Strategic CSR - World Cup

This is the last CSR Newsletter of the Fall semester. Happy Holidays and I will see you in the New Year!

The World Cup in Qatar, as usual, is a spectacle as much for what happens off the pitch than on it. Of particular interest in this World Cup has been the human/civil rights record of the host country, along with the plight of migrant workers who were central to building the infrastructure required for the competition to proceed. With this in mind, the article in the url below points out that the societal inequity that was essential for the competition to be held is not limited to the host country, but includes the complicit involvement of many who are likely criticizing the host country:

"As the World Cup in Qatar kicked off last week, millions of fans pulled on jerseys costing $90 to $150 that were sold by Nike and Adidas, the official outfitter of this year's tournament. Players, wearing new, brightly colored uniforms, slipped into shiny cleats and shoes that can retail for more than $200. But what did the people who made these items get paid? In the case of 7,800 workers at the Pou Chen Group factory in Yangon, Myanmar, a supplier of soccer shoes for Adidas, the answer is 4,800 kyat, or $2.27, per day."

Apparently, the workers in this Myanmar factory attempted to use the World Cup as leverage to raise the issue of their working conditions, in the hope of securing something better:

"After workers began a strike in October, demanding a daily wage of $3.78, factory managers called soldiers into the complex and later fired 26 workers. They included 16 members of the factory's union, who were believed to have led the strike of more than 2,000 employees."

Workers facing similar conditions elsewhere are utilizing social media effectively to raise their plight, with personal appeals to soccer stars caught in a no-win situation:

https://twitter.com/emelia_yanti/status/1594319979239059457

In Myanmar, and elsewhere, all of these factories are contractors, of course, so the line of responsibility to major sports brands is opaque:

"Most Western fashion and sportswear brands do not own production facilities, instead contracting with independent factories or suppliers, often in the Global South, to make their garments. This means they are not technically the employers of these workers, and therefore are not legally responsible for enforcing labor standards or human rights."

The level of hypocrisy that these major sports competitions expose (whether the World Cup, Olympics, Commonwealth Games, F1, or similar global/international events) is always both interesting and incredibly frustrating. Of course, these contradictions were always there but, while awareness appears to be growing, meaningful action in response is less obvious. Ultimately, organizations like FIFA have felt at liberty to break laws and social conventions throughout their existence (the corruption needed to secure the World Cup in Qatar is only the most recent and blatant example) with few concerns about being held to account for their actions (see also, John Oliver's passionate piece on the World Cup). While regulatory authorities are beginning to take specific legal action, major sponsors remain tied to their long-term contracts (not unwillingly, it seems). Given that these global sporting events are wrapped in patriotism, but driven by money, all stakeholders need to hold these sports organizations to account for anything meaningful to change, including the fans purchasing these expensive replica shirts. While the Qatar World Cup has revealed the faultlines more specifically and completely (as information today travels more transparently than ever before), I don't see any serious consequences for the actions that produce headlines such as the one in the article in the url below.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

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Luxury Soccer Jerseys, but Rock-Bottom Wages

By Elizabeth Paton

December 2, 2022

The New York Times

Late Edition – Final

B1, B5

https://www.nytimes.com/2022/12/01/business/world-cup-myanmar-adidas-wages.html

Strategic CSR - Bribery

If a government passes anti-bribery legislation but then fails to enforce it, does it really care about preventing bribery? The article in the url below reminds us that the enforcement of existing rules and regulations is a choice and that different administrations will put different emphases on different laws according to their own priorities/values/ethics:

 

"U.S. antibribery enforcement regressed to its mean after a record-setting spike in 2016, according to a report released Tuesday by business antibribery group Trace International."

 

It is also worth remembering, however, that the level of commitment is a relative measure that varies both within and among countries:

 

"The U.S. brought 14 foreign bribery cases in 2017, a decline by more than half from the 29 posted a year earlier but roughly in line with the average of the past decade, the group reported. Still, the U.S. brought more cases in 2017 than all other countries combined, Trace said."

 

So, while the U.S. might not care as much as it used to, or as much as it is possible to care, it still may care more than other countries. So, what does this say about our own commitment to preventing bribery, and our own commitment relative to the commitment of others?

