The investigation found senior SYNC executives guilty of breaching the firms’ code of ethics and charged them with bribery, money laundering and fraud amounting to over $56 million. More specifically, Mr.. Pierre Daytime, Zinc’s president, and Mr.. Riyadh Ben Sass, a former executive vice president, were accused of secretly funneling company money to Labia’s Gadding family in order to secure projects in Libya and subsequently strengthen Zinc’s presence in North Africa. Ethical Model: The primary ethical question that is to be addressed is: “Is it acceptable for
Canadian companies to engage in facilitation payments to gain business in developing nations? ” The active agents are Zinc’s senior management, who knowingly participated in blatant acts of bribery and fraud, as well as the Libyan facilitation agents. I will analyze SYNC Lapin’s actions using the utilitarianism model. The theory of Utilitarianism states that people should act in a manner that maximizes the total, collective utility of their actions. Zinc’s senior management would argue that they had to maximize shareholder value in order to maximize the total collective utility. Sing this OIC, the senior management felt it was important that they sourced work in all possible regions, in order to beef up their portfolio of projects. The senior management then expected this to directly translate into improved profits and higher share prices that would make shareholders and the board of directors happy. However, the senior management was also aware that certain nations, such as Libya, demanded facilitation payments for awarding projects in their countries. The management also knew that these payments were considered to be bribes and that they are deemed illegal in Scandal.
While these measures resulted in an 87% appreciation in share price in the short run, (share price grew from $31. 92/share in April 2009 to $59. 8/share in January 201 1) Zinc’s stock then proceeded to nose dive to a low of $35 once news of the bribery broke out . This dramatic fall in share price was almost completely attributable to the negative emotion towards and loss Of reputation suffered by SYNC Laving as a direct result of their decision to engage in bribery. These executives did not account for the significance of upholding their firms’ reputation before providing facilitation payments.
Moreover, as a result of their fraudulent behavior, SYNC is now also prohibited from undertaking projects funded by the World Bank for 10 years Consequently, contrary to senior managements’ intentions, SYNC suffered a reduction in share price combined with a loss in reputation. The above facts prove that Zinc’s management did not maximize the collective utility of their shareholders but rather proceeded to ruin their reputation by partaking in actions of bribery. The above analysis clearly shows that SYNC failed to do good by its shareholders by engaging in facilitation payments.
It is also important to consider and evaluate Syncs alternatives to bribery in this case. Bribes tend to have different definitions depending on the part of the world you are dealing with. While these bribes (aka facilitation payments) are considered a part of doing business in developing nations, such as Libya, they are illegal in Canada. An interesting perspective was raised in class defending Zinc’s actions. What if Syncs facilitation payments were being used to build basic infrastructure and provide basic amenities such as schools and hospitals in the developing nation?
This now raises the question as to whether facilitation payments are acceptable based on the activities being funded by these bribes. A number of valuable points were raised in class both defending and abhorring SYNC Lapin’s actions. I am of the perspective that companies must always adhere to the stricter of their country or the country where they are doing business’ rules as a guide for making ethical decisions. Consequently, I believe that firms should not elect to work in regions where they are forced to bribe local officials to gain projects.
Moreover, having irked as a project engineer at a competing engineering and construction firm, know that my company refused to do business in countries, such as Libya, where bribery was a requirement to gain projects. Our senior management and C-level executives were sticklers for winning and executing projects based on a fair and competitive bidding process that ensured the best candidate was awarded the contract.. While this approach to decision making might cause companies to lose out on certain projects, It will ensure that the firm’s reputation is never tarnished.
In the long run, company reputation, while being a “soft” measure, is one of the key factors in ensuring sustainability. Many world renowned companies have refused to pay bribes in foreign countries and have still managed to attain burgeoning profits while maintain a sterling reputation. For example, Shell refused to pay Venezuelan officials $35 million to maintain their license over a nickel mine It is interesting to note that Shell still owns and operates this mine in Venezuela and have never been threatened with any such facilitation payments since.
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