Deck 6: Ethics in International Business

Question 1

Freedom from physical abuse is a basic fair employment practice.

Answer 1

True

Question 2

Most companies do not have international labor and human rights policies.

Answer 2

False

Question 3

FIFA officials were not subject to U.S. laws and prosecution.

Answer 3

True

Question 4

Selling products banned from sale in the United States in other countries is not an ethical violation.

Question 5

Ethical codes for companies cannot apply internationally.

Question 6

A living wage is not necessarily a part of human rights issues in labor practices.

Question 7

Equal treatment and opportunity is generally a part of labor policies and principles.

Question 8

Bribes to government officials are only unethical if the culture of a country does not believe they are unethical.

Question 9

FIFA was a money-laundering case.

Question 10

Sweatshops are not an issue of human rights.

Question 11

FIFA's ethical and legal issues involved television rights and the award of the World Cup.

Question 12

Sweatshops are ethical so long as they are in compliance with the laws of the country in which they are located.

Question 13

Chiquita stopped its mercenary payments in Colombia immediately after officials met with the Justice Department.

Question 14

If I worked in purchasing in my company, it would be unethical for me to accept season tickets for my city's NBA team from the company that has supplied catering for the company's training sessions.

Question 15

"Grease" or "facilitation payments," which are legal under the Foreign Corrupt Practices Act can be considered ethical.

Question 16

There are not ethical issues in the use of child labor if the children's families approve of their jobs.

Question 17

Dumping a product that has been outlawed in the U.S. in other countries is legal.

Question 18

The penalties imposed for FCPA violations have been increasing.

Question 19

Product dumping does not present ethical problems in those countries without product liability recovery systems.

Question 20

No officers at Chiquita can be held criminally responsible for the Chiquita payments to mercenary groups.

Question 21

The Foreign Corrupt Practices Act does not apply to U.S. companies when they have operations outside the United States.

Question 22

On April 1, 2008, about 20,000 workers in Vietnamese factories that make Nike shoes walked off the job. The workers at the plants (managed by a Taiwanese company) were demanding higher wages. At the time of the strike, the Nike workers were being paid 14% above the minimum wage for Vietnam. However, consumer prices in Vietnam have risen 19% in one year. The inflation rate has been the impetus for a number of labor strikes over the past year. By April 2, 2008, the strike was settled. The workers were given a 10 percent raise to their $5 hourly wage. If Nike's wages that it was paying were legal, why did it settle the strike by agreeing to pay more?

A) Nike had an ethical dilemma that fit into the category of organizational abuse.
B) Nike was considering its stakeholders in resolving ethical dilemmas .
C) Nike was exercising social responsibility .
D) All of the above are correct .

Question 23

Facilitation and grease payments are two different things.

Question 24

Only one Siemens employee was involved in paying bribes.

Question 25

Extension of drilling contracts is covered under the FCPA.

Question 26

Guanxi is an example of a facilitation payment.

Question 27

Walmart self-reported its issues with payments in Mexico.

Question 28

Circumventing rules in order to get products imported is not covered under the FCPA.

Question 29

Bribery of foreign officials is prohibited by U.S. companies.

Question 30

Walmart used gestores in Mexico.

Question 31

Nike is not named in the FIFA indictment.

Question 32

Why is Transparency International's Corruption Perception Index important for economic systems?

A) Because it shows economic systems function perfectly well without any attention to ethical issues.
B) Because it shows that bribery and corruption are a necessary part of economic growth.
C) Because it shows that economic growth increases at the same pace as political corruption.
D) Because it shows that economic growth requires a level playing system for all risk-takers.

Question 33

Bribery is a cultural issue and generally not regulated by law.

Question 34

Gaining access to non-public bid information is not covered under the FCPA.

Question 35

Italy's freeway system has not been completed despite billions in funding.

Question 36

GlaxoSmithKline paid bribes directly to government officials.

Question 37

Walmart executives had no prior knowledge of FCPA issues in Mexico.

Question 38

Dumping a product that has been outlawed in the U.S. in other countries is ethical.

Question 39

GlaxoSmithKline had no managers involved in the criminal charges brought against the company for its Chinese operations.

Question 40

Which of the following is not one of the components of the four-legged stool of interrelationships in economic systems?