 

"Europe is a focus for U.S. authorities; U.S. probes involving bribes paid by foreign companies and individuals predominately focus on European countries, the study found. Twenty percent of investigations concerning bribes paid by U.S. companies related to payments to European officials, Trace said. … The U.S. has brought more than two-thirds of the foreign-bribery enforcement cases worldwide over the past 40 years but other countries are starting to pick up the pace."

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

© Sage Publications, 2017

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

 

 

U.S Pace of Bribery Enforcement Slows

By Samuel Rubenfeld

March 13, 2018

The Wall Street Journal

https://blogs.wsj.com/riskandcompliance/2018/03/13/the-morning-risk-report-u-s-pace-of-bribery-enforcement-declines-newsletter-draft/

 

Strategic CSR - Bribery

The article in the url below about the effects of bribery on firm performance reminded me of other research I have seen before. The research summarized here states that, while bribery helps drive revenue, it does not help drive profits:

 

"[The research] by two Harvard Business School professors analysed anti-corruption data from 480 multi-national firms based on sales growth, the strength of companies' anti-corruption programs and the type of market the businesses were operating in. When companies with lower end anti-corruption programs entered high bribery markets they achieved 14.1% growth over three years, compared with 2.6 % growth for top compliance companies. But the fast growth was typically offset by other costs, the study found."

 

In other words, while bribery appears on the surface to pay dividends, it in fact stimulates other costs that end up offsetting any gains. So, while bribery drives revenue growth, it does not increase a firm's profits. The article in the second url below, however, shows that (like much academic research), this empirical reality does not necessarily change behavior:

 

"Bribery is a way of life for British companies working in emerging markets, with 85pc of managers forced to resort to it to do business, according to a new report. … [The research] claims the vast majority of UK managers operating in these markets resort to the dishonest practice on a monthly basis – often with the tacit permission of their chief executives."

 

Rather than a choice, however, the article suggests bribery is a way of conducting business in some emerging countries that cannot be avoided. As the researcher notes:

 

"'It is the managing directors and general managers in country… who are being forced to give bribes to win business. These are good people being forced to do bad things. Boards are doing worse than paying lip service to anti-corruption laws because they are using them to protect themselves while they know bribery is going on.'"

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

© Sage Publications, 2017

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

 

 

Study Finds Bribery Increases Sales Not Profits

By Stephen Dockery

March 1, 2016

The Wall Street Journal

http://blogs.wsj.com/riskandcompliance/2016/03/01/study-finds-bribery-increases-sales-not-profits/

 

Bribery a way of life for companies operating in emerging markets 

By Alan Tovey

October 26, 2016

The Daily Telegraph

http://www.telegraph.co.uk/business/2016/10/26/bribery-a-way-of-life-for-companies-operating-in-emerging-market/

 

Strategic CSR - Walmart + bribery

The article in the url below revisits Walmart's bribery scandal in Mexico (see Strategic CSR – Walmart in Mexico and Strategic CSR – Walmart), which I thought had wrapped-up a long time ago:

 

"Wal-Mart Stores Inc. tried and failed to settle a foreign-bribery probe that has stretched for five years and cost the company more than $820 million, according to people familiar with the federal investigation."

 

Since its original focus on operations in Mexico, the scope of the investigation has broadened considerably, which explains the growing cost to Walmart:

 

"The Justice Department and SEC investigations were largely driven by a 2012 series of articles in the New York Times portraying details of possible misconduct at Wal-Mart in Mexico. The investigation spread to other regions where Wal-Mart does business, including Brazil, India, and China. A final settlement is expected to cover multiple countries, the people said."

 

Apparently, towards the end of a presidential administration, firms with outstanding investigations push to settle them with the team they know (and who are familiar with the history of the case), rather than wait for the incoming team that may impose different and more burdensome terms. In this case, Walmart was unable to reach agreement with the DoJ and SEC before Obama left office:

 

"'Wal-Mart and the government are very far apart in terms of a settlement,' one of the people [familiar with the federal investigation] said Thursday."

