ETHICS and SOCIAL RESPONSIBILITY
Ethics in marketing, business and international business
Corporate Social Responsibility
- examples of ethical dilemmas and bribery
- examples from students of unethical situations globally

for the international business students of Prof. Tim Richardson

updated 2013 Dec 05
 
for Seneca Students this unit is taught in 
BUS106, 
MRK460 and 
IBM 600
ggg
for UTSC Students Students of Dr. P. Constantinou at UTSC, who teaches MGTC59 Management Ethics, will find that MGTC59 was a good background to many of the topics mentioned herein
.
http://highered.mcgraw-hill.com/sites/0070401799/information_center_view0/ this online unit ethics.htm includes material from
Chpt 4
Ethics in International Business Human Resource Management
in  Global Business Today, 3rd Ed.
Hill, McKaig ... and Richardson  ISBN-0070401799
b
online learning centre of the publisher this online unit ethics.htm includes material from
Chpt 4
Ethics in International Business Human Resource Management
in  Global Business Today, 2nd Ed.
Hill, McKaig ... and Richardson  ISBN-10: 0-07-098411-5
bb
this online unit ethics.htm includes material from
Chpt 3 Ethics
in  Business, 6th Canadian Edition
Griffin, Ebert, Starke    by Pearson, Prentice-Hall
b
http://highered.mcgraw-hill.com/sites/0070136793/information_center_view0/ this online unit ethics.htm includes material from
Chpt 17
(used in MRK460 Jan-Apr 2012) in
International Marketing 3rd Canadian Edition
Cateora et al ISBN  0070136793
b
http://www.nelson.com/futureofbusiness4e this online unit ethics.htm includes material from
Chpt 4
(used in BUS106 Sept-Dec 2013) in
The Future of Business 4th Edition
Authors Althouse, Allan and Hart; published by Nelson
b
 
 
This web page has audio clips - just click on the icon (like the one to the left) and you can hear Prof. Richardson's voice adding additional information to topics on the page. turn on your speakers to hear audio clips
.
 
INTRODUCTION Ethical Dilemmas and Social Responsibility

  o bribery of foreign officials
  o companies interference in ethnic and tribal conflict, violence
  o trade influence on other governments' domestic politics
  o perceptions of bribery effecting Canadian exporters
  o international price fixing
  o conflict diamonds

An increasingly popular topic in International Business, which, if avoided, or hidden, can end up with your company on CNN or 60 Minutes. Some universities advocate a specific "ethics" course for business and management students because it is increasingly seen as a necessary part of the curriculum of business students.

For UTSC students, Prof. Andrew Stark teaches MANAGEMENT ETHICS, MGTC59 see http://www.scar.utoronto.ca/~stark/mgtc59soutline.htm
- in the course outline for prof. Stark's course there is a lecture titled Ethical "Issues in International Business" which deals with "A South African Investment"

.
KEY POINTS There are a number of examples we can look at to discuss ethical topics in Canadian International Business management - we will consider the case of
  • a mining company in the Sudan
  • an engineering firm in Lesotho
Students should understand that the mining and oil business worldwide is very competitive and that Canadian companies are involved in some of the biggest projects and some of the controversial projects, by virtue of the simple fact that mining has been big business in Canada for decades so some of the most active and largest mining companies in the world are Canadian. 

Being in a leadership position, as mining and exploration grows worldwide, has put Canadian companies in an economically advantageous situation. This success in mining has helped the Canadian economy, but the increasingly risky and challenging locations in which mining companies operate (all the safe places are mined out), create situations which necessarily include dealing with contentious ethical issues. These ethical issues involve Canadian mining and exploration companies who have to deal with regional politicians that expect certain financial “rewards” for facilitating mining developments, as well as labour and employment practices by local companies hired to develop the sites.

WTGR


 


...
 
An amusing parody of a "news interview" in which a corporate PR exec is questioned about an environmental shipping disaster - the front fell off the ship.

The clip shows the absurd way in which some executives respond to questions about ethics and the environment.
 http://people.senecac.on.ca
/tim.richardson/video/
CorporateDoubleSpeakAustralia.wmv (2 MB)

also on YouTube
 http://www.youtube.com/watch?v=WcU4t6zRAKg

s
http://www.youtube.com/watch?v=OBUaopHHxYU 2008 Sept 24th Prof. Richardson, with contributions from the BUS 106 class at Seneca College, made a simple clip about how Ethics is influenced by the 6 environments.

The point is that ethics cannot be discussed purely in a theoretical way, it has to be discussed in the context of the "real world" which is "real" due to the influences of the
 o Competitive Environment
 o Political/Legal/Regulatory Environment
 o Social/Cultural Environment
 o Technological Environment
 o Economic Environment
 o Geographic Environment

on YouTube
www.youtube.com/watch?v=OBUaopHHxYU

Ethics, as effected by the “Environments”

The circumstances which effect Ethical considerations in the new millennium are circumstances caused by drastic changes in the


There has always been pressure on companies to behave ethically, but in years past this pressure was not so intense as it is in the new millennium where the mistakes of a corporate executive can have international repercussions when CNN makes it a headline story or it is posted on Yahoo!’s news site, thereby making it possible for millions of people to know about committed some violation.

Let consider how politics has an effect on ethics. In the new millennium, the people you elect to run the city government cannot just attend to municipal affairs but must also take into account national and even international influences – recent examples  which Canadians will be aware of are SARS and Toronto’s bid for the 2008 Olympics.
 


Rules, regulations, laws and guidelines which may be created to serve the local citizens are now being influenced by events and circumstances far away from the municipality. Politics at the local and national level is also strongly effected by a worldwide shift in the social-cultural environment such that many groups of identified cultures use technology and economic influence to exert pressure on governments to change rules and regulations, such as allowing gay marriage, or permitting Shari’a  law, or changing the age of retirement or banning smoking in public restaurants, etc.

WTGR ©McGraw-Hill Ryerson 2006
.

