globally. The goal is cutting off their sources of funds and one
primary source would be the protection money such as that demanded of Chiquita. Alternatives include
private security, doing business in another market, negotiating with the government.

CASE 6.3 – PIRATES! THE BANE OF TRANSNATIONAL SHIPPING

The following was a write-up I did for my students on this exercise to help them with their analysis. The
questions at the end of the case are answered in detail here with lists that you can walk through with your
students.

Some Thoughts on the Transnational Exercise

Remember, you are not just sitting around “I think”-ing – you are analyzing and taking the rich body of
science, theory, and case history that you now have and using it to help a company. Please also
remember that as you go into the final, it would be rare for anyone to have reached solid “A” standing.
We are on a journey of improvement here – this exercise is designed to give you some insights into what
I am looking for (and what any company/organization would also look for) if called upon to analyze an
ethical issue. So, this is a preemptive strike to take the candid evaluations I have given your work and
study this sheet on how to go about the expected form of analysis. You will have the opportunity to write
a sample final near the end of January as a way of understanding expectations.

Several of you went right off the cliff where you wrote what you think I want to hear, e.g., “Just pay the
ransom.” Remember, I don’t really care how you conclude, just need to see the solid thinking process
that got you there.

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Business Ethics, 8e Jennings

Some of you just threw the kitchen sink and then some at me, i.e., you just listed most everything you had
read and hoped it applied. The old “throw spaghetti against the wall” approach and hope that something
sticks. Listing things that are not applicable is a sure sign you are not quite with me on the analysis.

I was grading your papers on a flight and I had a “reader” next to me, i.e., someone who reads what you
are doing. He said he was “trying not to read everything, but I couldn’t help myself.” Good thing I do that
number/privacy deal. He then asked what I taught, and I said ethics, and he laughed. He said, “Well,
there is no right or wrong answer.” “Well,” said I, “there is still a disciplined method for thinking about the
issues and that’s what I am trying to teach them.” He responded, “Ah, it’s all subjective.” We stopped
talking then because I was going to rail on him about the ethical issues in reading the work of the
passenger next to you. I hope after you read what appears below that you will understand there really is
very little subjectivity in what I expect from you. You are developing a practical set of skills for analyzing
tough questions.

Time was limited on this, but I needed an exercise to be able to determine where we were in terms of
progress on the analysis. I should have the grades posted in the next week.

Here are some ideas on answering the question, which was to offer a list of advice, issues, and concerns.
I offer the following, all within the framework of what you have studied so far. Remember McNamara’s
thoughts on Vietnam, “We didn’t ask enough questions.” Those numbers:

• $25 mil – not a great deal of scratch for an international shipping company to lay down – we don’t
know how this relates to the actual financial picture for Transnational and that is one of the questions.
Sounds callous – can we afford to pay the ransom? But, there is method in this madness of asking
these questions (see below).
• Numbers require you to go up and down and across the chain, so you have some numbers effects
that are not easily quantifiable. You can also do stakeholders here if you want and analyze cost and
stakeholders together.
 Impact on Transnational’s costs going forward.
 You can always pay, but there is always the next set of pirates and a new demand.
 Once pirates know you pay, your negotiation power is somewhat reduced.
 How long can Transnational continue to follow the “Just pay the ransom” approach to resolving
these pirate attacks? This is where the big numbers picture comes in. And your Donaldson
comes in here. With certain moral absolutes, where are you as a company? Given the reality of
pirates, does the company need a new business model? Does the company need new security
measures? Different routes? Different ways of training crews? Maybe new routes that avoid
high-risk pirate areas? Maybe revisiting the whole international business transport model?
 Not paying and employee death (think Kelly aristocracy) is bound to have a negative impact on
recruiting new employees and wages will increase because international barge work just got a
much higher risk, and risk demands increased pay.
 Families of employees – going to get some lawsuits on this one.
 Customers – higher price issues depending on which way you go as well as the risk of a boycott
(Nestlé case gives us background for this); let 25 employees bite the dust because you don’t
negotiate with pirates and there might be some backlash.
 Insurance costs go up – maybe uninsurable depending upon what Transnational does and the
results.
 Classic sunk cost pressures here.
 Other companies that do shipping are affected because pirates are emboldened when they get
what they want.
 Transnational’s shareholders will be affected by the decision no matter which way you turn on this
one – there can be bad reaction either way (payment or no payment).
 Davis’s early warning and a previous industry accident put you in the position of being aware of a
risk and having done nothing – this coming out is problematic, especially if you opt not to pay.
 This is a low probability (maybe medium probability, depending upon where the ship is sailing and
off the coast of Africa carries higher probability than other areas)/high risk event.