 

Apart from learning that this investigation was still ongoing, however, I was more interested to see what appears to be the main obstacle to a conclusion:

 

"The people familiar with the probe said one major sticking point has been Wal-Mart's eligibility to continue accepting food stamps in its 5,300 Wal-Mart and Sam's Club stores in the U.S. after a settlement is reached. A company that pleads guilty to a federal crime can lose its right to win government contracts -- a penalty that could block Wal-Mart from the $71 billion food-stamp program. The retailer, one of the largest sellers of groceries, is also one of the biggest beneficiaries of food-stamp spending."

 

How important, exactly, are food stamp customers to Walmart?

 

"The loss of food-stamp shoppers would be a blow to Wal-Mart, which each year receives some 18% of the money spent through the Supplemental Nutrition Assistance Program, or SNAP. That represented about $13 billion in sales last year."

 

Although this is a small percentage of the firm's almost $500 billion annual revenues, it still represents a significant transfer of funds from the government. As such, this amount represents a subsidy that allows the firm to operate at a much lower cost than competitors. And I would guess that a similarly large number is involved in terms of Medicare and Medicaid healthcare payments for employees who do not receive insurance directly from the firm. Tax breaks to locate stores in particular geographic, economically-deprived regions also no doubt help pad Walmart's bottom-line. There are good arguments on both sides for these payments to exist and continue. What I find funny, though, is the widespread belief that the U.S. economy is a free market. The inefficiencies introduced by the various political biases on both sides of the fence reduce competition and support firms that would otherwise struggle or even fail, preventing the creative destruction that is so fundamental to the effective functioning of the capitalist system.

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

© Sage Publications, 2017

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

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The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

 

 

Wal-Mart Stuck in Probe Limbo

By Joann S. Lublin, Aruna Viswanatha, and Sarah Nassauer

January 28-29, 2017

The Wall Street Journal

Late Edition – Final

B1

http://news.morningstar.com/all/dow-jones/retail/20170128139/wal-mart-stuck-in-probe-limbo-wsj.aspx

 

Strategic CSR - Bribery

The article in the url below indicates that, finally, the rest of the world is taking the issue of bribery seriously:
 

"Anti-bribery enforcement actions conducted outside the U.S. outnumbered the actions taken in the U.S. in 2014, according to a new report. Countries other than the U.S. took a total of 15 enforcement actions against foreign bribery, according to the 2014 edition of the Global Enforcement Report from business anti-bribery group Trace International. … The U.S. took 13 actions in 2014, the report said."

 

Hopefully 2014 indicates a trend that will continue because the rest-of-the-world has a lot of catching-up to do:

 

"Overall, the U.S. still dominates, however: it's taken 70% of the 269 total foreign bribery enforcement actions from 1977 to 2014 recorded by Trace International."

 

1977, of course, was when the Foreign Corrupt Practices Act was passed in the U.S. following the Congressional hearings into the Watergate scandal. One of the interesting things that investigation unearthed was the slush funds companies had created to make surreptitious payments to Nixon's re-election committee. What Congress also discovered, however, was the companies were also using these slush funds to make payments (bribes) to foreign elected officials in order to win business contracts. The FCPA was passed in an attempt to prevent such payments and begin holding corporations to account for the illegal and unethical actions of their employees overseas. The modern-day ethics and compliance profession traces its roots to this period.

 

Have a good weekend.

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

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Global Anti-bribery Enforcement Actions Outnumber U.S. in 2014

By Samuel Rubenfeld

June 4, 2015

The Wall Street Journal

http://blogs.wsj.com/riskandcompliance/2015/06/04/global-anti-bribery-enforcement-actions-outnumber-u-s-in-2014/

 

Strategic CSR - Bribery

The article in the url below marks an important step forward in the campaign to minimize instances of bribery by corporations abroad:

 

"U.K. oil, gas, mining and logging companies will, as of Jan. 1, 2015, have to disclose … payments to foreign governments of more than 86,000 pounds (about $135,000) for taxes, royalties, permits, bonuses and the like, and they'll have to do it on both a country-by-country and project-by-project basis."

 

In other words, rather than merely punishing firms that get caught, this legislation requires the reporting of all payments (legitimate or otherwise) over the minimum amount by energy companies. This is useful because, in the past, firms have cloaked bribes in legitimate-sounding payments, such as consulting fees. Now, all payments will have to be reported, allowing regulators the opportunity to identify suspicious patterns:

 

"The U.K. is the first European Union country to implement an EU directive passed in June 2013 requiring member states to pass laws requiring the disclosures. The first company payment reports will be published in the U.K. in 2016."

