Commercial corruptions in the disguise of corporate benefit
Updated: 2012-10-05 08:02
(HK Edition)
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Back in 2008, eight Chinese procurement staff of Carrefour, the retail giant from France, were charged by the Beijing court for accepting monetary advantages for placing orders and showing favor to a poultry supplier. During the trial, one of the defendants admitted that he had accepted advantages from the supplier as this is an unspoken rule in the industry. He did not realize it was a violation of law as he was just one of many others in the industry doing the same thing. Such a statement demonstrated the insufficient local ethics awareness on the subject of commercial bribery.
Despite the excuse given by this Carrefour employee, there is no doubt of his culpability as he had clearly placed his personal interest above the employer's interest. However, while conducting numerous potential fraud enquiries in Greater China, this writer was personally told by local employees who honestly thought what they were doing was correct and good for the company.
This case involved a subsidiary of a US leading pharmaceutical company located in southern China. An anonymous complainant to the management alleged that one of the company's sales team had offered valuable gifts and other cash equivalents to doctors to secure orders from them. During an interview, one of the salespersons admitted offering gifts but denied having been involved in any illegal activities because he did not obtain personal gain out of such an arrangement. He, together with his team, aimed to increase the company's competitive edge in the market and all their actions were for the company's benefit. Given such a shortsighted and deviated mindset, the employee had no idea that his act had already put his company at legal, financial and reputation risks.
There was also another case in which the wife of a sales and marketing manager had set up a shell company with a Chinese name phonetically spelt the same as the English name of the genuine vendor. The victim's company signed the contract with the wife's company at a contract sum doubled the actual price charged by the actual vendor. This was a case where the manager defrauded the company for personal gain. However, what if the shell company was used to make facilitation payments to secure more business opportunities?
Globalization has been moving at a fast pace and the demand for a level playing field has never been greater in recent years. Aggressive enforcement of the Foreign Corrupt Practices Act (FCPA) by the US as well as the latest enactment of the UK Bribery Act called for an ethical business environment on a global basis. The Chinese government has also kept up with the development in this area by increasing cooperation with the US counterpart and tightening its enforcement on anti-corruption against government officials. Adequate compliance and control framework shall be in place to safeguard the company from being attacked by unethical business practices. Proper internal review and investigation procedures shall be established, which could certainly serve as effective deterrents to corrupt activities. Companies shall pay special attention when entering into a business relationship with local business partners. Training workshops could also help increase the knowledge and awareness of employees on business ethics.
The author is the Founding Principal at MAWSL Consulting. The views expressed are entirely his own.
(HK Edition 10/05/2012 page2)