Business Ethics

Summary

Wal-Mart's stock tumbled on the news that the company was investigating possible violations of the Foreign Corrupt Practices Act. According to information leaked to the press, Wal-Mart may have been bribing Mexican government officials in order to gain the zoning approvals it needed to build stores in the country. What makes the story especially interesting was the fact that the company appears to have known about the violations for several years, yet seemingly chose to do nothing.

While Wal-Mart had no legal obligation to disclose the fact that it was looking into the situation some years ago, analysts agree that the company had an ethical responsibility to make some disclosure, particularly given that the retail giant seems to have done little with the knowledge of a potential violation. Investigators will be looking to see whether the company gained an unfair competitive advantage as a result of its illegal activity.

If the company is found to have violated the Foreign Corrupt Practices Act it could face fines, and possibly have to return some of the profits it earned as a result. In addition, because it seems that top level executives were aware of the bribes when they occurred, there could be further penalties. Wal-Mart's current CEO, Mike Duke, was head of Wal-Mart International at the time of the bribes.

Discussion Questions

1. If the allegations against Wal-Mart prove to be true, the company will certainly be penalized for its illegal behavior. Consider, though whether the Foreign Corrupt Practices Act puts U.S. firms at a competitive disadvantage in foreign markets. Does it actually encourage unethical behavior by firms?
2. Is it ethical for U.S. lawmakers to prohibit bribery in foreign markets? What are the implications of the Foreign Corrupt Practices Act on employment and economic development in countries like India and Mexico?