 

The hope is that this action in the UK will encourage the SEC to move forward with a similar proposal in the U.S. that has run into strong industry resistance and is currently stalled.

 

Have a good weekend.

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

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The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

 

 

U.K. Implements Extractive Transparency Rule

By Samuel Rubenfeld

December 1, 2014

The Wall Street Journal

http://blogs.wsj.com/riskandcompliance/2014/12/01/u-k-implements-extractive-transparency-rule-as-sec-delays-standard-further/

 

Strategic CSR - Bribery

The Wall Street Journal’s Risk & Compliance Journal (http://online.wsj.com/public/page/risk-compliance-journal.html) is interesting and informative, and demonstrates the increasing importance of compliance-related issues today. The risks are multiplied for multi-national firms working across cultures. As the article in the url below indicates, Walmart’s exposure to bribery is increasingly apparent following its Mexico scandal, while the changes it is making in response are beginning to affect performance overseas:

 

“Three years ago Wal-Mart Stores Inc. set out to be India's top retailer by 2015. … Today, Wal-Mart's advance on India is barely moving. The company opened just five wholesale stores in the country last year – well below the 22 planned. This year, Wal-Mart plans to open eight locations, a person familiar with the company's plans said. Part of the reason lies in what people in the industry say is India's labyrinthine process for developing commercial real estate and operating stores. But one of the biggest reasons has been a compliance crackdown at Wal-Mart.”

 

As a result, the consequences for firms (especially for those that are trying to operate with integrity) are growing. A recent newsletter from the WSJ’s Risk & Compliance Journal (summarizing events at a Dow Jones Compliance Symposium) provides some compelling examples of how firms can become enmeshed in convoluted situations that break U.S. law. This has greater consequences for these firms today because this law is increasingly being enforced more stringently by federal agencies:

 

“Susan Angele, the former global deputy general counsel at the The Hershey Co., said that in Japan, it’s customary to give cash gifts at funerals to the bereaved family. Of course, if one of the family members is a government official, such payments could qualify as a bribe under the U.S. Foreign Corrupt Practices Act. Angele said that guidance on the FCPA, recently released by the DOJ and SEC, provided no clues on how to avoid insulting a grieving family. ‘You do the best you can’ in such situations, she said.”

 

“Jonathan Drimmer, assistant general counsel for Barrick Gold Corp. , said he ran into trouble with Saudi Arabia’s ‘value-based billing’ system. The company had inherited a $125,000 service contract in the country, he said, but was surprised when it received a $1 million tab from the contractor. Drimmer said outside lawyers told him that Saudis regularly throw out contracts and charge what they think is the actual value. ‘I said, ‘we’re a multinational, we can’t do that,’’ Drimmer said. ‘The lawyer said, ‘well they can take you to court for not paying, and they’ll probably win.’’”

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

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The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

 

 

Wal-Mart's Path to Power in India Hits Its Limits: The Lawyers

By Megha Bahree

April 2, 2013

The Wall Street Journal

Late Edition – Final

B1

http://online.wsj.com/article/SB10001424127887324373204578373830411211410.html

 

Strategic CSR - Bribery

The article in the url below is interesting because it suggests a negative correlation between bribe paying and a firm’s economic performance:

“Companies that bribe their way to contracts under-perform for up to three years before and after winning the work for which the bribe was paid , according to new academic research … conducted by Cambridge University Professor Raghavendra Rau.”

What is also interesting is that the research reveals an interesting relationship between the status of the bribe receiver, the amount of money involved, and the utility of the bribe:

“When high-level government officials are bribed, the value derived from the bribe is close to zero, Rau said. But, conversely paying smaller bribes to lower-level officials is less likely to ensure that a contract is won, according to Rau.”

Relating the bribes to economic performance, Rau found that it is worse performing firms that tend to pay:

“‘From the point of view of society it’s terrible because the worst kind of companies are winning the contracts, and that amounts to a distortion of resource allocation in an economy,’ Rau said.”

