Case:

Facilition or Bribery: Cultural and Ethical Disparities

Geletex, Inc., is a U.S. Telecommunication corporation attempting to expand its operations worldwide. As Geletex begins its operations in other countries, it has discovered cultural, governmental, and ethical standards that differ significantly from country to country and from those in the United States. Geletex has had a code of ethics for its U.S. operations since 1975. The company's director of compliance, Jed Richardson, provides ongoing training for employees, runs a hotline through which employees can reports problems and is well known and respected throughout the company for his high standards and trustworthiness. As Geletex's international operations grow, Jed is becoming increasingly uncomfortable with what appear to be double standards for the company's U.S. operations and its operations in other countries. Jed who has been traveling to each of the Geletex international offices, has found the following situations, which since have been causing him some sleepless nights:

In the Lima, Peru, office, Jed, in reviewing financial records, discovered that the commissions expense for the branch is unusually high. Geletex pays its salespeople commissions for each commercial customer they recruit for cellular of long-distance services. Jed knows from experience that some companies pay unusually high sales commissions to disguise the fact that salespeople are paying kickbacks in exchange for contracts. In the United States, such payments would be commercial bribery and a violations of Geletex's code of ethics. When Jed confronted the Lima. Peru, district manager and questioned him about the high commissions, he responded, "Look, things are different down here. We've got a job to do. If the company wants results, we've got to get things moving any way we can".

In the Stockholm, Sweden, office, Jed noted a number of college-age student employees who seemed to have little work to do. Again, Jed questioned the district manager, who responded, "Sure, Magnus is the son of a telecommunications regulator. Caryl is the daughter of a judge who handles regulatory appeals in the utilities. Andres is a nephew of the head of the governing party. They're bright kids, and the contacts don't hurt us. In the Scandanavian culture, giving jobs to children is part of doing business.

In the Bombay, India, office, Jed noted that many different payments had been made to both the Indian government officials. When Jed voiced his concern, the district manager responded, "I can explain every payment. On this one, we needed utilities [water and electricity] for our offices turned on. We could have waited our turn and had no services for ninety days, or we could pay to get moved to the top of the list and have our utilities turned on in forty-eight hours. On the check for licensing, again, we could have waited six months to get licensed or pay to expedite it and be licensed.

Jed is an expert on the Foreign Corrupt Practices Act (FCPA). however, Jed is unsure about Geletex's international operations and compliance with the law. He is very unsure about Geletex having an international code of ethics.

Questions:

1. Do any of the offices' actions violate the FCPA?

2. Must a business adopt the ethical standards of a host culture in order to succeed?

3. Are all of the actions in the various offices ethical?

4. If you were Jed, what ethical standards would you develop for International operations?

5. Does Jed's firm create any internal problems by allowing different conduct in different countries and cultures?

6. The American Bar Association reports that there have been only 16 bribery prosecutions under the FCPA since 1977. However, thousands of others have settled voluntarily rather than go to trial. Is the FCPA necessary for international business operations? Does it impede U.S. businesses' success in other countries?