Foreign Payments- Vignette 9 To: BPG Management Team From: J. P. Jordan, Chair,

Question

Foreign Payments- Vignette 9 To: BPG Management Team From: J. P. Jordan, Chair, Board of Directors Subject: Foreign Payments Our firm has just received a large order, representing as much as a 35 percent increase in our sales, from Lumar, a medium-sized state-owned firm in Africa. The order would be filled over the next four quarters with a potential of orders continuing nitely. One of the unwritten specifications of the order is that we increase our price by 10 percent. We would then forward the Lumar as a finder's fee. Finder's fees such as this are common practice in the country with very little chance of discovery. The government has more pressing problems on which to concentrate. 10 percent premium to the sales manager of This offer looks very attractive due to its volume and future potential. However, I ha some concern with the payment of the finder's fee. Please meet me tom to discuss this opportunity. I would like your views on the following orrow at 8 a.m. 1. The profit potential of the offer. 2. Our capability to supply the additional volume. 3. The legal issues involved in paying the finder's fee. 4. The moral issues involved in paying the finder's fee. 5. The ethical issues involved in becoming economically entwined with this nation. Would your views be different if this country still practiced apartheid? 6. Your recommendation as to whether to accept the offer.

Explanation / Answer

I would like to answer the last question first i.e., 6th question as I consider that as the most important. My recommendation is that this offer MUST NOT be accepted as this offer is indirectly asking for bribe. Explanation is in below answers:

1. Profit potential: There could be nice profits in the short term, however, it doesn't look much bright in the long term because this company doesn't seems to have any standard ethics. Most importantly if the government discovered such transactions, then not only the contract will be terminated but also the parties involves may get pinalized a very high amount and it can also go the extent of imprisonment to many associates. Such activities may even lead to black list both supplier and the buyer. Secondly, by only paying 10% as finder's fee (bribe), the situation won't come in control because youmay have to bribe further to other government officials to allow you to continue the business this way as it is clearly mentioned that this is the common practice in the country.

2. Capacity to supply high volume: Considering the huge demand, new machineries and more manpower will be added i.e., additional cost to the company. Now considering the first question's answer, a sudden lose of contract may result in additional loses too due to the extra capital invested in increasing the supply capacity.

3. Legal issues: Paying finder's fee is definitely a bribe, which is illegal and this is not tolerable by any government. Consequences have been explained in above points.

4. Moral and Ethical issues: Foundation has to be strong and it has to be build on ethical values in order to survive for longer time in the business. Both paying and accepting the bribe is a crime. Foundation of any business on anything unethical will not last for long. One unethical move by you may cause your employees also to do the same. They may further start involving into such acts at their respective levels. Therefore, you must not let it start at your own level.

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