 
 

Business,
th Canadian Edition
published by
McGraw-Hill

 

Approaches to Corporate Social Responsibility

A number of textbooks and websites discuss Social Responsibility, in the context of how companies are behaving ethically. The most common four terms are

  • Obstructionist Stance
  • Defensive Stance
  • Accommodative Stance
  • Proactive Stance

  • Obstructionist Stance
    • When a company places barriers to customers complaining about ethical situations, or makes it difficult for ethical circumstances to be resolved. Companies typically do this by requiring customers to fill out forms, or have certain versions of receipts or go through particular processes. Of they can make it difficult to get action from a complaint by taking to long to reply, or having no specific information on how to complain, or to whom.
  • Defensive Stance
    • When a company avoids blame, or says "it wasn't our fault", or tries to make the customer believe nothing can be done at all. Sometimes managers insist their job is to make money for the company and anything that takes away from that objectives is not important. Companies are also defensive when they say "we are obeying the law" to the exact letter, and not taking into account "fairness" or being compassionate" - some recent examples include situations where travel agencies and airlines go bankrupt and leave vactioning people stranded overseas.
  • Accommodative Stance
    • Firms who not only meet the standards expected, but go further, often receive the reward of repeat customer purchases and good PR which helps in branding in a competitive environment. Some examples include companies allowing customers to exchange items for products that are not exactly the same, but similar, or allowing customers to return items for warranty even if they do not have the original receipt.
  • Proctive Stance
    • When companies reach out to customers to tell them, in advance, some information they need - such as letting a customer know a warranty period may expire several weeks in advance, or that a product will soon be withdrawn so they have the option to buy spare parts.


    • WTGR w his Google Nexus 4
      A "proactive stance" (on a small scale) adopted by Telus is to let customers know how much data they have used as the month progresses so they do not "go over" and incur charges. Allowing the customer to keep track of their phone usage protects Telus from having to respond to irate customers who receive bills for amounts much higher than they expected.
      some of the descriptions for these points are listed in 
      Chpt 3 in Business, 6th Canadian Edition, McGrawHill
.n
http://www.nelson.com/futureofbusiness4e
"The Future of Business"
4th Edition
Custom Ed. for Seneca
Authors Althouse, Allan and Hart
published by Nelson

 

Corporate Social Responsibility to Stakeholders
 
  • Responsibility to Employees
  • Responsibility to Customers
  • Responsibility to Investors / Shareholders / Partners
  • Responsibility to Suppliers
  • Responsibility to Governments (taxes, laws, rules and regulations)
  • Responsibility to Society / Neighbours

.
.

s
CASE STUDY 1 
Company caught in a bribery situation 
aACRES INTERNATIONAL
   Canadian engineering and construction company
.
.
.
 
Acres
Int'l
Canadian engineering firm Acres International - 1,000 employees operating worldwide, including Africa

This story was widely reported.
The following information is quoted from the National Post Sept 18th, 2002

"Acres was convicted of bribing an official in the southern  African country of Lesotho.  Acres said it was "shocked"  by the verdict and will immediately appeal. The case arose after Acres hired a Lesotho engineer, Zalisiwonga Bam, as its local representative as it sought and won contracts for the Lesotho Highlands Water Project, a massive development to generate electricity and move water from the mountains of Lesotho to South Africa. Bam, whose pay was deposited by Acres in a Swiss bank account, secretly relayed part of his fees to the director of the water project,  Masupha Ephraim Sole. The High Court of Lesotho ruled Tuesday that the representative agreement between Acres and Bam was a smokescreen for bribery."..Sole, 54, did not testify at the Acres trial, and previously remained silent at his own trial at which he was found guilty of bribery and fraud. He is appealing an 18-year sentence for accepting the equivalent of more than $1.6 million Cdn from intermediaries for a dozen international companies, including $320,000 from Bam."

The following information is quoted from The Globe and Mail Sept 18th, 2002

"The guilty verdict in Lesotho raises serious questions about how contracts for these megaprojects get awarded," said Pam Foster, co-ordinator of the Halifax Initiative, an Ottawa-based advocacy group....Acres is likely to face a big fine next month, and its chances of winning future contracts from institutions like World Bank, which are major financiers of projects in the developing world, could be at risk."

.
Acres
Int'l
In July 2004, after an investigation reaching back to events in the late 1980’s, the World Bank publicly announced that they were official laying sanctions against Acres International Limited. Acres, a Canadian engineering consulting firm based in Mississauga, was found guilty of paying bribes to win contracts on a multi–billion dollar dam project in the tiny country African country of Lesotho. The Lesotho High Court convicted Acres of bribery for paying nearly $266,000 USD to Mr. Masupha Sole, the former chief executive of the Lesotho Highlands Water Project. 

Acres had mounted a defense saying that they were not responsible for the payments to Sole because Sole was bribed through an intermediary Acres had hired. Which begs the questions that not only do international companies have to behave ethically and according to the rules and regulations in the jurisdictions they operate, but they must also assure that any persons acting on their behalf as contract consultants or advisors, also behave ethically since the consequences may impinge on the parent firm. Sole, a Canadian-trained engineer (who was later sentenced to 18 years in prison) was the person Acres cast in the role of overseeing the $6 billion Lesotho Highlands Water Project. Publicly released court documents noted that Sole was reported as having passed the bribe money through Zalisiwonga Bam, a local engineer hired by Acres – a situation which the Lesotho Court later ruled was a ploy to disguise the bribe. 

Acres was not alone in being challenged as to its ethical practices, the French company Spie Batignolles  and the Italian firm Impregilo also face disbarment from World Bank contracts.  Germany’s Lahmeyer International is also scheduled to go to trial for a circumstance that ultimately involved as many as twelve large foreign firms in a highly competitive bid for a project in which hundreds of millions of dollars was at stake to the winners. 

What did it cost Acres, other than the obvious bad press throughout Canada and the international community? The World Bank imposed a three-year ineligibility period within which Acres would not be allowed to compete for contracts financed by the World Bank. Keeping in mind that this institution is actually five banks, including the International Bank for Reconstruction and Development, the International Development Association and the International Finance Corporation, such a penalty could be considered severe since Acres is the type of company that is specifically oriented to working on large development aid projects which are predominantly structured by NGO’s like the World Bank. 

As this section of prof. Richardson's site is updated [June 2005],  Acres is involved in the Bujagali Dam in Uganda and Nam Theun 2 Dam in Laos, both projects are scheduled to receive World Bank funding. Acres also participated in the large Three Gorges Dam Project in China.

