The Dilemmas Surrounding Issues of Corruption - Essay Example

Discuss the dilemmas surrounding issues of corruption that multi-national corporations may face DISCUSS THE DILEMMAS SURROUNDING ISSUES OF CORRUPTION THAT MULTI-NATIONAL CORPORATIONS MAY FACE GRACE SARKAR Order No. 423934 21 March 2010 Table of Contents Introduction 3 Facilitation Payments 3 Nepotism 6 Conclusion 8 Sources 9 DISCUSS THE DILEMMAS SURROUNDING ISSUES OF CORRUPTION THAT MULTI-NATIONAL CORPORATIONS MAY FACE Introduction They are awkward but they exist. It is difficult to prise open either and call them correct or incorrect. They are facilitation payments and nepotism. Both are connected to business and both have their advantages and disadvantages. More aptly, both continue to dodge legal scrutiny although both are legally questionable and are not considered good business policy. Facilitation payments and nepotism will continue to confuse and confound business and legal circles as long as business lasts. There is no end in sight to them. Different countries have set different parameters on the basis of which they are evaluated and judged. Legally, facilitation payment is not allowed in the United Kingdom. However, it is allowed legally to certain extent in the United States (Special Cases, 2009). The issue of facilitation payment becomes specially challenging when doing business with a foreign country. The laws in a different country may or may not be similar to those your own country. Hence, this issue has to be studied clearly and carefully before deciding on its legal implications. Facilitation Payments Multi-national corporations operate in different countries all over the world. So it is not possible for them to work under one set of rules. Their memorandum of association must tally with the laws and customs of the host countries. They also have to do business with customers in the host countries as well as overseas. This makes the situation of facilitation payments more complicated if flexibility is not maintained (Special Cases, 2009). Research show that majority of multi-nationals have indulged in facilitation payments although they same majority would prefer not to make these payments. This is a catch-22 situation with the giver and taker harboring guilty conscience and yet performing the act in the larger interest of business (Gordon, Kathryn and Miyake, Maiko; 2001, p3) "Bribes can come in all sizes. The media likes to highlight the more flagrant examples, but the smaller, everyday forms often go undetected. In the past, governments have overlooked facilitation payments. Western lawmakers assumed that such payments were simply unavoidable, a necessary part of doing business abroad" (Wrage, Alexandra; 2009). Nonetheless, the issue does not stop at that. Time and again, facilitation payments have reached the courts and resulted in destabilizing outcomes. Daewoo is an example of a major multi-national firm collapsing owing to financial irregularities (Daewoo corruption scandal deepens, 2001). However, facilitation payments continue to be made the world over. How do these payments reflect in the eyes of the law Morally, facilitation payments, whether big or small, are wrong. But these payments are given and received in different and ambiguous ways and bypass the law. They may simply be given under the nomenclature of a gift or in the form of entertainment. International businesses have accepted it as a necessary evil. And it does appear that it is prospected to stay this way for a very long time to come (D'Ascenzo, Michael; 2008). By and large, in most countries, facilitation payments are tolerated if the sum involved is small. Nobody is inclined to run to the courts on small amounts spent on getting business. However, it is large facilitation amounts that can cause trouble. Large amounts not only cause legal hassles, they can even destabilize the concerned corporation. It is not healthy for large corporations to be paying out large facilitation amounts as these can spoil the financial records of the corporation ultimately leading to its closure or takeover by better management. However, it is difficult to determine what constitutes a large facilitation amount. When there are orders worth billions to be secured, the facilitation amount becomes tricky to determine (Business Anti-Corruption Vocabulary). Nonetheless, it is necessary for multi-nationals to have appropriate policies and codes of conduct as safeguards in order to preserve the company's integrity in the long run. What appears to be working are conventional practices of marginal give and take that does not affect business and does not bring it under legal scanners either. Entities such as the Organization for Economic Cooperation and Development (OECD) are bound to be seized of the issue of facilitation payments. Such developments are welcome. They play a vital role in limiting the practice of facilitation payments although they may not be capable of eradicating the menace (Gordon, Kathryn and Miyake, Maiko; 2001). All countries recognize that doing business with people in foreign countries invariably require mutually acceptable principles and these are outlined in documents such as memorandum of understanding. However, it is people who actually do businesses with such foreign countries who face the real challenge. It is difficult to bracket every giving as facilitation payment. Certain giving may have to do with the culture and customs of the receiving side. For instance, if the receiver is using the funds for some charitable purpose it will be difficult to censure him for receiving the facilitating payment. Refusing to give in such conditions will not only be seen as impolite but also imprudent. For all practical purposes, it is better to allow small facilitation payments. In case the amount given is large, an