Bribes, Gifts, and Corrupt Practices:

Operating American Businesses in Russia

Elizabeth BanksBusiness Administration- Finance

Expected Graduation- May 2012Toya Powell

Business Administration- Human Resources Expected Graduation- May 2011

Economic Efficiency“Always act to maximize profits, subject to legal and

market constraints and with full recognition of external costs, for maximum profits under those

conditions are the sign of the most efficient production. ”

Hosmer, 1995

Ethical Principles that Guide Business Practices in Russia:

http://mie306.wordpress.com/handouts/ (Hosmer Link)

Hosmer’s Ethical Principle of Personal Virtue:

“Never take any action that is not honest, open, and truthful in which you would not

be proud to see reported widely in national newspapers and on network television.”

http://courses.ncsu.edu/mie306/lec/001/corpover04.pdf

Ethical Principles that Guide Business Practices in Russia, cont.:

http://mie306.wordpress.com/handouts/ (Hosmer Link)

“All employees, agents, consultants, representatives, and joint venture partners acting on behalf of McDonald’s or its controlled subsidiaries must fully comply with the provisions of the FCPA (Foreign Corrupt Practices Act, 1977).”

“We must never pay commissions or fees to dealers, distributors, agents, finders or consultants that are used as a bribe or kickback.”

McDonald’s Code of Conduct: Managing Bribery in Russia

http://216.139.227.101/interactive/mcd2008standards/

InBev SA, the worlds largest brewer by volume has growing profits around the world.

Profits grow fastest in South America, Russia, the Ukraine.

This offsets the sluggish sales in Western Europe

Economic Efficiency, Personal Virtue, and a sound code of conduct allow InBev SA to do business in countries such as Russia without conceding to corrupt practices.

Articlehttp://proquest.umi.com.www.lib.ncsu.edu:2048/pqdweb?index=0&did=893905981&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1276459444&clientId=15092

Profitable financial return for owners Enhanced final products & lower prices from suppliers

Possibility of in-sourcing abroad for managers and employees

Encourages the community to permit the construction of more firms.

More customers

Advantages:(Hartman, p.116-117)

Owners could suffer profit losses in Russia Difficulty in finding suppliers in Russia that

adhere to the ethics and principles of your company

Managers have less opportunity to compete for higher positions

Employees may feel future compensation for their specialized work will become stagnant

Community may distrust company if Russia’s ethical system is held in very low regards

May lose some socially conscious customers

Disadvantages:(Hartman, p. 116-117)

Our group agrees with our assigned position that business SHOULD be conducted in Russia. In order to conduct successful business the organization must abide by the following principles:

Financial reports are thoroughly audited by an independent third party.

Management will effectively communicate our company’s policies and procedures on how to conduct themselves when faced with corrupt practices.

Identifying and rejecting corrupt practices as they arise.

Group Opinion: We Should Conduct Business in Russia

“[Execute] honest and ethical including fair dealing and ethical handling of conflicts of interest.

[Execute] full, fair, accurate, timely and understandable disclosure”.

AT&T “Giving bribes, kickbacks or other improper cash

payments (or anything else of value) to government officials, civil servants or anyone else to influence them is prohibited and illegal under the U.S. Foreign Corrupt Practices Act (FCPA). This includes direct or indirect offers or promises of payment. Even if bribery seems to be an accepted local practice in a country, Gap Inc. employees are not allowed to engage in this practice”.

Gap, Inc.

Preferred Code of Conduct: http://www.att.com/gen/investor-relations?pid=5595

(AT&T Code)http://www.gapinc.com/public/documents/Code_English.pdf (Gap Code p. 11)