WTGR ©McGraw-Hill Ryerson 2006

.


d
CASE STUDY 2 
a TALISMAN ENERGY
    Canadian natural resources firm based in Alberta
.
.
.
.
Talisman
Energy
Canadian natural resources firm Talisman Energy Ltd. of Alberta operating in Sudan, Africa

This is an ongoing story which has been reported on in several Canadian papers since the late 1990's. In order to understand this story, a brief introduction is needed to the country of Sudan - see the maps below

.
 
from the website of the National Geographic
 http://ngm.nationalgeographic
.com/ngm/0302/feature2/
images/mp_download.2.pdf
a map showing the location of the oil business in Sudan

original at
 www.rightsmaps.com
/html/sudmap2.html

(2010)

.
Talisman
Energy
Essentially, the company Talisman Energy of Calgary has been accused of spending money in the country of Sudan, to pay for military forces to protect the region in which it has been operating. Apparently, according to various newspaper stories, these forces have been accused of murdering innocent people in circumstances unrelated to security of the property needed to be guarded. Talisman "...began operating in Sudan where United Nations observers estimate that two million people have died in fighting since 1983, and where allegations of slavery and genocide are rampant."
 www.vitrade.com/editorials/991122_profit_in_sudan.htm

Talisman, is no longer in involved in oil exploration and development in Sudan. In the late 1990’s and early millennium years the Alberta-based company was accused of developing oil exploration in the Sudan knowing that the country was in the middle of a civil war. A resource extraction business that intends to successfully operate in a country that has been, at times, referred to as the poorest country on earth and one of the most dangerous countries in Africa, will undoubtedly face many difficult challenges. One of the toughest challenges for Talisman was developing its oil exploration program and oil refinery operations in a region that had open armed conflict between religious and ethnic groups. 

The Sudan, since the 1980’s, and up to the time of printing this text, has seen violent conflict between the Muslims and Christians. The Muslims hold a majority in the north of the country, and control the government and military forces. The Christians are concentrated in the south and, as a consequence of extreme violence over many years, have ended up in crowded arid refugee camps along the southern and western borders. Along the western border of Sudan is Chad, a country described by various NGO’s as having the lowest GNP per capita on the planet and certainly not in a position to supply food and  support to the refugees fleeing the conflict.

Depending on your sources, (www.amnesty.org  says 2 million dead, 6 million refugees) hundreds of thousands of Christians have been displaced from their homes and large numbers have been killed violently by nomadic bands of lawless criminals – a sad tragedy that goes unchecked by the Sudanese government despite growing international pressure. A lot of that pressure was put on Talisman by activists who claimed that by operating in the Sudan and openly courting the government’s favour for developing their oil projects, Talisman must be, by association, complicit in the crimes against humanity that are increasingly reported in the global media. 

WTGR ©McGraw-Hill Ryerson 2006

ss.

first published by Scott Adams in Oct 2010

While this Dilbert cartoon is funny, it raises a common problem facing people providing the bribe
- namely how to get the money (or gold, or diamonds [preferrable]) to the corrupt decision maker
 
Talisman
Energy
http://www.witiger.com/640radio.htm
http://people.senecac.on.ca/tim.richardson/audio/audio2008May12interview640news.mp3
During the 2nd week of May 2008, Richardson was interviewed by John Downs of AM 640 news for a segment about the consequences of a company involved in a foreign investment where terrorists benefit from the investment. During the course of this interview Richardson talked about the circumstances of Talisman in the Sudan. 
.MP3 here.http://people.senecac.on.ca/tim.richardson/audio/audio2008May12interview640news.mp3
.
Talisman
Energy

Why?

Why did Talisman operate in the Sudan, and pay money to the Sudanese government, who then used that money to support armed strife against another ethnic group in the country? Ed Broadbent , former leader of the federal NDP Party, speaking at the 2003 CES Conference, said “… global competition led Canadian business executives to do outside of Canada what they could not do at home. In developing countries this has led in the past to exploitative labour policies, bribery of public officials, and the degradation of the environment. In short decisions about appropriate behaviour in the corporate sector, as with other decisions, is shaped by the market.” The intensity of the competitive market outside Canada has created a situation where some companies feel obliged to do battle with a blind eye to corporate behaviour that would not be tolerated in their home nation.

Jim Buckee, president and chief executive officer of Talisman seems to absolve himself of any responsibility "I don't doubt there's nasty things going on on all sides," he has said about the civil war in Sudan, a country in which his company has a 25 per cent share in a vast new oil field. "But we are a business, and we are not in politics, and we can only affect things within our sphere of influence."

A number of media reports say "....the war, which began in 1983, may well have ended by now if it weren't for revenues being collected from the government’s oil production. Money collected from oil revenues has allowed the government to purchase more sophisticated weaponry and thus prolong the war and increase the devastation of the people of South Sudan. " 
 www.persecution.org/whitepapers/sudan_talisman.html

The point being that if Talisman of Canada wasn't operating in the country, and paying the Sudanese government, the government would have less money to fight its civil war.

WTGR ©McGraw-Hill Ryerson 2006

.
Talisman
Energy
During the 4th week of Jan 2011, student Tushar C. in MGTC46 at UTSC emailed to say

After having our class discussion on Talisman Energy and their presence in Sudan, I decided to research further and find some more information on the role they may have played.  I found an intriguing and eye opening video entitled, "The Oil Wars - Sudan"
 youtube.com/watch?v=VRzVyGypybs
Talisman executive Jim Buckee at the time was interviewed and questioned on their role in Sudan. It is interesting to note how he defends and justifies his company's presence in Sudan.  Some interesting points he made included the fact that the areas they explore for oil are not populated and the living conditions prevent individuals from settling there anyways, as well as the fact that their operations in Sudan would bring prosperity and wealth for the people of Sudan, including those in the South. 
 