inquiry can be initiated. Nepotism Nepotism may not be a severe offence like facilitation payment. However, nepotism can attract clearer and quicker legal indictment in case proof is provided that less efficient or qualified relative of the employer or an existing employee was recruited. Nepotism is the charge that a relative of the employer or an existing employee received preferred treatment in recruitment instead of more efficient and qualified candidates (Nepotism Definition, 2010). Charges of nepotism, if filed and proved in courts, can have deleterious effects for the company in question. Nepotism linked with racial or gender discrimination or for the purpose of creating job opportunities can have serious consequences. "It might constitute illegal discrimination on the basis of race or sex, if an employer with 15 or more employees consistently hires relatives of a particular race or gender to the exclusion of non-relatives of other races or the opposite gender. "The consequences of nepotism might constitute wrongful termination too. For example, if a boss fires employees solely to create job opportunities for relatives who have the same religious beliefs as does he or she, then the boss might have illegally discharged those employees based on religion discrimination, if their religious beliefs were not the same as his or hers" (Nepotism Definition, 2010). It is easier in the case of nepotism to establish intent and motives when compared to facilitation payments. Intent and motives can be established by conducting appropriate investigations. Depending on the outcome, it becomes possible for the court to decide on the conviction or acquittal of the company (Lynch, Colum; 2009). Hence, it is not possible to brand every case of nepotism as malafide. Family-run corporations have chairmen and directors whose children join these corporations and successfully work their way to the boards. It is unfair and contrary to natural justice to brand these as cases of flagrant nepotism (Kneale, Klaus; 2010). On the whole, it is apparent that nepotism has caused more good than harm. By and large, relatives do take their responsibilities seriously. It is easier to have better working environment with relatives around. Teamwork and communications are smoother. Good corporations have justifiably benefited by the policy of sustainable nepotism. Undoubtedly, there may be some black sheep here and there. But it is not healthy to tar the entire community of nepotism with the same brush. However, it must be accepted that just like facilitation payment, nepotism can have two sides denoting advantages and disadvantages. Per se, nepotism is not harmful if the relative in question is indeed a deserving candidate. There are benefits for the company that has proper policy in place for employment of deserving relatives. A team with relatives as employees exhibit better responsibility in achieving targets. Also, there are instances where relatives have single-handedly turned around company's fortunes after saving it from the brink of collapse (Kneale, Klaus; 2010). Multi-national corporations basically run on the merits of competition and efficiency. If relatives prove that they meet the criteria of employment by competition and efficiency, there is little that can be done to displace such relatives on account of nepotism. The corporation may even find itself in difficult situation trying to find capable replacements. Better sense must prevail on all issues pertaining to nepotism. Conclusion It may not be possible for multi-national corporations to operate on a clean slate devoid of facilitation payments and nepotism. But multi-national corporations can and must hold these two issues on a tight leash. It must be the corporation's visionary statement to give the bare minimum when it comes to facilitation payments. The corporation must depend on sufficient management support and careful planning rather than facilitation payments to obtain business (Trace Facilitation Payments Benchmarking Survey, 2009, p2). On the question of nepotism, the corporation must exercise due care that it does not lead to malpractices and mismanagement. Nepotism can be nurtured if it leads to better resource management and output. Corporations are large monoliths employing thousands of people. A few relatives in the rank and file of the corporation can hardly be the cause for any major concern. Sources: Business Anti-Corruption Vocabulary, http://www.business-anti-corruption.com/about-corruption/vocabulary/pageid=185 D'Ascenzo, Michael; 12 September 2008, Bribes and facilitation payments: A guide to managing your tax obligations, http://www.ato.gov.au/corporate/content.aspdoc=/content/00104079.htm Daewoo corruption scandal deepens, 02 February 2001, http://news.bbc.co.uk/2/hi/business/1149061.stm Gordon, Kathryn and Miyake, Maiko; December 2001, Business Approaches to Combating Bribery: A Study of Codes of Conduct, http://www.academia-research.com/files/instr/423934_business_approaches_to_combating_bribery.pdf Kneale, Klaus; Is Nepotism So Bad, 2010, http://www.forbes.com/2009/06/19/ceo-executive-hiring-ceonewtork-leadership-nepotism.html Lynch, Colum; 28 October 2009, A U.N. contractor's case again raises questions about about nepotism, http://www.washingtonpost.com/wp-dyn/content/article/2009/10/27/AR2009102703560.html Special Cases, 28 July 2009, http://www.publications.parliament.uk/pa/jt200809/jtselect/jtbribe/115/11510.htm Trace Facilitation Payments Benchmarking Survey, October 2009, https://www.traceinternational.org/documents/FacilitationPaymentsSurveyResults.pdf Wrage, Alexandra; 2009, Facilitation payments - Stop paying and they stop asking, http://www.ethicalcorp.com/content.aspContentID=4471 Nepotism Definition, 2010, Microfinance Empowers, http://employeeissues.com/nepotism.htm Read More