ETHICS

&
SOCIAL RESPONSIBILITY

Session III
2016-17 (T-2)
Austin I. Pull
 RESOURCES
Chan & Shenoy: Ch 7
http://www.cob.emich.edu/include
/templatesubpage.cfm?id=1208
http://
www.transparency.org/cpi2014
http://www.transparency.org/cpi20
14/infographic
The Scourge of Corruption
Bribery is an evil practice that
threatens the foundation of any
civilized society.

Lord Templemen in
Attorney General of HK v Reid
 Recent Scandals
Chaebols encouraged to make big donations
to the foundation controlled by the Korean
Mrs Rasputin who psychologically controls
President Park.
Teodoro Obiang
http://

www.bbc.com/news/world-africa-38488727
Corruption by Chinese Corruption Cops
http://www.bbc.com/news/world-asia-china-

38551841
 ELEMENTS
Agent with power/influence in the
exercise of a public or private function
Agent empowered to decide on
exclusive basis
Agent has duties associated with
position
Incorrectly exercises such powers
A private benefit results to the agent
 What is Bribery?
"the exchange of money or favor for a
benefit disbursed by a government
official.
when a person "confers, or agrees to
confer, any benefit upon any employee,
agent or fiduciary without the consent
of the latter's employer or principal,
with intent to influence his conduct in
relation to his employer's or principal's
affairs."
 What is Bribery? - II
An arrangement is a private exchange between two parties ('the
demander' and
the 'supplier') which: (1) has an influence on the allocation of
resources either
immediately or in the future, and (2) involves the use or abuse of
public or
Collective responsibility for private ends.

PCA Section 5
Corruptly give, solicit, receive, promise,
Any gratification
Inducement, reward, or otherwise
For doing or forbearing to do anything.

PCA: 37. (1)The provisions of this Act have effect, in relation to

citizens of Singapore, outside as well as within Singapore; and where
an offence under this Act is committed by a citizen of Singapore in any
place outside Singapore, he may be dealt with in respect of that
offence as if it had been committed within Singapore.
 What is Foreign Bribery?
FCPA:
influencing any act or decision of
such foreign official to do or omit to
do any act in violation of the lawful
duty of such official to obtain or
retain business.
Approvals of bids & sales
Favorable judicial/administrative rulings
Access to resources
TI: CPS 2016
Why Should we care about
Corruption?
$1 trillion paid in bribes
In inter-connected world, we feel impact
Political impacts, refugees, civil war, dictatorships
Loss of business
Loss of lives caused by substandard infrastructure
We buy medicines, foodstuffs, and cosmetics (toothpaste)
China Bribery
Ex-PM Wen $2.7 billion (ST, 20 Jan 2014 at A11)
JP Morgan strategic corruption (Sons & Daughters)
Hyper-Rich Corrupt Local Elites Hang on to Power by ANY
means.
Loss of Government Revenue
Cripples Good Governance
Extra Costs to Business & Consumers
Loss of Opportunities to Good Players
Erodes Respect for Rule of Law
Higher Public Investment/Lower Quality of Infrastructure
 Poor Affected Most
Channels resources from social
sectors into capital-intensive
projects where opportunities to
take bribes are greater.
Reduces the ability to collect
taxes.
Deters honest/upright people from
government
Business startups delayed
transaction costs paid by society.
 Grand Corruption
Corrupt officials distort public
sector choices to benefit
themselves.
Focus on too many of the wrong
kinds of projects and overspends
on these
By giving sweetheart contracts,
reduces the revenue-raising
benefits of privatization and the
 Corruption
A Value Maximizing
Strategy
Favored treatment on contracts,
concessions, and privatization
deals
Favorable contract terms and
shape future regulatory
environment.
If we dont pay, less efficient firm
wins.
A routine way of doing business
 Zheng Xiaoyu head
ofChina's State Food and
Drug Administration reacts
tohis deathsentence
 India
Kejriwals new Aam Aadmi Party (AAP), or the Common
Mans Party, was formed more than a year ago by anti-
corruption activists who had led national protests
against rising graft scandals. Kejriwal took his oath on
the same sprawling grounds where the activists began
their protests with a hunger strike in 2011.
Kejriwals speech: From now on, if any official asks you
for a bribe, say yes, you will pay, he said as the
audience clapped. And then alert us on our help line,
and we will catch them red-handed.
 Demand Side Supply Side
Rotten Apples v Rotten
Barrels
Demand Side
Individuals: Some people crooked & greedy
in every society!!!
Organizational Typically

Customs Police Tax
Institutional

Societal
Supply Side

Foreign Private Sector (Blue Chip Companies!)

Foreign Governments (Turn Blind Eye)
3 Types of Solutions
Control
Improve legal, electoral, educational and
other systems.
Exit or Increase Competition
C=M+DA
Eliminate subsides, privatize, no state banks
and no patronage lending
Voice Strategy
Civic Society and NGOs
Keeping and Publicizing Scorecards
CPI (Corruption Perception Index)
 Companies as moral
actors
A productive organization should
enhance the long-term welfare of
employees and consumers in any
society in which it operates.
Must not violate minimum standards of
justice and human rights in any society
in which is operates. (Donaldson)
Citizens United v FEC.
The market depends upon acceptance
of morality for its success.
Ethical Foundations
Tips to Waiters & Discounts to
Shoppers
Tripartite Relationships
Inducing breach of duty by agent
to principal
Moral Wrongs to Principal
Society
Business
Deontological Position
Bribery is an intentional violation
of a binding moral duty
Bribee is an agent of
government/company
Duty exclusively to principal
Violates duty by taking decision for
reasons that benefit herself
Consequentialist Position
Bribee harms principal by
Sub-optimal purchases
Hiding bribe from stakeholders
Social Harms
Government Distrusted Hated
Increased Lawlessness
Diminished Happiness of Citizens
Social Unrest -> Revolution
GUANXI
Confucianism principles
Li Ren Xiao
Guan (door) + Xi (group/dept)
Power social status resource
transmission
Private Social Network
Favor rewarded with bigger favor
 Liability of Professionals
Accountants/Managers/Lawyers
Complicity in Bribing (PCA & FCPA)
Incitement
Aiding / abetting
Authorization
Crime for Accountants
Omissions falsifications
Books

Records

Accounts & Financial Statements
 Laws to be concerned
about
Singapore PCA section 37
IKEA Case (domestic corruption)
UK Bribery Act
US FCPA
OECD Convention and
implementing legislation from
member countries
The Present Battle
UN Bribery Convention
Transparency International
CPI Index (on SMU Vista)

C2 Principles
Publish What You Pay (Soros)
Mining Companies

Oil Companies

Global Compact Principle 10