Tuschar adds.My course with Professor Stark taught me that there is a fine line when it comes to Corporate ethics. Companies have a fiduciary duty to provide a strong return to their shareholders, but there is a growing trend towards finding that fine line between profits, and corporate social responsibility.  Often times, which was the case with Talisman, a company may seek profits for their shareholders in the short-term, but in the process tarnish their image, so as to hinder their ability to provide further returns in the long run. With globalization becoming more and more relevant, companies such as Talisman should take a closer look at how they can achieve sustainable long-term profit goals, while ensuring they don't undertake any act that tarnishes their reputation, in order to prevent another Sudan situation from occuring. 
.
Talisman
Energy

the
Political
Environment
2005

Why is the situation in the Sudan and other African countries so problematic? One way of seeking a perspective might be to look at the context of the political environment and the inability to develop rules and regulations across multiple boundaries. Africa is home to an estimated 800 million people spread out into 54 different countries, by contrast, China (PRC) is one country of 1.4 billion people living under one set of laws. When rules and regulations are so different among countries in one geographic region, it is sometimes possible for outsiders to create exploitative situations that are unethical. As this text goes to print, a formal investigation into allegations of war crimes in Sudan's Darfur region is being planned for the International Criminal Court in The Hague. As for the refugees, the first week of June 2005 say the Red Cross beginning airlifts of food to refugees in the Darfur region of Sudan. Previously humanitarian organizations could not bring in food to the refugees because the trucks in the aid convoys were violently attacked. Despite these promising developments, progress is slow and the government in Khartoum [June 2005] is thwarting aid workers by arresting them if they talk to foreign media reporters about the conditions they are witness to.
.
Sudan

Political
Environment
2010

As reported at length in the November 2010 issue of National Geographic,
 http://ngm.nationalgeographic.com/static-legacy/ngm/0302/feature2/
the people of southern Sudan will vote on whether to secede from the north and form a fully independent country.
.

v
CASE STUDY 3 
SNC-LAVALIN
Canadian engineering and construction firm based in Quebec
- projects in 100+ countries
.dd
SNC-Lavalin

Libya

During the 3rd week of March 2012 Maclean's magazine did a long article about international ethics and corruption in which SNC-Lavalin was profiled for its relations with the family members of Gadhafi in Libya - including events of early 2012 in which SNC was alleged to have been involved in arranging for members of Gadhafi's family to escape Libya into North America.
 www2.macleans.ca/2012/03/13/friends-in-low-places-2/
Maclean March 2012 article explains that

"...two SNC-Lavalin executives have been sacked in apparent connection with the affair. The company is also probing $35-million worth of unexplained construction project payments, although it hasn’t said whether they are connected to Gadha? or Libya. Investors are nervous, sending shares down by more than 25 per cent over the past month. Some are even seeking a class action lawsuit that accuses senior management of being “engaged in unlawful activities in Libya.”

Mario Beauregard who wrote the article for Maclean's explains
"some experts suggest that any company working in the developing world, where personal relationships are paramount, is bound to get its hands dirty from time to time."

.d
SNC-Lavalin

Bangladesh

Sept 2011

RCMP raided Toronto offices of SNC-Lavalin.

"in connection with a failed bid it made to oversee a bridge project in Bangladesh. The Padma Bridge project was backed financially by the World Bank, which suspended its US$1.2-billion loan amid an investigation into allegations of corruption surrounding the bidding process"

from
 www2.macleans.ca/2012/03/13/friends-in-low-places-2/

 

As a result of the situation in Bangladesh and Libya + other situations, several media outlets reported that SNC stock suffered.

The Financial Post reported Feb 28th 2012
"Investors punish SNC-Lavalin as payment probe gets underway"

 http://business.financialpost.com/2012/02/28/snc-lavalin-posts-profit-warning/

.
.

s
CASE STUDY 4 
SPONSORSHIP SCANDAL
Federal money given to Quebec during the vote on separation
.dd
Perceptions of Bribery effecting Canadian Exporters The Sponsorship Scandal

In early 2005 almost every newspaper and magazine and radio and TV outlet was carrying stories about corruption related to the findings of the Gomery Inquiry. Justic Gomery was charged with investigating the events surrounding the spending of $100 million of tax payer dollars on ad campaigns and events in Quebec during the time of the separation referendum.

The "Sponsorship Scandal", as it is now called, broke in 2002 when the federal Auditor General recommended that the RCMP investigate how millions in federal advertising contracts were distributed to Quebec based agencies and consulting firms that were supposed to use the money to create advertising and publicity to convince Quebec votes to reject separatism and support federalism. In June 2005 the media focused on events such as advertising executives pleading guilty to fraud charges and courtroom tales of how certain agencies, with Liberal Party ties, pocketed millions, for doing very little work.

WTGR ©McGraw-Hill Ryerson 2006

n
Why
Important
Why would students of international business be worried about these revelations being recounted in the media and throughout the world?

Firstly, Canada is a trading nation.

n
Canadian Exporters International Business leads our economy. Our ability to be competitive exporters, and reliable importers, depends on several perceptions held by international customers and suppliers, and certain influences in the economic environment.

As a country whihc has been nobly regarded in many nations for the peacekeeping activities of our Armed Forces, combined with the comparitively polite way that Canadian tourists behave abroad, Canada has enjoyed favourable and confident opinion by nations around the globe. Political scandals, based on unethical dealings, raise the concern of international business people who are dealing with Canada.

WTGR ©McGraw-Hill Ryerson 2006

n
Currency
Exchange 
Rate
Currency Problems

If the Canadian government appears to have difficulty running the country (ie. passing legislation), as we saw in the 4th week in May 2005 when an alliance of the Conservatives and the Bloc forced a tie in the House of Commons, on an important budget bill, it causes int'l currency traders to be concerned.

Currency traders, who are concerned, [May 2005] will sell their Canadian dollars, causing the value of the dollar to fall. Upon announcement that the buget was passed (since the Speaker of the House broke the tie) the Canadian dollar rose on world currency markets the next day.

WTGR ©McGraw-Hill Ryerson 2006

n
Bonds Bond Market

To explain, in overly simplistic terms, Canada, like many OECD countries, raises money for the federal government by floating bonds on the foreign debt markets. This money has a significant role to play in how the government budget can be forecast, and determines to what extent the government spends on education, health care, foreign aid, etc.

If the foreign investors lose some confidence in the ability of the Canadian government to govern, which in turn effects the chance the bonds might not be payable on maturity [in the extreme scenario], then the price of the bonds falls and this negatively effects the ability of the government to count on these amounts when they are forecasting the national revenue.

.n.
.

.
CASE STUDY 5 
Approaches to Corporate Social Responsbility 
TOYOTA 
Accelerator problems led to accidents 
.dd
 
 
http://watch.bnn.ca/#clip270260 Culture clash between Toyota execs and U.S. law enforcement 

clip of Prof. Richardson interviewed on BNN News about the public remarks made by the Japanese president of Toyota in the U.S. about the Toyota cars that had problems with the accelerator pedals sticking, and some subsequent fatal crashes which are alleged to have happened as a result.

