The Ethics of Bribery in Global Marketing

Instructor: Sudha Aravindan

Sudha has a Doctor of Education degree in math education and is currently working as a Information Technology Specialist.

To bribe or not to bribe is the question. In this lesson, we discuss the Starnes-Brenner Machine Tool Company case study and the dilemmas of bribery in International Marketing.

Bribery

In the business world, stories of bribery are all too common. The term bribery means to give money, of gifts, in cash or kind to someone in order to persuade them to make favorable and biased decisions for business gains. In the U.S., bribery is considered an unfair business practices and is therefore, illegal. However, in many countries, bribery may not be considered corrupt and is viewed as the normal way business is conducted.

So what happens when American companies do business in countries that are more tolerant of bribery? In 2012, the New York Times published an article about how Walmart was paying bribes to get permits and gain market share in Mexico. The story ignited several investigations and left the company scrambling to repair its reputation. To gain a deeper understanding of how companies may end up in a similar situation, let's examine a case study.

Bribery is unethical in the U.S. but is a business norm in many other countries.
Bribery

Case Study Starnes-Brenner Machine Tool Company

The fictional Starnes-Brenner Machine Tool Company is an American company that has a sales office in a Latin-American country. Bill is sent abroad to replace Frank, a long-time salesman nearing retirement. During training, Bill discovers that Frank had been bribing the engineer, who is a government official, to the tune of $1,200 per machine to certify that the machines were not flawed. He also paid bribes to the dock boss to speed up the transfer of machines. Frank also routinely paid bribes to promote sales.

Bill is shocked and points out that paying a government official is illegal as per the Foreign Corrupt Practices Act. The FCPA is a United States Federal law that makes it illegal for U.S. businesses, citizens, and people of American nationality to influence foreign government officials by paying bribes. This is considered a corrupt practice and is punishable by prison time. Frank responds by saying that the bribery costs are small in comparison to the sales. After living abroad for 10 years, Frank justifies the bribes he paid with the following reasons:

  • Everyone pays a bribe there, and when in Rome you should do as the Romans do.
  • Even in the U.S. there are bribes, albeit in different forms like political dinners, and payments to congressmen and speaking fees with no punishment to those taking the bribes.

Bill doesn't believe that the ends justifies the means, and the two men agree to disagree.

Types of Bribes

Not all forms of bribery are created equal. Each example of bribery that Frank engaged in has different implications.

Lubrication

One of the more common forms of bribery is lubrication. This is a small amount of cash given a low-ranking person to speed-up the execution of a task. Frank's transaction with the dock boss was a form of lubrication. Many countries outside the U.S. do not expressedly forbid this practice.

Subornation

However, the bribe Frank paid to the government official that was rather high, $1,200 per machine, would be considered subornation, which involves a larger sum of unaccounted money. Since the bribe was paid to a government official, it becomes an illegal act.

Extortion

Extortion involves using threats to get bribes or money. Even though there was no explicit extortion, and Frank was not verbally threatened, the engineer made it clear that the machines would be found defective unless the money was paid. Since he was not in immediate danger, Frank could have alerted the proper authorities rather than paying the bribe.

Dilemmas of Bribery

Paying a bribe always raises questions about ethical and legal dilemmas.

Ethical dilemmas

The ethical dilemmas of bribery are difficult to define. By U.S. standards, the bribes Frank paid would be considered unethical. However, by Latin American standards, can it be considered unethical because this was the common practice?

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