Essay on "Bribery the Issue of Business Ethics"

Essay 11 pages (3147 words) Sources: 7 Style: Harvard

[EXCERPT] . . . .

Bribery

The issue of business ethics is always at topic of interest for enterprises throughout the world. There are several business ethics issues that are frequently discussed. The purpose of this discussion is to examine bribery and kickbacks within the sphere of business. The research will also focus on the utilization of different ethical theories, namely teleology and deontology,

Bribery and Kickbacks

Bribery is defined as "money or favor given or promised in order to influence the judgment or conduct of a person in a position of trust… something that serves to induce or influence ("Bribery")." Kickbacks are defined as "a return of a part of a sum received often because of confidential agreement or coercion. ("kickback"). A kickback is slightly different from bribery but it is a form a bribery. Kickbacks can be particularly deceptive and in some circumstance present a danger to public health and security. Both bribery and kickbacks are present with the context of organizations regardless of whether or not they are public or private entities.

Within the context of business, bribery has different connotations depending on the region of the world in which business in being conducted. In general, in the West bribery takes place but they are generally frowned upon. However in other parts of the world bribery is considered to be an aspect of doing business and it is actually expected. In fact in China cultural and religious beliefs tend to applaud bribery as a practice. According to Whitcomb et al. (1998) Confucianism is the foundation upon which business dealing are based in China. The authors explain that there are four main ideas embraced by Confucianism. These four ideas are

(1) A stable society is dependent upon unequal relationships between people. That is there are leadership and subordinate roles (i.e. ruler/subject, husband/wife, father/son, and older friend/younger friend) (Whitcomb et al., 1998).

(2) The family structure serves as the archetype for every social organization (Whitcomb et al., 1998).

(3) Reciprocity is the foundation of virtuous behavior (Whitcomb et al., 1998).

(4) Virtuous behavior is inclusive of self-improvement through education, diligence, perseverance, and moderation in all things (Whitcomb et al., 1998).

Of the four characteristics of Confucianism, the idea of reciprocity being the root of virtuous behavior is the most relevant as it pertains to bribery and kickbacks (Whitcomb et al., 1998). In western countries bribery and kickbacks are believed to be unethical because they give a company an unfair advantage over the competition. However in societies in which Confucianism serves as a foundation, bribery and kickback are perceived as being a form of reciprocity which is the foundation of virtue (Whitcomb et al., 1998).

The author explains that even though the Confucian classification of society, into the hierarchal structures scholar administrator, farmer, artisan, and merchant, placed business as the lowest aspect of the structure, recent economic growth has changed some of Chinas ideas about the importance of business (Whitcomb et al., 1998). In addition there have been may studies that have a suggested a link between Confusion principles and the recent successes that china has experienced (Whitcomb et al., 1998). The author explains further that

"China represents a country in which the process of institutional transformation has left cultural values in a state of flux. After experiencing first a thorough denunciation of Confucianism followed by an overturn of Maoist values, the value system of the Chinese people has gone through a continual process of remaking.

The gradual shift throughout the 1980's from central planning to a market system has affected not just the way in which resources are allocated, but also Chinese

values and the way in which economic decisions are legitimized (Whitcomb et al.,

1998)."

Now that the China has shifted from central planning to a market-based system, the ideas and cultural norms of the society are still present in some ways. This is problematic for foreign firms that have invested in China because they have an obligation to abide by the laws of their host countries. While China has made some effort towards stopping bribery and kickbacks it is still very much a part of doing business in China and in many industries bribery and kickbacks are expected.

Indeed Chinese business executives and government officials are well aware of the power that China now has a result of the size of its population and economic growth in recent years. According to a survey involving both Chinese and American executives,

"Compared with the American respondents, the Chinese are at least equally, and sometimes more, motivated by profit. A typical Chinese respondent would be more willing than the Americans to accept business practices based on interpersonal relationships, and more likely than the Americans to use informal, in some cases illegal from the American point-of-view, means to achieve his/her profit objective (Whitcomb et al., 1998)."

This profit motivation seems to be a pivotal reason why bribery and kickback are so prevalent in China. For the Chinese who have experienced tremendous growth in recent years there is an increased desire to succeed and prosper. This motivation leads businesses and organizations to conduct business in ways that are unethical and even illegal. This is even the case when a company is fully aware of the consequences that may occur as a result of such actions. Companies that would never engage in bribery and kickbacks in their home countries often engage in such activities abroad. There are a separate set of rules depending on the market in which business is being conducted.

Indeed, the differences between the Western businesses and Eastern businesses as it pertains to bribery is a prime example of the difficulty that multinational businesses are confronted with. Should these companies conform to the traditions of the host country or should they continue to practice the business ethics policies of the home country?

In many instances western businesses conform to the norms of the host country. This has been particularly true in recent years as the economic situation in China has grown substantially.

"In interviews, China-based executives, sales agents and distributors for nine U.S.

multinational companies acknowledged that their firms routinely win sales by paying what could be considered bribes or kickbacks -- often in the form of extravagant entertainment and travel expenses -- to purchasing agents at government offices and state-owned businesses (Goodman, 2001, A01)."

According to the aforementioned China-based executives bribes or kickbacks are not paid directly. Instead they are distributed through public relations firms or distribution companies. Firms distribute bribes and kickbacks in the manner because it allows them to avoid prosecution that is likely to occur is the Justice Department or the securities and exchange Commission finds out about the bribery and kickbacks. These agencies are responsible for enforcing the U.S. Foreign Corrupt Practices Act.

American companies are not the only ones engaging in this type of conduct abroad. A plethora of businesses from all over the world are now a part of the Chinese market. These companies have invested heavily in having a presence in China and they want to see a return on their investments. Many of these multinational corporations are governed by laws that are similar to the U.S. Foreign Corrupt Practices Act.

Although prosecution is a very real possibility it is a risk that many multinational corporations are willing to take. For the most part it is viewed as a necessary risk that must be taken if a company is going to succeed in the Chinese market. For instance, If American companies do not engage in the offering of bribes and kickbacks their foreign competitors that do engage in such offerings have an advantage over them. This competitive advantage might eventually force the American companies out of the market.

Goodman (2001) also explains that such kickbacks are "normal industry practice." In other words, everyone is doing it. The question then becomes: does the fact that everyone is engaging in this activity make it ethical? The answer to this question depends on who you ask. Some would argue that bribes and kickbacks are wrong regardless of why or where they are occurring. Others would argue that companies have a responsibility to get a return on their investment, even if it means acting in ways that contradict the rules that govern international business established by their home countries. Still others argue that engaging in the activity gives them the ability to remain in the market and that their presence in the market will eventually lead to more ethical business standards. However, it appears that American businesses are adapting Chinese practices instead the other way around. Goodman (2001) explains,

"American business leaders often describe their China operations idealistically, suggesting that their presence here will compel Chinese competitors to adopt more ethical business practices. But in one key regard, the dynamic operates in reverse, with U.S. companies adopting Chinese-style tactics to secure sales, as they compete in a market in which Communist Party officials routinely control businesses, and purchasing agents consider kickbacks part of their salary

(Goodman (2001) ."

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