Reference no: EM133449009

Case Study: The fictional case subject for this chapter is based on the difficult issue of determining the ethics of employing a well-connected agent. In our case, an American for-profit educational institution, which we will call Cleveland College, is opening a Shanghai campus to offer United States-style college programs in China. There is a ready market in China for "prestigious" US baccalaureate degrees. However, Cleveland College needs to satisfy a lot of red tape to be accredited in China and obtain the necessary licenses for an educational institution in the Shanghai area. On an exploratory trip to Shanghai, the President of Cleveland College, Mark Rollins, is approached by a prominent businessman, Wang Li, a former member of the Shanghai city government who is familiar with the educational bureaucracy. Wang offers to assist as a public relations agent, but his fee is so hefty ($200,000 per year) that Rollins fears that Wang is going to use much of it to grease palms. Research with local authorities indicates that Wang is well respected and has a high level of guanxi with local educational officials. Wang promises to get Cleveland College all the necessary certifications in much faster time than it usually takes, and also promises to prevent bothersome audits and bureaucratic problems. Should Cleveland College sign him on? What FCPA danger would this entail? Affirmative Position Cleveland College should hire the local Chinese agent/ consultant. Possible Arguments • Secret cash payments may act as a morally- acceptable "lubricant" to facilitate commercial exchanges. • Corruption is an inevitable part of the process of opening up new and developing markets. • Companies that elect to comply with the letter of the law in the strictest sense may be at a severe competitive disadvantage. • Payment of "fees" to officials can serve as an incentive to development, cutting through unnecessary bureaucracy. • Corruption as defined in this context is a Western concept and may not be applicable in all countries. • In many societies, the "gift culture" is a form of appropriate behavior based on long-standing traditions of exchanging favors. Negative Position Cleveland College should not hire the local Chinese agent/consultant. Possible Arguments • Paying an agent a fee, who then bribes a government official does not necessarily relieve the college of the risk of violating anticorruption laws. • Paying an agent to bribe a government official sets a precedent that can lead to ongoing demands for bribes. • If the organization pays a bribe, and they do not get what they paid for, they have no recourse. This is a high-risk form of investment. • If the college goes down the path of bribing officials for any purpose, using the justification that it is a traditional and acceptable way of conducting business, it implicitly condones a lack of ethics to its employees-the next step would be to sell grades, diplomas or admissions.

Questions: Synthesis Questions Consider the following hypothetical example: An American college seeks to obtain a good image among Chinese educational regulators and accreditors by inviting a number of them, all expenses paid, to a week-long conference in Hawaii. Is this morally acceptable? Does it constitute a form of bribery? Why or why not? In the past two decades, a number of very large corporations have paid large fines for corrupt behavior. Presumably, the executives who authorized the payments were highly-educated, experienced, 1. 2. professional people. Why do you think they failed to speak up against the corruption? This chapter explores the concept of guanxi. Do you think guanxi is morally wrong, or rather, is an acceptable form of traditional practice that must be allowed to continue? What are the prospects for guanxi in the future?