Toyota's initial "reaction" was said to be a classic case of the Obstructionist Stance in that (as reported by the media) they did not initially co-operate with U.S. authorities and in fact the "Event Data Recorders" were encrypted so experts were not able to reconstruct the accident details.


.
CASE STUDY 6 
International pressure on an unethical situation 
SOUTH AFRICA - APARTHEID 
Canada's role in pressuring South Africa to end Apartheid
.dd
Ethics

Canadian
Political
Pressure

46664
 

Canada, as an influential member of the British Commonwealth, played a role in contributing to worldwide pressure on the South African government to drop Apartheid. Canadian politicians used their influence to affect political and economic sanctions on the government of South Africa.  Canadian Foreign Affairs Minister Don Jamieson established in 1977 measures which ended “… government support for commercial activities in South Africa, establishing a voluntary "code of ethics" for Canadian companies active in South Africa, and required visas for South African visitors.”

Through the 1980’s and early 1990’s Canadian government officials at the highest levels, business people and senior Canadian clergy, of several denominations, continued to advocate loudly for the end of Apartheid and played a role in facilitating the all-race elections in 1994. Direct support for South Africans included special circumstances allowing mixed race couples (who were in danger for their lives since inter-racial relationships were outlawed in South Africa) to immigrate to Canada, along with other Black Africans and Indian-South Africans who were at risk by virtue of their political activities. South African politicians were very angered at Canada’s growing influence and countered with allegations that Canada should look at the condition of Native tribes on the reserve system in Canada, before moralizing about other country’s circumstances. 

WTGR ©McGraw-Hill Ryerson 2006

n
In the end, Apartheid was crushed, and just four months after Nelson Mandela (Madiba) 1 was released from prison, he visited Canada in 1990 and made several speeches in which he thanked Canadians for their role. In a speech to the Canadian parliament, Mandela expressed appreciation, and encouraged Canadians to maintain economic sanctions against South Africa, which was enforced until Mandela was elected president in May 1994 . In 1998, on his second visit to Canada, Nelson Mandela became the first foreign leader to be awarded the Order of Canada – a distinguished honour that has never been repeated.

Students can hear some of the old news clips with speeches during this era on the CBC archives site at http://archives.cbc.ca/IDD-1-71-703/conflict_war/apartheid/

.
http://www.youtube.com/watch?v=i2xGDr_P_uc listen to what Mandela says about Canada's contribution to pressuring South Africa to repeal Apartheid

 youtube.com/watch?v=i2xGDr_P_uc

s

.
CASE STUDY 7 
NATIONAL GOVERNMENT LEADERS 
.dd
National
Government 
Leaders
One would think that elected leaders of national governments (prime ministers and presidents) of OECD countries would be under such scrutiny that
  • they would not try doing unethical things because they'd probably get caught
    • especially with everyone carrying smartphones that can record audio and take photos 
    • the trend even has a new term, "citizen journalists" which refers to the fact that everyday ordinary people can be the source of a news story
  • they wouldn't need to accept bribes because the process of getting elected is so costly that only very wealthy people can afford to go through the election process
    • or maybe they accept bribes because in all major democratic countries it is so costly to get elected, and they have pressure to "pay back" their supporters
It seems that we hear on a regular basis that some prime minister or president is charged, and sometimes convicted of unethical behaviour - with "accepting bribes" being one of the more common charges.

Suharto - Indonesia
Marcos - Philippines
Milosevic - Serbia
Duvalier - Haiti
Fujimori - Peru

n

gate to the Chiang Kai-Shek Memorial, 
in Taipei, Taiwan,  photo by WTG Richardson
Ivan W. in IBM600 at Seneca emailed in June 2013 to note that

While I was browsing the internet and searching for articles of unethical situations I stumbled upon an article involved with bribery in Taiwan.  The former president of Taiwan from 2000-2008 (Chen Shui-Bian) was convicted of 2 charges of bribery and was serving life in prison but the sentance has been reduced to 19 years.

What he did was launder fifteen million US  - he wired twenty one million in campaign funds to accounts around the world include Singapore, Switzerland and the Clayman islands. In May 2008, he was prohibted from leaving the nation due to the allegations of curruption and abuse of authority.

References & further details:
https://en.wikipedia.org/wiki/Chen_Shui-bian

WTGR replies - yes Ivan, this is an interestiing story because it is one of the rare examples where a national leader of a country (that has a good economy) gets caught in an unethical situation, AND is convicted, AND goes to jail.

.

photo by WTG Richardson
..
.
 
Bribery
in
Int'l
Business
Bribery in International Business - a definition

"Transnational bribery consists in offering or giving of money, valuable goods or other benefits as favors, promises or advantages to foreign government's official for procuring that official do or omit any action addressed to influence on economic or business transaction which has relationship with his public function."
 www.worldpolicies.com/english/transnational_bribery.html

Most countries have in their domestic law stipulation that it is an offence to bribe their own public officials.   Notwithstanding, only in the Interamerican Convention Against Corruption, in 1996, and in the OECD Convention, in 1997, did nations assume the commitment to punish bribery of foreign officials.

.nn
KEY POINTS The point here is that until recently, it was against the law to bribe people in your own country, but there was nothing in Canadian law to make it illegal to bribe someone in another country - the only thing that stops you from bribing someone else in another country is the bad publicity you may receive if you are caught, and the media find out. 
WTGR
m
Bribery
in
Int'l
Business
Why do we care about bribery - is it not a "victimless crime" - actually, there are severe consequences.