The only issue with the data is that they capture actual recorded incidents of bribery and, as such, do not include firms that bribed, but did not get caught. As such, perhaps a more accurate interpretation of the data is that it is the less competent firms that bribe ineffectively, perform poorly, and get caught. There could be a missing variable in the model (incompetent managers) that is really driving the results!

Further details of the study are available on the University of Cambridge’s website: http://www.jbs.cam.ac.uk/media/2012/5400/

Have a good weekend.

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

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Bribes Provide Companies Few Benefits, Study Finds

By Christopher M. Matthews

November 23, 2012

The Wall Street Journal Blog

http://blogs.wsj.com/corruption-currents/2012/11/23/bribes-provide-companies-few-benefits-study-finds/

Strategic CSR - Walmart

The article in the url below provides an update on the ongoing Walmart bribery investigation in Mexico:

“Wal-Mart on [November 15] reported that its investigation into violations of a federal antibribery law had extended beyond Mexico to China, India and Brazil, some of the retailer’s most important international markets.”

On the upside, at least Walmart disclosed the expanded investigation voluntarily this time, rather than being ‘encouraged’ by The New York Times (see: Strategic CSR – Walmart in Mexico). On the downside, however, the announcement of the expansion via regulatory filing suggests the extent of the FCPA violation is both serious and widespread throughout Walmart’s international operations:

“A person with direct knowledge of the company’s internal investigation cautioned that [the] disclosure did not mean Wal-Mart had concluded it had paid bribes in China, India and Brazil. But it did indicate that the company had found enough evidence to justify concern about its business practices in the three countries — concerns that go beyond initial inquiries and that are serious enough that shareholders needed to be told.”

The disclosure is more concerning in that, in recent years, Walmart has relied on international operations to drive growth throughout the firm. Both in terms of lost revenue and mounting costs, the full consequences of this investigation for Walmart are still far from clear:

“Wal-Mart has so far spent $35 million on a compliance program that began in spring 2011, and has more than 300 outside lawyers and accountants working on it, the company said. It has spent $99 million in nine months on the current investigation.”

Take care

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

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Wal-Mart Takes  Broader Look at Bribery Cases

By Stephanie Clifford & David Barstow

November 16, 2012

The New York Times

Late Edition – Final

A1

http://www.nytimes.com/2012/11/16/business/wal-mart-expands-foreign-bribery-investigation.html

Strategic CSR - GSK

The article in the first url below shows what is possible when one of a firm’s stakeholders holds that firm to account for its actions and responsibilities:

“Drug maker GlaxoSmithKline PLC agreed to plead guilty to criminal charges of illegally marketing drugs and withholding safety data from U.S. regulators, and to pay $3 billion to the government in what the Justice Department called the largest health-care fraud settlement in U.S. history.”

Specifically:

“Under the deal, which requires court approval, Glaxo will plead guilty to criminal charges involving three drugs—the antidepressants Paxil and Wellbutrin and the diabetes drug Avandia. … The guilty plea covers a range of behavior by the U.K.-based company, including illegally promoting the antidepressants in the U.S. for uses that weren't approved by the Food and Drug Administration, a practice known as off-label marketing, and withholding important safety data about Avandia from the U.S. regulator.”

In addition to these illegal activities, a pattern of practices was identified that resulted in this settlement, GSK’s fourth with the U.S. government in the past few years:

“Over a period of more than a decade, the government's latest investigation found, the company plied doctors with perks such as free spa treatments, Colorado ski trips, pheasant-hunting jaunts to Europe and Madonna concert tickets, Justice Department officials said.”

I firmly believe that there are two sides to the “responsibility” that we talk about when we discuss “CSR.” The first responsibility is the responsibility of companies to meet the needs and demands of a range of stakeholders, broadly defined. It is in firms’ best interests to do this because it helps secure the societal legitimacy necessary for long-term survival. The second responsibility, however, lies with stakeholders to hold firms accountable for their actions. This responsibility is equally (if not more) important than companies’ responsibility because I also believe that firms respond to market forces much more effectively than they can predict market forces (see also: ‘Why Aren’t We Stressing Stakeholder Responsibility?’). As such, if stakeholders are not willing to hold firms to account, only a small percentage of firms will alter their behavior sufficiently.

