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Bribes, Gifts, and Corrupt Practices:

Bribes, Gifts, and Corrupt Practices:. Intro. Daniel Fordice Finance concentration, expected graduation 2012 Matthew Marks Finance concentration, expected graduation 2010

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Bribes, Gifts, and Corrupt Practices:

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  1. Bribes, Gifts, and Corrupt Practices:

  2. Intro Daniel FordiceFinance concentration, expected graduation 2012 Matthew MarksFinance concentration, expected graduation 2010 Topic:If it would be profitable for an American business to operate in Russia, but it must pay a bride to operation there, should the American business operate in Russia?Position: The American business should NOT operate in Russia

  3. Ethical Principles • Government Requirements (Hobbes and Locke) • In a democratic society, “Never take any action that violates the law, for the law represents the minimal moral standards of our society.” • Russia is a democracy, and bribery is illegal for any U.S.A. business, whether domestically or internationally. • Economic Efficiency (Adam Smith) • “Always act to maximize profits subject to legaland market constraints and with full recognition of external costs, for maximum profits under those condition are the sign of the most efficient production • It is illegal, and external costs are great on the local Russian community as they distort the economic system; so the economic system would not operating as efficient as possible

  4. Excerpts • Coloplast Corp.’s Code of Conduct on Corruption and Bribery • Coloplast does not accept or solicit bribery of any kind. • Bribery is the offering, giving or accepting of any undue pecuniary or other advantage to or by: • a public official, at national, local or international level; • a political party, party official or candidate; and • a director, officer, employee or agent of a private enterprise in order to obtain or retain a business or other improper advantage, e.g., in connection with regulatory permits, taxation, customs, judicial and legislative proceedings (ICC Rules of Conduct and Recommendations 2005).

  5. Daimler Benz • From 1998-2008, Daimler (formerly known as Daimler-Chrystler) paid between 10-25 million euros(~$5-20 million, depending on the exchange rates at the times) in brides to officials in at least 22 countries, which netted them ~€35 million in pre-tax profits. • April 1st they agreed to pay ~ €135 million(~$185 million) • Daimler video • As Germany outlawed bridery in 1999, Daimler was in violation of the governance requirement and economic efficiency principles. • As Daimler was fined ~4 times what they made, in the long-run it was not economically efficient for them to pay the brides… total, that’s $200+ million that can no longer be used to create profits or anything beneficial to the company.

  6. Advantages to building reputational capital • Strengthens investors’ trust in your company • According to the OCED, abstaining from bribery in international business can “strengthen development, reduce poverty and bolsters confidence in markets.” • More apt for sustainable development • Coincides with suppliers’ and consumers’ code of conduct for their supply chain, and thus good for business relationships

  7. Disadvantages to building reputational capital • Loss of a profitable opportunity for critical stakeholders • Not maximizing shareholder value • Loss of profitable opportunity for suppliers who have a surplus

  8. Our opinion if we were the management team facing a bribery situation • Kimberly-Clark: Giving Gifts, Entertainment or Favors (p.20) • “Do not give gifts, entertainment or favors if you are doing it to make the other person feel obligated to give business to Kimberly-Clark” • “Make sure that you are not violating the other company’s gift and entertainment policy” • “Never give cash, checks, money orders, gift certificates, loans, or other types of money” Ethical Principles supporting this include Government Requirements, Personal Virtues, and Economic Efficiency

  9. Works Cited • StenScheibye, . Coloplast Group.Coloplast A/S, 8 June 2010. Web. 8 June 2010. <http://www.us.coloplast.com/About/ourcompany/responsiblity/Documents/Code%20of%20Cond uct%20corruption%20and%20bribery%20final%20version.pdf>. • OECD, . Organization for Economic Co-operation and Development. OECD, 25 Mar. 2010. Web. 7 June 2010. <http://www.oecd.org/department/0,3355,en_2649_34855_1_1_1_1_1,00.html>. • Hosmer, Larue T. "Trust: The Connecting Link Between Organizational Theory and Philosophical Ethics." Academy of Management Review 20.2 (1995): 379-403. Web. 10 June 2010. <http://www.jstor.org/stable/258851>. • Reuters, . Reuters. Thomson Reuters, 24 Mar. 2010. Web. 9 June 2010. <http://www.reuters.com/news/video?videoChannel=5&videoId=61810363>. • Folk, Thomas. J. Kimberly-Clark. Kimberly-Clark Worldwide, Inc., 2009. Web. 12 June 2010. <http://www.kimberly-clark.com/pdfs/Code%20of%20Conduct.pdf>.

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