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Business Ethics, 8e Jennings

 If you pay, costs will increase; the pirates live to play another day (from the movie “Speed,” with
an ex-cop demanding a ransom).
 If you don’t pay, you have the employees and their families as stakeholders and the fact that
Davis alerted management to the issue but no one took any steps – this is classic Nash – how did
you get in this situation in the first place? You are here largely because the Davis issue was
unresolved.
• Transnational undertook its business model without thinking through the real costs of this type of
business, costs that include this ultimate confrontation between human life and continuing existence
and profits

The Law

• International waters mean a certain degree of lawlessness.

• If you call it a “ransom,” then there is no illegality.
• If you call it a “bribe,” then Transnational may have issues as a U.S. company.
• You have one of the areas in which no country has jurisdiction.
• The US does have the right to protect its citizens in international waters, so there is the thought of
involving the U.S. government (something that was indeed done in the previous pirate attack that
Davis referred to).

Examine Categories

• This is a classic “condoning unethical conduct” if you pay the pirates.

• If you don’t pay the pirates, it is organizational abuse, because we probably all can agree that letting
employees get bumped off may not be a good morale booster or HR policy.
• Underlying this will be hiding information – like Merck, Manville, Dow, company was aware of an
issue but took no action or steps to develop policies, processes, procedures, resolution prior to the
time the pressure of this situation hit.
• Were we saving money by not having necessary precautions and security on board? Organizational
abuse.
• There is also a classic balancing of ethical dilemmas here – 25 human lives at stake, but the
implications of payment are significant for so many others who will be affected.

Checks For Rationalization, Perception, Bias, Language

• “Bribes” vs. “ransom”.

• Davis sees his perspective.
• Do we really understand the pirates and their motivation? Is there something in our ethnocentrism
that might provide some insights and answers about their behavior, choices, and willingness to
negotiate?
• Employees believe the company credo on bribes is paramount.
• Is it a “cut your losses” situation (i.e., loss aversion)?
• Diagnosis bias – is the problem the pirates or was it the lack of training, lack of security procedures;
lack of security plan in place? If the cause is something other than just “bad pirates, evil pirates,”
there may be an effect on the decision.
• The outcome is presumed—going both ways.
• Is it possible that the rules of the high sea are different (Sadhu) and that everyone in shipping buys
into these risks?
• “It’s a gray area.”
• “Everybody else just pays the bribes.”
• “This is the way we have been doing it.”
• “If we don’t do it, another company will and we will have suffered because of our stance.”
• Time pressure because of pirates’ deadline.
• Sunk costs and the draw to recover them.

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Business Ethics, 8e Jennings

• We can fix this; we always have in the past.

List Those Affected By Your Decision

• Did a fairly good job as part of numbers (see above).

• Transnational’s reputation.
• Transnational’s shareholders.
• Creditors for Transnational and the ability to raise capital.
• Transnational’s employees – both those on the boat and otherwise.
• Other shipping companies because decision here affects their ability to stop piracy, depending on
what Transnational does.
• Employees who work international shipping company boats.
• U.S. government’s foreign policy and diplomacy.
• Military forces as decisions are made about deployment and use of force.
• Insurers for company, cargo, and employees.
• Effect on insurance industry.