If we are going to talk about a corporate social responsibility (the responsibility on firms to act in accordance with stakeholder needs) and, in particular, if we are going to talk about the business case for CSR, therefore, we also need to be talking about corporate stakeholder responsibility (the responsibility on a firm’s stakeholders to hold that firm to account). Both sides of the responsibility coin are equally essential to the extent that, without one, we are unlikely to see enough of the other.

Additional reporting on the GSK case is available in the article in the second url below.

Take care

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

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Glaxo Sets Guilty Plea, $3 Billion Settlement

By Jeanne Whalen, Devlin Barrett, and Peter Loftus

The Wall Street Journal

July 3, 2012

B1
http://online.wsj.com/article/SB10001424052702304299704577502642401041730.html

Drug Firm Guilty in Criminal Case

By Katie Thomas and Michael S. Schmidt

The New York Times

July 3, 2012

A1
http://www.nytimes.com/2012/07/03/business/glaxosmithkline-agrees-to-pay-3-billion-in-fraud-settlement.html

Strategic CSR - Walmart in Mexico

The fallout from the Walmart bribery investigation in Mexico is interesting on many levels. Principally, why would a company that is so process- and control-oriented allow things to get to this point? Of course, the key questions directly related to the case are: How much did Walmart know, when did they know it, and did they disclose their knowledge to the correct authorities? The initial media reports do not appear to bode well for the firm and its senior executives. As we know from Watergate, it is not the original crime, but the cover-up that does most of the damage.

The fact that reaction to these allegations has been so swift and the prospective consequences so extreme (Walmart shares were down nearly 5% on Monday, alone: http://www.msnbc.msn.com/id/31260763/ns/business-markets?q=wmt), however, speaks to the particular nature of the ethics transgression—bribery.

This phenomenon struck a chord with me because it is related directly to the research I did for my dissertation. Part of my study involved constructing a comprehensive list of all the actions a firm can commit that an Ethics & Compliance Officer (ECO) would consider to be an ethics transgression. The list was created in close consultation with the Directors of the Ethics & Compliance Officers Association (ECOA, http://www.theecoa.org/), all of whom are senior ECOs in their respective firms. In addition to creating the list, I also asked the ECOs to score each transgression in terms of severity from 1 to 5 (with five being most severe). The ethics transgression at the top of the list in terms of severity is “bribery (in the U.S. or overseas).” The complete list of all the transgressions is below FYI.

The increased vigilance with which the U.S. government is prosecuting Foreign Corrupt Practice Act (FCPA) cases (e.g., http://www.nytimes.com/2012/03/11/business/corporate-bribery-war-has-hits-and-a-few-misses.html) may well be a driver of the heightened attention being given to bribery; it would also explain the market’s reaction to the allegations against Walmart:

“Enacted in 1977, the Foreign Corrupt Practices Act prohibits American companies and foreign companies whose securities are traded on exchanges here from bribing foreign officials to attract or keep business. For many years, there were few prosecutions under the act. In 2003, for instance, not a single person was charged. But in the last four years, a total of 58 companies have paid a combined $3.74 billion to settle such corruption charges. Since 2009, some 67 people have been charged, 20 are still awaiting trial or are at large, and 42 have been convicted, some from charges prior to 2009. A total of 22 have been acquitted or had charges dismissed.”

For an interesting interactive map detailing FCPA prosecutions regarding corporate actions in countries all over the world, see: http://fcpamap.com/

Take care

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Strategic CSR - Chiquita

Two recent articles about Chiquita Brands, the multi-national banana producer, gave me pause for thought. The article in the first url below reports that Chiquita will be forced to face charges in Federal Court in the U.S. regarding its role in making payments (opponents say ‘bribes,’ defenders say ‘payments to protect employees’) to terrorists in Colombia:

“Chiquita, the global banana producer, was ordered this week to face a federal court over their role in paying off right wing death squads in Colombia. … Cincinnati-based Chiquita has been growing bananas in Colombia since 1899. For over four decades these operations have been under attack … . Court documents show that Chiquita executives paid off [two terrorist] groups. FARC was paid between $20,000 and $100,000 a month. Chiquita has also admitted to making over 100 payments totaling $1.7 million to the AUC or affiliated organizations over seven years.”

