Excellence and Professionalism in the Face of Corruption
by Michael BaileyFirms that are investing in or exporting to Asian Pacific countries need to be sure their executives understand how laws and ethics affect and shape the way professional foreign businesses behave in Asia. It is also important for companies to understand that certain regulations and ethical issues apply not only to their own organizations, but also to individual managers within the organization and to agents under organizational and individual authority. Care must be taken in the selection, education and monitoring of partners. Upholding high legal and ethical standards is not just about following the rules. It's about having an attitude of excellence and professionalism which necessitates making the right decisions for the company to promote the firm's long-term business interests and to achieve overall success in the market.
The business culture of some Asian countries is such that businessmen have been encouraged by partners and end customers to give cash or other items of value to win or retain business. According to Transparency International which indexes countries based on instances of corruption, the perception of corruption in many markets outside North America and the EU remains high. This is especially true in certain Asian markets. To fight bribery, North American and EU countries have agreed to the Organization of Economic Cooperation and Development's (OECD's) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The ratifying states have implemented laws making it illegal for their nationals and businesses to offer cash or gifts to government officials in exchange for favorable business consideration.
There are also laws, both in Asia and the West, that prohibit bribery in the commercial sector. Companies that have specific legal questions should refer to their lawyers. However, a good rule of thumb is, if you donât feel right about doing something, donât do it. Practices which pass the legal test may still fail the test of ethics and therefore the test of overall good business practice. In addition to the issue of bribery, Western companies need to be aware of their obligations to avoid dealing with prohibited companies or persons. These may be entities that are engaged in the proliferation of weapons of mass destruction, terrorists or other undesirable elements.
Significantly, in the US it is typically the entities themselves which are prohibited, not the goods, services or technologies which are provided to those entities. Therefore, even benign items like a box of tissues or a CD ROM cannot be exported to a prohibited entity without special consent. Moreover, companies and individuals located in "friendly" countries and in countries with a low ranking on Transparency International's corruption index, such as Singapore or Switzerland, can still appear on a government's prohibited entities list. It is therefore necessary to know your end user, and (in the case of American firms) to check the end user against a list published by the Department of Commerce's Bureau of Industry and Security. The Department's "entities list" and guidelines for export control can be found on the US Department of Commerce's Bureau of Industry and Security website.
In short, export control regulations mandate strict procedures of due diligence that must be implemented before providing goods, services or technologies to entities abroad. "With all the rules, regulations, and ethical concerns, why not just find a distributor that can work around all these issues," some may conclude. "If you don't know about it, you can't be blamed," your partner may say. Nonsense! In fact, an affirmative policy to avoid "bad" information by "self blinding" can be considered an aggravating factor in an enforcement proceeding. Knowingly or unknowingly, using a distributor or agent to grease palms and ensure deals succeed or to facilitate working with prohibited entities is not a wise strategy for international business development. Companies have been severely fined and penalized. Individuals have been fined and some have even been jailed.
Thus, given the higher rates of bribery and corruption in many Asian markets and the strictness of applicable laws back home, it is necessary to be selective when choosing agents, partners, distributors and representatives. Such parties need to be trained, duly informed and monitored when it comes to communicating and enforcing what is acceptable and unacceptable business practice. Yet, high ethical and legal standards are not recommended simply for the sake of compliance. Rather they are necessary to convey your firm's professionalism and excellence to customers and to promote the long-term business interests of the organization. Take the example of submitting to a demand for a bribe. Such an action could easily lead to more and ever increasing requests in the future, representing a potential unlimited cost to the organization. Furthermore, what if a bribe were to be discovered by a more senior and un-bribed member of the accepting organization? What are the chances that you will be invited to bid next time? If you are invited a second time, how many people will be asking for "favors" then?
High standards are not simply self serving ideals; rather, they are common good business sense. Entering foreign countries is an exciting and rewarding way for companies to grow business and develop new markets. However, for those who are used to operating in the confines of the North American and EU markets, issues of bribery, corruption and export control may be new. Understanding regulations and ethical issues makes managers aware of how they are expected to behave in the overall business environment. But more important than simply following the rules is having the attitude of excellence and professionalism that sets your firm apart from others. By holding fast to the legal and ethical rules of engagement, managers are – in the end – promoting their company's products and services in the best way possible, by building their firm's reputation.
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