Decide Your Role And The Role Of Business

• Utilitarians – do the most good for the most people – losing 25 lives now could save millions.
• Natural law – human life is paramount and policies on bribes take a back seat to preserving human
life.
• Rights – there are the rights of the employees, but there are also the rights that exist in commerce.
• Rand and self-interest – in whose self-interest is the death of the employees? In whose self-interest
is the preservation of their lives? There is great depth to be found in just exploring this issue.
• Everybody knows the high seas are tough territory – all part of the game – and we bought into it,
employees, companies, etc. (Albert Carr).

Apply Questions

• There is a slip into the either/or conundrum here – either we pay the bribe or we lose the lives.
• Is there “wiggle room” here?
• How does Transnational define itself? Is the no-bribes policy part of its credo? What about human
life?
• The issue is framed only one way, “To pay or not to pay,” and that framing costs us the perspective of
options.
• Flaws in the “to pay or not to pay” are that you can’t really trust the people you cheat with; they will
throw you under the bus. These are pirates – even with payment you may not attain the release of
the employees.
• Reframe to think of country assistance, military options, possibility of the release of some in exchange
for partial payment, a way to reduce the likelihood of employee injury if you do fire upon.
• The headline test is awful no matter what (and the fact that you knew does not help either way).
• You could discuss consequences here (WSJ).
• Blanchard and Peale – the element of conscience – even with logic on your side, the loss of
employees will be tough to live with – see our discussion of Andrew Carnegie and his response to the
Homestead rebellion when the suppression of union activities cost employees their lives.
• If I were one of the employees, how would I want this issue resolved?
• Can I see alternatives or have I fallen into the either/or conundrum?
• Classic Laura Nash – how did we get in this situation in the first place?

Rely On Cases And History

• Facts give you information that this type of piracy has happened before – how was it resolved? What
strategies did that company use? Can we use them?

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Business Ethics, 8e Jennings

• What do we risk if we do not see all of these issues?

• Seems to be a failure to get input here.
• What other companies have faced similar life-and-death dilemmas and how have they responded to
them?
• Can we get help?
• Have others developed a strategy?
• The likelihood of all of our lack of ground work on this issue coming out is 100%.
• If we assume our inaction will become public, how should we resolve this stand-off?
• Explore alternative resolutions.
• Recall Merck, Dow, Manville and the costs of their lack of candor – Transnational knew of issue but
took no action – problematic position no matter which way they turn.
• Maybe this is an inherently dangerous activity that cannot be controlled, in which case, do they need
to reformulate where they are headed?

Incorporate Strategy

• Thinking long term, what effect will this decision (regardless of what it is) have on the company?
• Is this an isolated incident or is it part of an evolving problem that requires involvement of the
international community?
• If I am working to resolve the problem internationally, can I proceed on a case-by-case basis until the
international community has a resolution, help, etc.?
• Where do my individual positions and postures fit when there is movement in a different direction that
will eventually solve the issues?
• Who is in charge here? Is this Transnational’s responsibility, and if it isn’t can they be excused from
their “no bribes” policy?

CASE 6.4 – THE FORMER SOVIET UNION: A STUDY OF THREE COMPANIES

AND VALUES IN CONFLICT
PwC and the Russian Tax Authorities

Answers and Key Discussion Items

1. The Laura Nash model of how did PwC get into this situation in the first place is very important. PwC
decided to expand its business into a country where it knew that corruption abounded. PwC has
been forced into a corner because of corrupt officials, but, nonetheless, the dilemma is real. The
experience here is a lesson to walk through the political climate, demeanor, etc., of a country before
opening shop there because the risks to license and reputation are great, as illustrated by the
dilemma in which PwC finds itself. The ethical dilemma PwC missed was whether it should be doing
business in a country with this much instability.