"In the early 1990s, scandals involving extortion and bribery were a significant factor in toppling governments in many parts of the world. This situation, if allowed to continue, could undermine the most promising development of the post Cold-war era, i.e., the spread of democratic governments and of market economies   worldwide."
from http://www.iccwbo.org/home/statements_rules/rules/1999/briberydoc99.asp (link no longer works in 2013)

.
Bribery

effect
on
stock

Bribery is not good for your stock value

Publically traded companies have to be very careful about proven, or even unproven cases of bribery

Walmart saw $17 billion of its stock value wiped out when people sold shares after a story ran in the New York Times

In 2012, Walmart was accused of knowing that it affiliate in Mexico was paying bribes to obtain building permits. The New York Times reported that Walmart did not do a thorough investigation of the allegations and when the story broke in early 2012, many large investors dumped their stock..
.
 
 
read this to understand the issues associated with bribery This screen capture from the Int'l Chamber of Commerce shows an example of how international NGOs are setting themselves up as "rule setters" for issues related to ethics and bribery
from http://www.iccwbo.org/home/statements_rules/rules/1999/briberydoc99.asp (link no longer works in 2013)
 
NGOs like the ICC have no jurisdiction within which they can enforce recommendations or regulations about ethics, they can only suggest that individual countries adopt certain standards and if they wish to do so, NGOs like the ICC are eager to make suggestions as to how that can be done.
WTGR

ICC says "...national governments must strengthen their enforcement of laws prohibiting the solicitation and receipt of bribes, as well as the payment of bribes"

 

,
 
International 
price 
fixing
Diamonds

DeBeers, a giant South African diamond supplier, which has vertical and horizontal monopoly over much of the diamond mining and diamond distribution industry, has agreed to 1/4 of a billion dollars ($250 M) to settle an outstanding lawsuit in the U.S.

Many years ago, DeBeers was sued by American jewellery retailers, manufactuers, and other people in the business, who claimed that DeBeers had been guilty of fixing prices - thus artificially inflating the price of diamonds and diamond jewellery.

DeBeers did not settle this giant lawsuit - instead, they avoided it by refusing to do direct business in the U.S. Now that the U.S. diamond market has become very large (55% of global retail sales), DeBeers wants into the U.S. again and in order to do that they agreed to settle this old lawsuit. The U.S. judge reviewing the case approved the conditions based on DeBeers agreeing to comply with U.S. anti-trust laws.

This lawsuit settlement follows an action in 2004 in which DeBeers pleaded guilty to fixing prices of industrial diamonds and agreed to a $10 M USD fine

n
Conflict 
diamonds
Conflict diamonds - AKA Blood Diamonds

Why are diamonds used as a "unit of currency" - which has contributed to an unethical trade in diamonds from "conflict regions"?

1. One of the tactics to control the international drug trafficking trade, and a tool to limit terrorism financing, is to put regulations on the amount of cash that can be physically carried by a person crossing the border. 

In Canada this limit is $10,000. If you are carrying more than $10,000 crossing in to, or leaving Canada, you have to declare this to officials at the border.

2. For a "bad guy", to carry $ 1 million in cash, is now a problem because he (she) would have to answer questions about how they got the money and where are they taking it and for what purpose. 
3. Because Canada no longer has the thousand dollar bill in circulation - instead of trying to hide one thousand, thousand dollar bills (a million), you'd have to hide ten thousand of the hundred dollar bills - which would be very bulky and challenging to conceal from the Border Services agents.
4. Therefore instead of trying to hide thousands of bulky hundred dollar bills "bad guys" have taken to using diamonds because the value per weight and size is much more than hundred dollar bills and also, being non-metallic, they do not set off metal detectors.

n
click to see MORE MONEY Wanna know what a million dollars looks like in hundred bills?
 
 

If you wanna "run away" with this pile, just imagine trying to swiftly carry a pile of half a dozen full-size textbooks and that will give you an idea of the physical mass you have to move.

By comparison, a million dollars of diamonds can easily fit in the palm of a small women's hand.

The pic to the left, of U.S. hundred dollar bills comes from
http://demonocracy.info/infographics
/usa/us_debt/us_debt.html

.
Conflict diamonds

photo by Giacomo Pirozzi for UNICEF
Conflict diamonds - AKA Blood Diamonds

What is a conflict diamond?
"Conflict diamonds are diamonds that originate from areas controlled by forces or factions opposed to legitimate and internationally recognized governments, and are used to fund military action in opposition to those governments."
 www.diamondworld.be/conflict-diamonds.htm

"During the past decade, more than 6,500,000 people from Sierra Leone, Angola, and the Democratic Republic of the Congo have been driven from their homes by wars waged in large part for control of diamond mining areas. A million of these are refugees eking out a miserable existence in neighboring countries, and tens of thousands have fled to the United States. Approximately 3,700,000 people have died during these wars."

from the `Clean Diamond Trade Act 2003', U.S. Congress

n
Conflict diamonds Kimberley Process for Rough Diamonds
The Kimberley Process was initiated by South Africa in May 2000 to develop an international certification scheme for rough diamonds in order to help prevent conflict diamonds from entering legitimate markets. Conflict diamonds originate in areas controlled by rebel groups and are often used to fund military action that targets governments."
from  www.nrcan.gc.ca/mms/diam/index_e.htm
 
"Canada has been a leader in the process to control the conflict diamond trade. It has supported the United Nations in this initiative and ... has now passed legislation to control the import, export and transit of rough diamonds in Canada."

How can a conflict diamond be distinguished from a legitimate diamond?
Diamonds which are sold without going through the recently established regulatory channels do not have accompanying paperwork to certify their origin. Legitimate Diamonds (uncut) have accompanying identification which allows them to be certified as having been mined and transported according to the new regulations accepted by the authorities worldwide.

n
Canada's
role in
the
diamond
market

Diamonds
 
In 2005, very few Canadians know that northern Canada has become a really hot place for mining diamonds.
See the Natural Resources Canada page on diamonds and Canada
 www.nrcan.gc.ca/mms/diam/index_e.htm
"Canada’s diamond industry has now become an industry worth more than $2.0 billion with all indicators pointing to potential for future growth. Canadian diamond production in 2003 was about 11.6 million carats and in 2004 was 12.6 million carats."