A) Government
B) Customers
C) Business
D) Stakeholders

Question 41

Which of the following applied to the FIFA indictment?

A) It was primarily for money-laundering charges.
B) It involved an NGO.
C) The FCPA did not apply because there were no government officials involved.
D) None of the above

Question 42

Robert J. Stein was hired as the CFO for the American occupation effort in Iraq. As someone who had the authority to award lucrative contracts to companies seeking portions of the reconstruction efforts there, Mr. Stein wielded a great deal of power. Mr. Stein had served time for felony fraud in the 1990s, but either the background check was not completed or his criminal activity was deemed irrelevant for this position of power. ​
Mr. Stein and his wife have been accused of being involved in the following transactions:
Philip H. Bloom, the owner of several U.S.-based construction companies seeking Iraqi business wired $140,000 to allow Mr. Stein to purchase real estate in North Carolina.
Other contractors spent $65,762.63 to purchase cars for Mr. Stein and his wife (a Chevrolet and a Toyota).
One contractor gave $44,471 for home improvements for the Steins' home.
$48,073 for jewelry paid for from funds totaling $258,000 that had been transferred into the Bragg Mutual Federal Credit Union account begun by the Steins.
A donation of $7,151.58 to the Steins that was used by Mr. Stein's wife to purchase a "towing service".
Ironically, $200 of the credit union fund was transferred to the clerk of a Federal District court for restitution payment for his earlier conviction.
Mr. Bloom was awarded a significant number of contracts in Iraq. Which of the following best describes the conduct of Mr. Bloom and Mr. and Mrs. Stein?

A) The conduct is not a violation of the FCPA because Mr. Stein is a U.S. government official and Mr. Bloom owns a U.S. company, but the two may have violated U.S. laws that prohibit bribery.
B) The conduct is a violation of the FCPA because the money and gifts were given with the idea of being awarded contracts.
C) The conduct is a violation of the FCPA because the money and gifts related to transactions in international operations.
D) The conduct, while ethically dubious, is perfectly legal.

Question 43

Chiquita Banana was required to pay a $25 million fine to the U.S. government because:

A) It violated the Foreign Corrupt Practices Act .
B) It made grease payments to customs officials by declaring extra weight on its banana shipments.
C) It made security payments to a terrorist organization.
D) None of the above

Question 44

AES's solution to the increasing demands of the Kazakh government was:

A) To lease generators.
B) To make facilitation payments to government officials.
C) To offer political donations instead of bribes.
D) To shut down its operations there.

Question 45

Suppose that AmTrain, a U.S.-based company, is submitting bids for the construction of a high-speed rail system in India by the Indian government. AmTrain has met with and wants to hire Josh Griffin, an international consultant who has worked with many Fortune 100 companies in their foreign business operations. AmTrain requires all of its agents, consultants, and contractors who work with it on its international operations to sign a statement in which they promise to comply with the FCPA. Griffin has refused to sign the AmTrain FCPA form. Which of the following best describes AmTrain's position when it receives the refusal?

A) The refusal is a red flag that would require AmTrain to at least do additional due diligence on Griffin .
B) AmTrain has not violated the FCPA if it hires Griffin and he does something its agreement prohibits .
C) AmTrain is not subject to the FCPA when contracts are with government agencies and not private foreign companies .
D) AmTrain has violated the FCPA by attempting to deal with Griffin .

Question 46

Which of the following practices best helps prevent sweatshop conditions in factories?

A) Company training
B) Independent monitoring
C) Exclusion of outsiders
D) Varying country standards
E) None of the above

Question 47

Once Walmart executives became aware of the payments in Mexico:

A) It self-reported the problems to the U.S. Justice Department .
B) It issued a press release .
C) It conducted an investigation .
D) It stopped the payments .

Question 48

How did Siemens accomplish its long history of paying bribes to government officials in exchange for obtaining contracts from those governments?

A) It used business consulting arrangements in all of the countries.
B) Siemens was not involved in any bribery activities but it was found to have been involved in useful expenditures.
C) Siemens is not subject to the FCPA because it is a German company.
D) Siemens used NGOs to funnel the money into the various countries .

Question 49

What are the risks of marketing infant formula in third-world countries?