2. The ease of entry into a country means that there are those waiting to also skim the cream from those
who are skimming the cream in a new market. The market is new, regulators are inexperienced, the
groundwork for economic freedom has not been laid, and the result is the kind of chaos PwC
experienced because it did not think through the inevitable political risks in evolving markets as well
as the potential for corruption in government officials.

3. The two values in conflict are the loyalty to the client and keeping the client’s records private. The
other duty is the obligation to make money, and if its license is revoked, this division of the company
cannot make money in Russia. It’s a battle of honor between two valid and conflicting values.
However, that the battle is noble does not mean that there were incorrect decisions made in terms of
the initial one entering the country to do business.

Ikea and the Generators

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Business Ethics, 8e Jennings

Answers and Key Discussion Items

1. In finding a way to honor its values of not paying bribes, but also paying its employees and vendors,
Ikea missed an overarching issue – that the corruption in this country may interfere with the
company’s ability to do business there in a stable manner.

2. The political stability of the country; an atmosphere that may run contra to Ikea’s basic values. Ikea
will constantly be facing issues in this country – visiting and revisiting the instability and values needs
to be ongoing as the company expands there. There are ethical minefields fraught with risk in
countries such as this.

AES and the Power Plant

Use PowerPoint Slide 260.

Answers and Key Discussion Items

1. The government is unstable. No one is clear what the rules are, how the rules change, how the
pricing will work, and what new demands will be placed on the company.

2. What is the political condition in the country? What systems are under government control? Utilities?
What is the foundation of government? How are disputes settled? What is the country’s culture on
gifts and kickbacks? What is the history of other companies that have done business there? What
FCPA violations have occurred in this country? What local assistance can we obtain from lawyers
and other experts?

3. The numbers must include the possibilities of: being shut down fully; having the government take
over operations; the unknowns of the tax structure; profit sharing with the government; the loss of
reputation when government makes demands or releases information about the company and its
operations there.

CASE 6.5 – PRODUCT DUMPING

Answers and Key Discussion Items

1. Is it legal to dump products? Yes, so long as the other country has not banned them. Is it balanced
to dump products? No, you are selling products without a full disclosure of their hazards and their
fate in your own country. How will this action be depicted in a newspaper? As it sounds: dumping
bad products on those with little knowledge in countries with little consumer protection and no liability
system for recovery for harms.

2. The inventory write-off or write-down needs to be analyzed over both the short term (20% income
reduction), and the long term (damage to reputation; possible accidents in those countries and
liability; public relations damages). The write-down can be explained as a one-time event. Wall
Street and investors are sufficiently sophisticated to understand this.

3. In some cases, the evidence on safety is disputed. Some officials believe the product is safe and
others do not. Perhaps selling the product internationally is possible with new disclosures attached
about the debate regarding its safety. It is not the selling of the product itself that is unethical. It is
the selling of the product without disclosure of its previous history here. The element of conscience
does enter into these discussions because where there are children’s products involved, the shipping
of those products to other countries does not eliminate their risk. Children there are as vulnerable to
safety issues in products as children in the United States. Some managers simply cannot live with
the notion that the products they shipped to another country caused harm to children. That would be

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Business Ethics, 8e Jennings

a credo line – not doing anything that results in harm to children or the problem in being left to fend
for oneself.

4. Full disclosure is a compromise on products with safety issues. If the problem of defect is known,
and one still buys the product, there should not be an ethical problem. When the information is
withheld, it is unfair and unethical. Further, the purpose of information is a free market.

CASE 6.6 – BANGLADESH, SWEATSHOPS, SUICIDES, NIKE, APPLE, FOXCONN,

APPLE, AND CAMPUS BOYCOTTS
Answers and Key Discussion Items

1. The economic issues center on the comparisons between U.S. wages and wages in these countries.
The discussion must begin from the value of a dollar in those countries and the going wages. The
social discussion must center around the children and what is best, in the long run, for the economy
of that nation. The ethical issue is that many U.S. firms are doing in a foreign country what would be
illegal here and that is the use of child labor.