We'll be No.# 3 worldwide
"...three mines are scheduled to open by 2008: one at Snap Lake northeast of Yellowknife, N.W.T.; Victor, near James Bay in Ontario; and Jericho in Nunavut. These mines will consolidate Canada’s position in world diamond production by value, third after Botswana and Russia."

n
Canada's
role in
the
diamond
market
Diamonds - the Polar Bear Logo
In class Jan 27th 2010 it was mentioned that one of the ways Canadians identify Canadian mined diamonds is with a tiny laser cut image of a polar bear on the finished stone. Two UTSC students in MGTC46, Roshani T., and Christine M. were able to find diagrams explaining this (see below)
This image shows where you will typically find the polar bear mark on diamonds mined in Canada
n
Canada's
role in
the
diamond
market
Diamonds - the Polar Bear Logo
n
Canada's
role in
the
diamond
market


Tushar

Diamonds - our global share

Student Tushar C. in Feb 2011 emailed to say "I came across your section on diamonds and the fact that "Canada has become the world's third largest producer of diamonds in the world" stood out to me.  As a result, I went on to Stats Canada to investigate further and came across something even more interesting. According to Stats Canada, not only is Canada third in the world in terms of production, but the average price per carat for a Canadian-mined diamond is also third (as of 2001), only behind Namibia and Angola.  This is due to the fact that our rough diamonds are very high in quality, which is measured based on size, clarity, and colour. This has provided many opportunities for employment in the under utilized Northwest Territories, which is great for Canada. I found this chart as well"

from  statcan.gc.ca/pub/11-621-m/11-621-m2004008-eng.htm
 

n
Canada's
role in
the
diamond
market
Diamonds - merchants using the Canadian identifier
 
http://www.witiger.com/internationalbusiness/diamond-merchant.jpg Sept 2011. while shopping with his wife in Port Perry, Prof. Richardson came across a jewellry store in which they had a display specifically noting the Canadian origin of the diamonds they are selling. WTGR spoke to the merchant and they kindly explained how the information about the source of the diamonds can sometimes be encouraging to people who want to make a purchase.
The name of the store in Port Perry is Dana's Goldsmithing  danasgoldsmithing.com
n
Bribery

- when it was just intended as a "tip"

Sean Z., a UTSC student in MGTC44 in March 2008 sent an email in which he communicated a somewhat humourous story about how a Chinese women in Vancouver was convicted of bribing the driving licence examiner.

She left 2 $100 bills on the seat so when the examiner sat down they's see the money.

After chatting back and forth with Sean, I decided to list it here as an example of how sometimes a bribery situation can develop out of difference in cultural understanding

the original story in on the newswire at
http://www.newswire.ca/en/releases/archive/March2008/03/c8248.html

In emailing back and forth with Sean, I asked if this situation was maybe because she was from a certain place were such things might be "culturally acceptable". 
Sean said
"This lady was from the mainland [PRC]. Culturally, small briberies are acceptable (or overlooked) in both locations. Some times these small bribes are called red envelopes - though there is a distinction between these are the ones given out during lunar new year. In terms of bribing government officials, even in HK, it is a very serious"
 

n
Bribery
driving
exam
Another story related to bribing driving examiners - seems to be a global thing
. "Y", a UTSC student in MGTC46 in 4th week of January 2009, sent in an interesting email citing a specific example of bribery - I had asked for students to give some examples of bribery in countries other than China and "Y" gave an interesting example of Malaysia.
"Y" introduced his comments saying

"I didn't get a chance to share my experience with you in class last week as we were discussing bribery [so sent this email]. I have personally been involved in bribery without my knowledge."

WTGR
The part about "without my knowledge" intrigued me so I asked "Y" to explain
"Y" explained
" In Malaysia, it was apparently a bribe that got me my driver's license. I went through a driving school to take my driving test. On the day of my road test, I didn't even make it out to the main roads.
I was still driving through the residential area when the examiner told me to turn back. I thought at this point that I have failed but there were no mistakes on my part. "
"Y" added
"When we got back to the parking lot, I was told that I had passed. Immediately, I asked my driving school teacher how this was so. He told me that the school had already bribed on my behalf so the actual test was just for show."

n
Bribery

- foreigners using bribery in Asia

"X", a UTSC student in MGTC46 in 4th week of January 2009, sent in an interesting email after a class in which I [WTGR] made some comments about generalizations about ethics in China. Essentially, I said that the North American media covers lots of stories in 2006, 2007 and 2008 about "knock offs" and ethics in China and I wished I had some other examples of other countries to give some balance.
"X" introduced his comments saying

"I just wanted to touch on the point someone mentioned about how the Western countries were once "corrupted" (well they still are) and that we should not criticize China for doing so because they are a developing country. Although I understand and accept the way people do business in corrupted countries, it does not mean I agree with it. I continue to think that there should be pressure to disapprove these activities. Most of the time, businesses will only change if they are forced to change."
"X" added an example
"I have a relative that is currently doing business in Macau. He does renovations for American owned casinos there and also deals with an Australian construction company. According to him, a lot of times contracts are not based on the price (especially in the Casino industry), but more on the relationships
Although he dealt with Western companies, his main success for securing the contracts was through "networking events" (if you know what I mean) that sometimes cost a few thousand dollars USD a night for 3-4 people.   I thought it was interesting to note that it is not only the Chinese companies that are accepting "offerings" but also the foreign companies that operate within the region because they have gotten accustomed to the business norms. I was just wondering in this case, was the events considered as bribery or was it just a strong and normal business relationship? I think it is more of a matter of perspectives."

n
Bribery

- does it include giving gifts


pic supplied by Keting
Keting C., a UTSC student in MGTC46 in 4th week of January 2009, (and also formerly in C44 in 2008) sent in an interesting email after a class in which we talked about bribery.

Keting noted

"We discussed many issues of bribery, but we did not clearly define bribery. Bribery is a form of pecuniary corruption, is an act usually implying money or gift given that alters the behaviour of the recipient in ways not consistent with the duties of that person or in breach of law. However, the definition of bribery may vary amongst individuals.  For example, when doing business in China, individuals may give gifts such as flowers or gifts of gratitude.  But how do we draw a line between gift giving out of gratitude and respect and gift giving due to bribery? Often times, the level of gift giving to alter the behaviour of the recipient is different from individual to individual. Then how do we clearly define what bribery is? When should we draw the line? When should companies draw the line?"

definition from https://www.amazines.com/Bribe_related.html

WTGR responds
Keting - you raised an interesting point, and it seems that efforts to create a "definition" are challenging because each situation is different, due to the fact that the two people in communication will have different relationships.

I think the key point to determining if the VALUE of the gift is high enough to be considered a bribe, is to compare it to gifts given in corporate situations in which there is no previous, or subsequent business exchanged.

n
 
Bribing

Business
Officials

 An example of the costs ssociated with having to bribe officials in Pakistan
http://www.youtube.com/watch?v=KlAamwW-IkU Prof. Richardson and Student Mobashar U. in IBM600 at Seneca in May 2012 discussing bribery in Pakistan as it relates to access to electricity and gas and the subsequent effect on manufacturing productivity 

WTGR explains "I thought Mobashar's comments were very interested because it provided a specific example of how the cost of bribery can negatively effect the productivity of a business"

n
Bribing

Business
Officials
and
Police

Neha R., a UTSC student in MGTC44 in June 2010 sent in an interesting email to contribute to the cultures section on India, and we have added it in here.

