Questionable Payments

7 Pages Posted: 21 Oct 2008

See all articles by R. Edward Freeman

R. Edward Freeman

University of Virginia - Darden School of Business

Christopher Hernadi

Independent

Cheryl Tolbert

University of Virginia - Darden School of Business

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Abstract

This note consists of vignettes illustrating the breadth and depth of the issue of questionable payments. Petty bribes, graft, blackmail, and corrupt officials are all included in these real-life examples of managers caught in the middle of difficult situations. See also "A Note on Questionable Payments in Business" (UVA-E-0179).

Excerpt

UVA-E-0178

Questionable Payments

The following 14 vignettes have been developed to facilitate a discussion on whether or not some particular kinds of payments should or should not be made. In reading these vignettes please keep the following questions in mind: (1) Who is affected by the payments? (2) What are the likely consequences? (3) Are there any rights or duties at stake? (4) What principles are involved in the payments? (5) What are the implications for both the “payer” and “receiver”? (6) What cultural institutions are relevant?

These vignettes have been developed from several sources. First of all, some of the vignettes are fictionalized accounts of actual payments that have been reported in public sources. For instance, see (1) Fortune, June 13, 1994, vol. 129, 152–53; (2) Fortune, February 24, 1992, vol. 125, 108; (3) Sales and Marketing Management, May 1994, vol. 146, 13; (4) Wall Street Journal, August 4, 1994; (5) Wall Street Journal, May 20, 1993; and (6) New York Times, September 2, 1994. Second of all, the vignettes are disguised accounts based on the personal experiences of a number of students at MBA and executive programs from around the world who wish, for obvious reasons, to remain anonymous. Finally, the vignettes reflect the authors' general business experiences. All of the vignettes are presented to facilitate class discussion rather than to illustrate the effective or ineffective handling of a business situation. Any resemblance to actual companies or people is entirely coincidental.

(1) Traffic Tickets

For many years, a large U.S.-based department store, Company Y, had one of the strictest anti-bribery policies in their industry. When confronted with randomly issued traffic tickets in Country X, Company Y considered it proper to contest the tickets in court. But as Company Y soon learned, going to court turned out to be costly and time-consuming, while simply paying off the traffic cop (the accepted practice and, indeed, the purpose of the tickets in the first place) made much more business sense. Company Y executives were in a bind, torn between their personal conviction that bribery was wrong in any form and the prevailing Country X standards, which indicated that the payoff was perfectly proper.

. . .

Keywords: corporate culture, bibery, cultural conflict, ethical issues

Suggested Citation

Freeman, R. Edward and Hernadi, Christopher and Tolbert, Cheryl, Questionable Payments. Darden Case No. UVA-E-0178, Available at SSRN: https://ssrn.com/abstract=908442 or http://dx.doi.org/10.2139/ssrn.908442

R. Edward Freeman (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
804-924-0935 (Phone)
804-924-6378 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/freeman.htm

Christopher Hernadi

Independent

Cheryl Tolbert

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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