The points that many economists make is that these countries that are developing must go through
the same evolutionary process as was present in the United States before we had child labor laws.
However, the ethical issue is whether U.S. companies have an obligation to enlighten these nations
about the effects of child labor.

While libertarian economics produces fascinating discussions, it does assume that both sides to the
transaction have full information and the capability to contract. These jobs and wages are negotiated
with those who are traditionally assumed unable to contract because of lack of experience and
knowledge.

One way to look at the view that the jobs support the families is to ask if the jobs are so good, then
why don’t the adults in the families do them? Why are the children forced into the jobs? Reasonable
people disagree about this issue – companies need to be aware of the various stakeholders and be
prepared for accountability to those who hold different views.

2. The legal issues of employing a 12-year-old are very different from the moral ones. The issue is no
different from Union Carbide and Bhopal. Yes, they were in compliance with the law, but what they
did was morally wrong. The same question is here and the answer is the same. Legally you can do
it, morally you should not.

3. Some companies have actually improved the lives of children through school programs coupled with
work at decent wages and for limited hours. The children are off the streets and are fed and
educated.

4. How children are treated is also a question of ethics. Using the jobs as a means for them to get
ahead and carefully policing the work efforts are critical parts of the ethical obligations imposed for
employing children.

5. The stories involving this big shoe company and a big star hit home and made people realize what
was happening with sweat shop labor. The reality hit home when famous icons were associated with
it. In fact, it is often a strategy used by human rights groups to attract attention to an issue.

Compare & Contrast

The purpose of the economic background in this part of the case analysis is to help students see the
sweatshop issue beyond the emotional reaction. There are very real economic issues at play here and

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Business Ethics, 8e Jennings

there is a balancing of good outcomes here. There is a delicate balance to be struck. Once again, have
the students go back to the models and questions and various schools of ethical thought to reach their
conclusions. Consider what happens if there are no factories. Consider whether the use of the factories
should be balanced with other benefits for the country, the children, and their families. Consider the
issues of quality. Consider the gradual introduction of differing work standards and, especially, in light of
the history of labor in the United States.

CASE 6.7 – BHOPAL: WHEN SAFETY STANDARDS DIFFER

Answers and Key Discussion Items

1. The U.S. policies on shanty towns would be markedly different. They would not be permitted to be
located anywhere near the chemical plants. Although the plant met Indian standards for safety, such
close proximity would be considered unconscionable in the United States. That great disparity is
what contributed to the market and public reaction to the accident.

2. The issue of justice is one that enters into the question of how much is enough in terms of
compensation for the victims. U.S. dollars provide them with more recovery than the Indian courts
would.

3. Loss of reputation; increase in cost of capital because of increased risk; eventual end of the company
because the reputational damage was so severe that the company could no longer do business
under its name; litigation costs; boycotts and loss in sales.

4. Dow’s position is that it has no responsibility – legally the company is correct, but the reputational
impact still carries over to Dow and it experiences the protests as well as the shareholder protests.

5. A great deal of the initial analysis of the Bhopal disaster centered on the fact that the standards for
plant operation and location were different from India. The shanty towns would never be located so
close to a plant in the United States and operational standards and processes were more stringent
and regulated. So, much of the moral responsibility was assigned to Union Carbide. However, the
introduction of sabotage means that those factors did not cause the accident – sabotage can happen
anywhere, unless of course, there were not the basic protections in a plant against such an act –
something additional regulations cover in the United States.

CASE 6.8 – NESTLÉ: PRODUCTS THAT DON'T FIT CULTURES

Answers and Key Discussion Items

1. Nestlé, as an unassailable proposition, had a brilliant marketing program for infant formula. However,
social responsibility and the moral responsibility for the right of these young children to life, dictated
that Nestlé take other factors into account before using the marketing program. Once the boycotts
began, the harm to children was obvious. It was morally wrong to continue the program unchanged.
An executive with authority to do so should have changed the program.