A) Customers cannot afford the formula .
B) Customers may mix the powdered formula with bad water .
C) Customers may water down the formula .
D) All of the above

Question 50

PwC, one of the "Big 4" accounting firms, was involved in a scuffle with Russia's Federal Tax Service over one of its clients, Yukos. PwC did not want to turn over confidential information about its client. However, the failure to cooperate with the Federal Tax Service could result in the loss of its license to do business in Russia. What questions should other companies consider before expanding their operations into countries in which they have never done business?

A) Companies should consider the legal and cultural backdrops and customs in a country before undertaking expansion into that country .
B) Companies need to adapt to differing legal systems and simply comply with government requests .
C) Companies should turn to the International Court of Justice when country leaders and agencies are violating professional standards .
D) Companies should realize that doing business without engaging in bribery in certain countries is not possible .

Question 51

What happened to the Union Carbide plant in Bhopal?

A) Union Carbide still operates it .
B) Dow acquired Union Carbide and now operates the plant .
C) The plant has been mothballed .
D) The Indian government now owns the plant and produces dry-cell batteries .

Question 52

Which of the following is true about the Union Carbide Bhopal plant?

A) It met Indian safety standards .
B) It was operated by Union Carbide technicians from the United States .
C) It never met government regulations .
D) It met both U.S. and Indian safety standards .

Question 53

Which of the following would be both legal and ethical acts in an international operations?

A) Offering to pay a regulator for a favorable inspection report .
B) Offering to pay a police officer for not writing a ticket .
C) Offering to pay a government employee extra to speed up phone service connections .
D) None of the above

Question 54

Global Factors, a NYSE company, wanted to obtain an extension to its contract with Somalia for the sale of its government bonds. Global hired seven interns who were children of Somalian government officials. Global:

A) Has not violated the FCPA unless it was obtaining an exception to a rule .
B) Has not violated the FCPA unless it was evading customs and duties .
C) Has violated the FCPA .
D) Is not subject to the FCPA .

Question 55

Nike is changing its interaction with international suppliers by:

A) Ceasing to outsource its production .
B) Using third parties to negotiate labor contracts so that it can distance itself from issues .
C) Not having sudden design changes that can affect plant working hours and conditions .
D) Forming coalitions with other retail clothing manufacturers.

Question 56

When Ikea was poised to open a flagship store outside Moscow in 2001, its executives were approached by employees of the public local utility. If Ikea wanted electricity for its planned grand opening, the public utility officials needed individual cash payments.

A) Ikea could pay the money as a facilitation payment and not violate any anti-bribery laws .
B) Ikea and other companies from Sweden do not follow the OECD requirements on bribery so Ikea could pay the officials and not violate any laws .
C) The payment to the public officials would be a bribe and would violate Swedish law .
D) The anti-bribery provisions apply only when a company offers to pay them, not when public officials request payments .

Question 57

The Fair Labor Association:

A) Is a group of companies with international labor pools.
B) Is a group of colleges and universities dedicated to human rights issues in employment.
C) Is a federal agency in the United States.
D) Does not count Nike as a member.
E) None of the above

Question 58

Which of the following were charged in the FIFA indictment?

A) Members of the FIFA executive committee
B) Nike
C) Adidas
D) All of the above

Question 59

What has been the impact of corruption in Brazil?

A) The country has been able to expand its economy .
B) The country has become an amoral society .
C) The country has been able to do more business with the United States .
D) Both a and c

Question 60

Ikea's solution to obtain electrical power for the grand opening of its flagship store in Russia was:

A) To pay the bribes demanded by the government officials running the electric company because it was a facilitation payment.
B) To lease generators.
C) To shut down its operations in Russia.
D) To use an agent to pay the officials so that it was not violating the law.

Question 61

Make a list of all of the challenges businesses face in doing business internationally based on all of the cases studied in Unit 6.

Question 62

Explain the correlation between the amount of corruption in a country and economic development.

Question 63

Greta Thompson is the head of the Gresham Companies office in Qatar. Greta and her staff have submitted a bid to the central government of Qatar for a consulting project to install a new phone system that will revamp the government's phone system and call answering methods. Greta has just hired six summer interns for the offices in Qatar. All six of the interns have at least one parent who works for the Qatar central government. Which of the following statements is correct?