Neha noted
"I would  like to share some points regarding what you should know while conducting business in India;

To carry out business, one should have a significant amount of  capital to offer (bribes) in the form of donations, or charity. Also, there are cases where even to get a child admitted to a good school or  even preschool; you need to offer bribes in the form of donations for  the welfare of the school. Another fact, the most corrupt institute is the Indian Police Force which causes a lot of problems for many companies to carry on their activities."

WTGR responds
I noted an article in the Toronto Star in Feb 2010 discussing the "deep-rooted culture of extortion"  thestar.com/news/world/india/article/772389

The article collaborates your points about dishonest policeman by citing additional examples of corrupt cops asking for bribes. The Toronto Star article made a point of saying that "India's Central Bureau of Investigation is poorly trained to ferret out large-scale corruption and is disinclined to pursue small-scale crimes".

One thing I found interesting is that young college and university students in India are speaking out strongly on the issue. "Our country is sick with corruption," said one student interviewed for the article.
"About 54 per cent of India's population is younger than 25."

n
Bribing

Business
Officials
and
Police

As a result of the comments made by student Neha R., a a significant number of students at Seneca and UofT emailed me to provide their own stories and experiences with unethical behaviour by police in India.

One of the typical stories is shown below.
Seneca student N.T. in MRK460 in Feb 2011 emailed to say

"In July 2010 I went to India with my family for 6 weeks and whenever we went anywhere outside of our village, we would get pulled over or stopped whether we were at an intersection or pulling out of a restaurant by the police because my uncle had foreigners (me and my brother) in the car and they would accuse him of being a private taxi driver for visitors to the country and would not let us go until either my dad or uncle paid them off. Sometimes they would hold us on the side of the road for 20-30 minutes questioning my uncle and dad individually to make certain we were family and not foreigners exploring the country and even after we would verify we were family they still would collect a payment before letting us continue. "

N.T. added "Anywhere in the major cities in India they have 3 – 4 cops standing at every intersection and doing nothing but looking for cars with foreigners in them and then accusing them of being private taxi drivers to collect a ‘reward’. and/or just stop random cars and not let them go until they pay them."

n
 
http://www.youtube.com/watch?v=6gbseVCvX3A Students Stephen H., Terrence H., Jennifer K., Kim M-D., and Mary-Ann M in MRK460 at Seneca in May 2012 made a video about the controversy with Nestle and milk replacement forumula used in third world countries
vv
http://www.youtube.com/watch?v=-s6OOZrrHIA Students Jathuzan K., Steve L., Talia R. and Subi T.  in MRK460 at Seneca in May 2012 made a video about the tainted milk scandal in China in 2008.
vv
http://www.youtube.com/watch?v=59FIZc_Ef4M Students Rocky Y., Uni Y., Andrea R., Anthony L. and Jonathan H. in MRK460 at Seneca in May 2012 made a video about the BP Oil spill in 2010.
vv
http://www.youtube.com/watch?v=Nad1E78AFc0 Students  Ishwinder S. and Simran S. in MRK460 at Seneca in March 2012 made a video about some unethical things in getting your drivers license in India.

 
http://www.youtube.com/watch?v=Hk4eY89fqxg Students Jordan M. and Olga V. in MRK460 at Seneca in March 2012 made a PPT about Chevron and some allegations of unethical behaviour regarding an oil spill in Ecuador

It is  a good example of how students can do a "voice over" audio on a PPT and convert it into a video to post on YouTube, and it also serves as an example of how a large multi-national corporation was involved in a situation many say was unethical

bb
http://www.youtube.com/watch?v=pqT1SMzCIgc&feature=related Students Rahul D., Hamsa D., Sri K., Ken N. Tahir S., and Akshay S. in MRK460 at Seneca in March 2012 made a good video about unethical situations regarding education in Vietnam, Sri Lanka. Lebanon, India and in Canada
dd
Students Alex V., Chris D., Simon R. and Erika V.  in MRK460 at Seneca in March 2012 made a good video about unethical situations regarding Reebok's marketing campaign for the Easytone shoe
vv
http://www.youtube.com/watch?v=Uh9Q9cXmt_A Students  Alyssa C., Kathryn C. and Duncan S. in MRK460 at Seneca in March 2012 made a detailed video about dolphins being killed in Japan, and the meat being marketed unethically.
vv

.
http://www.edc.ca/corpinfo/pubs/exportwise/winter05/p10_e.htm

.
In June 2005 Prof. Richardson wrote the "Canadianized" version of a chapter on Ethics for the an International Business textbook published by McGraw-Hill Ryerson.
Some of the material in this unit comes from the writing Richardson did for that Ethics chapter and is © McGraw-Hill Ryerson 2006.
 
 
George Carlin on Business Ethics & Politics
 youtube.com/watch?v=d82hYbDU-0w
 youtube.com/watch?v=d82hYbDU-0w
(link working March 2012)

"Explicit" language
and hard core swearing

- but if you don't mind the "language", Carlin makes several interesting points, through his humour,  about how ethics in business is twisted to serve the corporate goal and objectives

 

s

1. Madiba is the name of the clan of which Nelson Mandela is a member. A clan name is much more important than a surname as it refers to the ancestor from which a person is descended. Madiba was the name of a Thembu chief who ruled in the Transkei in the 18th century and the Madiba clan is still very important in the region. It is considered very polite to use someone's clan name.
.

... . .,,,,
witiger.com
  CONTACT I MAIN PAGE I NEWS GALLERY I E-BIZ SHORTCUTS I INT'L BIZ SHORTCUTS I MKTG?BUSINESS SHORTCUTS I TEACHING SCHEDULE
.
  MISTAKES ITEXTS USED I IMAGES I RANK IDISCLAIMER I STUDENT CONTRIBUTORS I FORMER STUDENTS I PUBLICATIONS I TIPSfor those On The Level who believe in faith, hope and charity
.
.













Prof. W. Tim G. Richardson © www.witiger.com