In June 2012, the government of Vartan invited bids for the construction of a cellular telephone network. ZenTel, an experienced communications company, was eager to enter the growing field of cellular telephone networks in countries with poor infrastructures for land lines. If ZenTel won a few of these early contracts, it would be sought after for its field experience and expertise. After careful analysis, it prepared a detailed bid for the Communications Ministry of Vartan, building in only half of its usual profit margin and providing a contractual guarantee that the project would be completed in two years or less. The multimillion-dollar bid was submitted before the deadline, and ZenTel received notification that it had reached the Vartan government. Then, despite repeated faxes, emails, and phone calls to the ministry, there was no news on the bids or the project from the Vartan government.
Steve Cheng, VP of Global Operations for ZenTel, contacted the Canadian commercial attaché in Vartan, who told him that his best chance was to go to Vartan and try to meet the deputy minister of communications in person. Cheng prepared thoroughly for the trip, rereading the proposal and making sure that he understood the details.
At the commercial attaché’s office in Vartan’s capital, Cheng waited nervously for the deputy minister and his assistant. Cheng had come to Vartan with a clear negotiating strategy to try to win the bid. Soon the deputy minister and his staff arrived, introductions were made, and pleasantries were exchanged. The deputy minister asked a few questions about ZenTel and the bid and then excused himself, leaving his assistant to talk to Cheng. After clearly indicating that many other compelling bids had been made by firms from around the world, the assistant said, “Mr. Cheng, I guarantee that ZenTel’s bid will be accepted if you pay a $1 million commission. Of course, your excellent proposal doesn’t have to be altered in any way.” It was clear to Cheng that the “commission” was, in fact, a bribe. Tactfully, he pointed out that Canadian laws and ZenTel’s corporate policy prohibited such a payment. The assistant wished him a good day and a pleasant flight home and left.
REQUIRED
1. As a shareholder in ZenTel, would you prefer that ZenTel executives agree to the payment of the “commission”?
2. When Cheng described his experience to his friend Hank Shorn, who managed international business development for another company, Hank said that his own “personal philosophy” was to make such payments if they were typical in the local culture. Do you agree with Hank’s point of view? Explain.
3. Why would ZenTel have a corporate policy against such payments?
4. What should Steve Cheng do next?