The Ethics of Bribery in Global Marketing

Lesson Transcript
Instructor: Sudha Aravindan

Sudha Aravindan has taught high school Math and professional development in Information Technology for over 10 years. Sudha has a Doctorate of Education degree in Mathematics Education from the University of Delaware, USA, a Masters degree in English Literature from the University of Kerala, India, a Bachelor of Education degree in Teaching of Math from the University of Kerala, India, and a Bachelor of Science degree in Math, Physics and Statistics from the University of Kerala, India. Sudha has a certificate in Java programming and Statistical Analysis.

To bribe or not to bribe...that is the question. In this lesson, we discuss the Starnes-Brenner Machine Tool Company case study and the dilemmas of bribery in international business. Updated: 05/03/2021

Bribery: Background

In the business world, stories of bribery are all too common. The term bribery means to give gifts of money, 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 practice 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.

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  • 0:04 Bribery Background
  • 0:57 The Starnes-Brenner Case Study
  • 2:23 Types of Bribes
  • 3:32 Bribery Dilemmas &…
  • 4:45 Lesson Summary
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The Starnes-Brenner Case Study

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 (or the FCPA). 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 ten 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 campaign donations to political candidates who can advance the company's objectives.

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. Let's look at some of these in more detail.

1. 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. don't expressly forbid this practice.

2. 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.

3. 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.

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