2. Nestlé suffered a twenty-year taint on its reputation because of the decisions made in the infant
formula marketing program. It was not until the 90’s that the company began to emerge from the
taint.

3. A marketing program that satisfies not only WHO and AAP, but the ethical constraints as well, is one
that begins with the premise that in these third world nations, mother's milk is best and should always
be the first choice. "If you cannot nurse . . . " is the next line in a marketing program that would be
socially responsible. Also, a marketing program must involve some education because mothers need

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Business Ethics, 8e Jennings

to understand the risks they run of drying up if formula is used.

4. Those who made the decision to go forward with the program and were aware of the cultural, physical
and educational problems that would produce watered-down formula and malnourished babies are
morally responsible for the deaths and developmental problems of those children.

5. The moratorium is voluntary but it is only a matter of time before regulation is imposed that would
prevent distribution of samples. The potential for harm is great when the samples are used and the
mother's milk dries up or decreases. The lack of knowledge about lactation can cost infants' lives.
The moratorium is not required by positive law, but it is mandated by ethical constraints.

6. A discharge pack from a hospital with formula sends a signal of hospital approval. There is no
disagreement among the experts about breast milk being best. As a hospital administrator, you may
be making rationalization easier and actually be affording the opportunity for formula.

7. Some ads do read “Breast is best.” Many companies are exercising great ethical discretion in the
marketing of their products. Such an approach has the additional business benefit of building trust
among mothers.

CASE 6.9 – THE INTERNET, CENSORSHIP, AND HUMAN RIGHTS IN CHINA

Emphasize again the importance of analyzing the issues a business will face in another country BEFORE
entering that country to do business.

Answers & Key Discussion Items

1. Yahoo and Google forgot the upfront analysis necessary before doing business in another country.
The overarching question is, “Are we able to conduct business in this country in a manner that is
consistent with our core values? In a manner that will not bring customer and regulatory backlash? In
a manner consistent with human rights?” Asking any of those questions would have caused some
red flags to emerge that required more analysis of this strategic move by the two companies.

2. Any of the questions listed in question #1 would have been appropriate and important for Yahoo and
Google to ask. Both companies saw the potential of doing business in China without really analyzing
the risk or the implications for human rights.

3. Brin is focusing on the Blanchard/Peale question of, "How does it make me feel?” or the element of
conscience. There was a level of discomfort they were feeling and they used that as their standard.

Compare & Contrast

Point out to the students how these issues continue to arise in different countries and for different
reasons, but the analysis remains the same for the companies: Is it better to stay out of the country until
the human rights issues are resolved? Or is it better to go into the country and be an agent for change in
moving toward human rights? There is backlash for the latter, as Google and Yahoo experienced. Both
South Africa and China faced and face human rights issues. In China death sentences result from the
activities of Google and Yahoo. While South Africa had violence, the government penalties were
imprisonment and not automatic death. The consequences in China are more Draconian for those who
work toward human rights and freedom. However, both countries had conditions that ran contra to the
basic principles of human rights.

SECTION 6B – BRIBES, GREASE PAYMENTS, AND "WHEN IN ROME .

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Business Ethics, 8e Jennings

. ."

