· Examine two (2) of the major HR ethical issues multinational corporations face when operating globally. Recommend two (2) preventative actions that HR departments can take in order to lessen the occurrence of these ethical issues. Provide a rationale for your response.
Notes from Case study
Bribery is one of the most pervasive forms of corruption in global business. In the United States, the United Kingdom, and many other countries, bribery in business is illegal, par- ticularly when it involves the bribing of foreign officials. Unfortunately, bribery plagues even the most well-respected organizations. Corporations past and present have witnessed or participated in this illegal practice. Multinational organizations face the added challenge of having to monitor their subsidiaries in various countries, including some where bribes are expected as part of the normal course of business. IBM, for instance, paid fines of $10 million to settle claims it paid officials in China and Korea with gifts and other bribes to secure contracts. With fines often reaching into the millions, it is essential for companies to have systems in place to prevent this form of misconduct. Bribery is defined as the offering of payments or other incentives to gain illicit advan- tages. In business, bribery can be used to influence an organization or individual to pro- vide preferential treatment. Although bribery occurs on a widespread level, it is far from harmless; rather, it interrupts the competitive process between organizations. Many cul- tures, including the United States and the United Kingdom, consider bribery to be an unfair way of conducting business. For years corporations have adopted anti-bribery and anti-corruption policies in their organizations. However, these efforts mean little if they are not enforced. The form and frequency of bribery vary depending on the culture. In some cultures, bribery is a common way of doing business. Many cultures, including the United States, allow companies to provide hospitality or small gifts to those with whom they wish to do business. In fact, in Japan it is often considered rude not to bring a gift. One challenge for many companies is how to determine what constitutes a gift or an act of hospitality and what can be construed as a bribe. Giving a potential client a mug with the company logo on it is likely to be seen as a form of hospitality because it is so small in value it will not likely influence the client’s business decision. An all-expenses paid trip to the Bahamas is another question entirely. However, other items are not as easily defined. For instance, is a bottle of wine a gift or a bribe? What if the wine costs $20? How about if it costs $175? The distinc- tion between gifts and bribes can be a gray area. It is the firm’s responsibility to be aware of the bribery laws within each country it operates in and conduct business accordingly.
United States or the United Kingdom, respectively, from bribing foreign officials anywhere. Another important measure for combating international bribery is the OECD Anti-Brib- ery Convention, meant to criminalize international bribery of foreign public officials. All 34 OECD member nations and 7 nonmember nations are subject to this convention, although some countries are more proactive in enforcement than others. Even countries where bribery is commonplace have passed bribery laws and are prosecuting individuals or companies for acts of bribery. For example, China recently amended its criminal code to allow prosecution of companies that offer bribes to foreign officials over $31,640 (RMB 200,000). Brazil also recently passed its own corporate bribery law, making companies civilly liable for bribing government or foreign officials. The new Brazilian law is actually much stricter in some ways than its U.S. and U.K. counterparts, although how effectively it will be enforced remains to be seen. However, simply knowing the relevant bribery laws is only one step toward combating this practice. Unfortunately, the distinction between a gift and a bribe continues to remain ambiguous, and even the most wide-sweeping anti-bribery laws are not always clear on this issue. To eliminate this uncertainty for employees, generally accepted practices regard- ing bribery should be located in the company’s code of conduct as well as communicated to all employees. By implementing a code of conduct with clear distinctions between bribery and gifts or entertainment, a company can set a proper precedent that bribery will not be tolerated. This case analysis examines two of the major laws that impact the use of bribery on a global scale: the Federal Corrupt Practices Act of the United States and the Bribery Act of the United Kingdom. While there are many other global bribery laws, these are the most well-recognized anti-bribery laws in the world. We begin by examining the backgrounds of these two laws and then discuss the rules and regulations of each. The case explains why these laws were enacted and who is subject to their standards. The analysis also provides specific examples of bribery and its consequences. Finally, we offer an overview of how bribery negatively impacts national institutions, including political, social, and economy
FCPA, a bribe can be anything of significant value, including money, gifts, travel, or vari- ous types of entertainment. Forms of bribery vary from company to company; one orga- nization may view anything less than $100 as acceptable, while another company may see anything more than $10 as a bribe. To avoid discrepancies, it is necessary for companies to include their standards on gifts and entertainment in their codes of conduct. Any company with operations in the United States is subject to the FCPA over its entire business. The FCPA always applied to companies listed on the U.S. Stock Exchange, and in 1998 the law began applying to foreign companies as well. The FCPA was designed to encourage proper business transactions conducted by companies and individuals. Ulti- mately, Congress enacted the FCPA to bring a halt to the bribery of foreign officials and attempt to build and restore public confidence in the integrity of the American business system. With the development of the FCPA, the implications and consequences for bribes changed. Punishment for violating the FCPA varies from case to case. However, penalties generally include up to five years in prison and fines of up to $250,000 for individuals. For business entities, fines can reach $2 million. Also, company executives who know about bribery but do not report it can face prison time. Bribing government officials comes in many forms. In 2014 HP paid $108 million to settle allegations that it had bribed foreign officials in Mexico, Poland, and Russia. In 2012 Eli Lilly was charged with issuing improper payments to foreign government offi- cials in order to conduct business in Poland, China, Russia, and Brazil. Additionally, in 2012 the Securities and Exchange Commission found Tyco International guilty of arrang- ing improper payments to foreign officials in more than 12 countries.