Can A Case Be Made To Justify Corporate Bribery From The Corporation’s Perspective?

Imagine that you are the chief executive officer of a global energy corporation. You are attempting to secure a contract to drill for oil on the territory of an emerging African nation. If you believe that a bribe might help “facilitate” the securing of the contract, would you offer to pay one? And if so, how much would you offer?

That is the situation that Royal Dutch Shell (i.e. Shell Oil) and the Italian firm ENI faced in 2011 while they pursued drilling rights for an oil field in Nigeria named OPL 245. The field was believed to contain nine billion barrels of oil, valued at approximately $500 million.

The corporations paid $1.3 billion to the Nigerian government prior to securing the contract. In April 2017, the BBC reported that $466 million of this payment may have been diverted to the personal bank accounts of various politicians.

Two weeks ago, Italian prosecutors arrested 15 individuals in connection with the contracting process. One would think that it would be difficult for the individuals to justify the payment, wouldn’t it?

But let’s think about the situation from the contrarian perspective. What if such payments are legal activities in the emerging nation? What if other energy corporations, based in nations where such payments are commonplace, are ready and able to step in and develop the oil field? And what if these other corporations are already well established in the emerging nation?

If Shell and ENI didn’t decide to pay the $1.3 billion and then recoup the cost from the contract’s operating revenue, another company would have likely done so. The Chinese economy, for instance, has become the African continent’s largest economic partner. It supports many firms that can manage oil fields.

The question is not a simple one. Although some can certainly argue that bribery is a pernicious activity that must remain illegal, others can reply that the types of payments made by Shell and ENI are justified because they support the development of the Nigerian and European economies and societies. Without such payments from European firms, the Nigerian economy and society will simply become more interdependent on firms from societies where bribery is commonplace.

Incidentally, this is not an isolated case. Global energy corporations have grappled with such questions for decades. And several years ago, Michael Kraten (the author of this blog) developed a corporate training case with other professionals to address this issue amid other business concerns.

It’s called Save The Blue Frog, and it is available online at SaveTheBlueFrog.com. The case is named after a different issue that challenges global energy corporations; namely, the existence of an endangered species on the proposed oil field site.

If you’re feeling aghast at the very idea that bribery may be justifiable, you need not worry. At the moment, there are no significant initiatives underway to repeal the Foreign Corrupt Practices Act in the United States or similar laws elsewhere.

But you may wish to keep in mind that there are reasons why China has become Africa’s largest economic partner. In other words, there are costs to be paid — and opportunities to be lost — when a nation enacts laws that are based on moral codes of conduct.

Morality and the Auto Industry

Do you recall the great Volkswagen emissions scandal of 2015? American officials discovered that the automobile company was hacking the computers of its own diesel engine products by installing secret software that tricked emissions testing equipment into ignoring hazardous levels of pollution.

Volkswagen then compounded this crime by marketing those very vehicles as green products to environmentally sensitive customers. Thus, citizens who cared the most about clean energy were duped into purchasing the dirtiest products imaginable.

At the time, it seemed that the scandal was an extreme aberration that was unlikely to recur in the future. But guess what happened last week? Two different national governments, in different regions of the world, announced similar investigations into the products of a pair of additional automobile companies.

According to Bloomberg, “Paris prosecutors, who raided Renault a year ago in an initial emissions investigation, opened a probe into the automaker on Thursday. About the same time, the U.S. Environmental Protection Agency accused Fiat Chrysler of installing software in 104,000 Jeep Grand Cherokees and Ram 1500 pickups that allowed them to exceed pollution limits on the road.”

What is going on here? Why are the internal environments of these automobile companies permitting employees to behave so badly? Considering that the firms all maintain extensive codes of conduct with clearly stated ethical guidelines?

One reason may be that these ethical codes are not firmly rooted in foundations of morality. Thus, although they attempt to regulate behavior, they do not help employees make appropriate moral judgments about right and wrong.

Consider, for instance, the Fiat Group’s current Business Ethics and Anti-Corruption Guidelines. They simply state that “payments … to any political parties … are permitted only if in compliance with applicable law.” In any corrupt nation of the world, of course, a ruling party could simply declare such payments to be legal, thereby negating Fiat’s prohibitive guideline.

In other words, an ostensibly immoral bribe might be classified as a perfectly ethical payment under Fiat’s Business Ethics guidelines. By failing to define its own moral principles in terms of what is right and what is wrong, the firm allows its ethics officers to (either intentionally or unintentionally) draft behavioral guidelines that permit immoral behavior.

Now let’s contrast this Fiat bribery guideline to one that is listed in Coca Cola’s current Code of Business Conduct. The beverage company states that, when dealing with governments, its employees should “ … not offer anything to a government official—directly or indirectly—in return for favorable treatment … Bribes Are Prohibited. A bribe is giving or offering to give anything of value to a government official to influence a discretionary decision.”

Can you see the difference? Whereas Fiat simply instructs its employees to make ethical decisions that are consistent with local laws, Coca Cola defines such ethical decisions by implicitly describing a moral distinction between right and wrong. For Coca Cola, a wrong decision is one that attempts to solicit “favorable treatment,” even if such a solicitation isn’t necessarily defined as illegal by a host nation.

You might also notice that Coca Cola’s discussion of bribery appears in a section of its Code of Business Conduct entitled “Integrity in Dealing with Others.” Furthermore, the phrase “Acting With Integrity Around The Globe” appears on its Code’s cover page. In contrast, Fiat’s Business Ethics and Anti-Corruption Guidelines only mention the word “integrity” in passing in a brief introductory paragraph.

This is not to imply, of course, that Fiat’s ethical guidelines are unimportant. Nor is this to imply that the recent investigatory announcements of the American and French governments are unnecessary.

But if we hope to prevent such ethical lapses by automobile companies in the future, it may not be sufficient to simply rely on these controls. After all, they do not seem to be up to the task of compelling appropriate employee behavior.

Instead, we may need to require the corporate leaders of these firms to create cultures of morality within their own organizations. Once their employees are able to differentiate between right and wrong, they may be more likely to engage in honest behavior.