READING 6.10 – A PRIMER ON THE FCPA

Answers and Key Discussion Items

1. Use PowerPoint Slides 261 and 262. Companies pay bribes in other countries because they see it
as a expeditious way to accomplish their goals there and, in fact, may see it as the only way to
accomplish those goals. They see the time constraints of getting goods unloaded, product
manufactured or distribution chains established and seize whatever means exists for accomplishing
those tasks in the least amount of time. The short-term implications of bribes are that the company
gets its work accomplished. The tasks are done, business moves along and those who are taking the
bribes may benefit from having the extra income. In the short-term, those who point to bribes as a
good resolution do have a point. However, the long-term implications of bribes are the following:

a. Those in the country know that the company is willing to pay bribes. What may begin as a $100
payment to get goods unloaded can escalate until the company is paying everyone in the country
in order to accomplish anything and continue to do business there.
b. Those in the country also suffer economically. Corruption benefits the few at the expense of
many and the atmosphere created by the payment of bribes may produce an economy in which
there is so much uncertainty and risk that businesses no longer want to do business in that
country. An inherent distrust develops so that there is a hesitancy about investment in the
country by both those inside and outside the company.
c. Anyone can bribe – it is not a competitive advantage. Upping the bribe is not a resolution.

All forms of economic systems, from capitalism to socialism, suffer from the introduction of corruption.
The system no longer functions according to its rules and a favored class develops so that the open-
field of competition is destroyed in capitalism or the perception of equality is destroyed in a socialist
system. No matter what the economic or governmental system, corruption introduces distrust and
reluctance with the resulting economic impact on both investment and purchasing.

2. The policy should include the following: a statement of compliance with the FCPA; creation of
infrastructure to monitor payments to agents and others in other countries; monitoring of competition
in other countries, pricing and results; interrelationships of employees and agents and monitoring for
both – some companies add that facilitation payments are not permitted.

3. The issue of trust arises as the question is raised about whether the government officials are using
their time in public service to create private practice opportunities once they leave public service.

CASE 6.11 – SIEMENS AND BRIBERY, EVERYWHERE

Use PowerPoint Slides 263 - 266.

Answers and Key Discussion Items

1. The fines Siemens paid are far less than the company’s profits during the periods of the bribes.
Although we do not know whether the company lost money on these contracts as a result of the fines,
we do know that the amount paid in fines is very small in comparison to the amount of profits the
company earned during this period.

2. The risk is that employees come to rely on a facile business model, which, when taken away, leaves
the company with an infrastructure that does not know how to do business the usual way – by
negotiations, good terms, customer service, and good relationships.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Business Ethics, 8e Jennings

3. He is an amoral technician who believes that he must succumb to industry/cultural practices and just
behave as everyone else does. His failure to analyze the implications for Siemens resulted in the
upheaval of the company with five years of recovery estimated. Siemens probably began with smaller
gifts, lesser amounts of payments and then just expanded to a network within the company that
developed this business model of ease in gaining contracts.

CASE 6.12 – WALMART IN MEXICO

Answers and Key Discussion Items

1. The jobs are a positive effect, but the end result is that the economy is not based on the most
efficient, lower prices, etc., but rather on what you can pay. In countries where there is corruption
and bribery is a way of life, economic development is stalled. There are some break-throughs, as
with the Walmarts in Mexico, but the net effect is that bribery benefits a few without growing the
economy.

2. For some, this is a tough distinction to make – paying government officials for doing their job is
difficult. However, expedition fees that are available to all may be a way to get things done quickly.
For example, in the United States, we can get our passport quicker if we pay an expedited fee. But
that fee is available to everyone – it is not on a case-by-case basis.

3. Such a policy makes it clear for employees what they can and cannot do. The inclusion of facilitation
payments creates confusion and blurry lines.

4. Again, the economic development is halted when there is corruption. It is a cost of doing business
and some companies pull out because the fees only increase and the cost of doing business is
unclear. Once you pay, you become an easy target for government officials.

CASE 6.13 – ITALY’S FREEWAY CORRUPTION

Answers and Key Discussion Items

1. The costs include an incomplete freeway, the additional taxes for financing, the dangers of the
construction and incomplete roadways.

2. Because workers are able to get paid with little work – it was like a bottomless pit that they could tap.

3. The businesses and citizens in the towns trying to get connected by the freeway. The businesses
that might perform the work for a cheaper amount.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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