In contrast, the article in the second url below bemoans the fact that, although Chiquita has made great strides in becoming more socially responsible in recent years, it has not received nearly sufficient recognition for its efforts: 

“Chiquita traces its origins to the late 1890s and the United Fruit Company, which treated some of the Central American countries it operated in as banana republics. In recent years, however, the firm has made huge efforts to promote social responsibility and sustainability, working with activist groups such as the Rainforest Alliance. … Chiquita has signed and largely upheld a global agreement with local and international food unions. It has embraced sustainable farming techniques and allows products to be certified for environmental and other standards. Last year it promised to promote more women and to ensure there is no sexual harassment on the plantations it owns and buys from.”

The second article also notes that Chiquita’s progress is particularly notable in contrast to the absence of similar efforts by its main competitors, Dole and Del Monte:

“Chiquita’s conspicuous lack of reward is beginning to worry some veteran campaigners. Neither Dole nor Del Monte has been interested in following Chiquita in signing a global union agreement, says Ron Oswald, head of IUF, the international foodworkers’ union.“It’s not sustainable for any company in a competitive sector to make progress and gain no recognition for it,” he grumbles.”

So, what are we to make of this? It is true, for example, that Chiquita volunteered the information about its activities in Colombia that are now being used against it in court (information the firm’s opponents would not otherwise have been able to get hold of). Chiquita’s actions appear genuine, along with the claim that HQ was taken by surprise at what was going on in the country. It is also true that rumors suggest it was not the only firm engaging in such activities in the region, but it is the only firm that has come forward. Should we punish firms for revealing flaws as part of their effort to become more socially responsible (thus, discouraging other firms from making similar commitments)? Or, should we be lenient on past corporate actions that flouted laws, regulations, and social norms?

Hmmmm ……… , not easy. The conundrum reminds me somewhat of the Truth and Reconciliation Commission that was set up in the aftermath of Apartheid in South Africa to encourage a full accounting of all the crimes and atrocities that occurred during that period (http://www.justice.gov.za/trc/). While at times being very hard to swallow, such institutions can allow for the sort of progress and change that we need to see in firms today. But, as I said, the process is often hard to swallow.

Nevertheless, if we believe that social responsibility will be more effective when it is perceived by firms to be in their best interests, rather than bluntly mandated by government regulators, we will need to start swallowing and reward those firms that are willing to stick their necks out with our encouragement.

Take care

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Chiquita Banana To Face Colombia Torture ClaimChiquita, the global banana producer, was ordered to face a federal court over their role in paying off right wing death squads in Colombia that are alleged to have used “random and targeted violence” against villagers in exchange for financial assistance and access to Chiquita’s private port.
By Pratap Chatterjee
CorpWatch blog

March 30th, 2012http://corpwatch.org/article.php?id=15697

Going Bananas

Chiquita has tried hard to be good—and got no credit for it

The Economist

March 31, 2012,

74

http://www.economist.com/node/21551500

Strategic CSR - FCPA

This article caught my eye, if for no other reason than it is surprising.

The article reports a conviction of three employees from Lindsey Manufacturing Co. under the Foreign Corrupt Practices Act (FCPA) for paying bribes in Mexico. The surprising thing is that this is “the first time a company has been convicted at a U.S. trial in a foreign bribery case.”

Specifically:

“[The] conviction marks the first time a company has been convicted at trial for violations of the Foreign Corrupt Practices Act, which bans the bribery of foreign officials for business purposes. In the law's 34-year history, companies had always pleaded guilty or signed non- or deferred-prosecution agreements with the Justice Department.”

This case reinforces a trend in recent years (starting with the Bush administration) of a more aggressive enforcement of the FCPA by the Justice Department (see Newsletters: January 26, 2011, November 23, 2009, and September 16, 2009), which has resulted in a significantly larger number of investigations being initiated and now, apparently, in the first ever successful prosecution.

Have a good weekend.

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Corporate News: Conviction in Foreign Bribery Case Is First in U.S. Trial

By Samuel Rubenfeld

459 words

11 May 2011

The Wall Street Journal

B4

http://online.wsj.com/article/SB10001424052748703730804576315573205511018.html