Global company, ethical challenges with bribery. Shell Oil Company operates in many parts of the globe. These operations include oil exploration, production, transportation, refining, and marketing. One challenge faced by Shell is how to handle requests for “bribes”

and “facilitating payments.” The chair of Shell’s operations recently gave an address where he

“claimed that Shell loses valuable business because it refuses to pay bribes.”

One form of bribe is a payment to a private bank account that is portrayed as a charita¬

ble donation. Shell’s chair noted that “on occasion it has been suggested to me that Shell’s cause would be much helped by a donation to a national cultural or humanitarian fund—

which just happens to have a bank account in Switzerland.” Another form of a bribe is a pay¬

ment to an “intermediary” in which a company pays a third party for a “go-between” role that could be more efficiently handled without the third party. The “intermediary” handles the bribery payment plus takes an extra facilitating payment.

The Shell chair concluded the address as follows: “We do not bribe. We do not sanc¬

tion any type of illegal payment of any kind anywhere, directly or indirectly, and any employee who is found to have done so will be dismissed and, if possible, prosecuted. The principle employees have to follow is simple: ‘Just say no.’”

Required 1. Suppose you are a shareholder of Shell. Would you prefer Shell to pay bribes if it meant

“gaining valuable business”?

2. Suppose you are the CFO of Shell. You suspect that one of your overseas subsidiaries is making payments to a local law firm for being an “intermediary” as well as for legal serv¬

ices. This subsidiary also makes payments to several Swiss-based “humanitarian funds” of questionable nature. How would you examine whether bribery is occur- the ACCOUNTANT'S ROLE ring? If you discovered it was, what actions would you take?

3. Suppose again you are the CFO of Shell. A major oil discovery by Shell occurs in a country whose political regime is run by a dictator. His extended family has vast business dealings with oil companies. Shell’s market capitalization increases by $2 billion when news of the discovery is released. Shell owns the oil leases and is negotiating with the government for construction of an oil refining plant. You are told by the dictator’s key advisor that one of the dictator’s sons has a company that will have 10% equity in the oil refinery (with no payment) and be actively involved at the director and operating level of the local refining subsidiary. You contact two other oil companies with prior dealings in this country and hear stories about “facilitating payments” and other questionable expenditures. One company called it an “auditor’s nightmare.” The board of directors of Shell has asked you (as CFO) to make a presentation on all financial aspects of the oil refinery project. What ethical issues (with proposed solutions) would you raise in your presentation?