A) As long as the interns were hired on their qualifications and merits, there are no legal issues for Greta or Gresham.
B) The internships could be a violation of the FCPA.
C) Because the interns are not government officials there is not an FCPA violation.
D) Both a and c

Question 64

Outline the benefits and risks of the use of international suppliers.

Question 65

Explain how GlaxoSmithKline was able to conceal payments to government officials.

Question 66

Dennis Heap has been placed in charge of his company's operations in Benghazi. Dennis needs electricity turned on at the offices he has just rented. The electric utility explains that it will not be able to get the electricity turned on for 3 weeks. Dennis offers to pay $500 to have the electricity turned on in 24 hours. Which of the following statements is correct?

A) Dennis has violated the FCPA .
B) Dennis has violated the anti-money laundering provisions of U.S. law .
C) Dennis has not violated the FCPA .
D) Both a and b

Question 67

Describe the damage to Nestle's reputation following the decision to market infant formula in third-world countries.

Question 68

Apply the various schools of social responsibility to product dumping.

Question 69

Discuss the following statement: 
​
"There's a difference between being very competitive and can-do, and winning at all costs. All costs is costly."

Question 70

Explain the ethical and economic implications of paying above-market wages to factory workers in developing countries.

Question 71

What did PwC not anticipate in deciding to do business in Russia?

A) The problems with bribes .
B) The difficulty of many attempting to use it for money-laundering purposes .
C) The power of government officials to get information and results .
D) Both a and b

Question 72

Leslie Fay Companies was a clothing conglomerate that produced lines of women's clothing and lingerie under the brand names Leslie Fay, Joan Leslie, Albert Nipon, Theo Miles, Kasper, Le Suit, Nolan Miller, Castleberry, and Castlebrook. In early 1993, it was discovered that senior Leslie Fay executives, in an effort to inflate profits and to mask an actual loss of $13.7 million, had perpetrated an accounting fraud. Paul Polishan, Leslie Fay's chief operating officer, was placed on leave without pay in January 1993, along with Donald F. Kenia, the corporate controller. Mr. Kenia had first alerted the company to the accounting manipulations and worked with auditors to untangle the books.
​
By April 1993, Leslie Fay, under intense pressure from creditors, filed for Chapter 11 bankruptcy (reorganization) in Manhattan. Both Mr. Polishan and Mr. Kenia were fired. Mr. Kenia, charged with two counts of filing false statements with the SEC, has entered into a plea bargain with the U.S. Attorney in exchange for his cooperation in the continuing investigation of the Leslie Fay accounting improprieties.
​
Also in April 1993, two new outside directors were named to the Leslie Fay board. The audit committee of the board discovered, through continuing investigation, that accounting irregularities had inflated the company's profits for at least five quarters beginning in the fall of 1990.
​
As Leslie Fay continued its climb from bankruptcy, it was discovered that its law firm, Weil Gotshall & Manges, had failed to disclose its close ties to two board audit committee members. A federal bankruptcy judge ordered the law firm to pay fines totaling $800,000, which was the cost of having an independent review of the law firm's representation and conduct in the case.
​
In March 1995, Leslie Fay placed its flagship dress and retail business up for sale and offered its CEO a success fee of $1.5 million if those businesses were sold.
​
Also in March 1995, a report detailing accounting improprieties was released by the audit committee of the Leslie Fay board. The board found that when executives realized they would not meet pre-established goals, they would ship goods out to a Wilkes-Barre, Pennsylvania, facility to inflate sales. The executives also forged inventory tags, multiplied the value of inventory, developed phantom inventory and altered records to meet sales target. Some goods were invoiced to be shipped in the final day of a quarter even though they were not actually shipped until the next quarter. Numerous shareholders have filed suit against the Leslie Fay board and BDO Seidman, the company's auditor during this period.
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John Pomerantz continued as CEO from 1993 onward. The company has tried to find a buyer but has remained unsuccessful in doing so.
​
a.What signals about the importance of earnings at Leslie Fay were sent to the officers who committed the accounting improprieties?
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b. Wouldn't employees have been aware of the financial fraud? Why didn't they speak up? Why didn't they tell someone?
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c.How might Leslie Fay have prevented what happened?
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d.If you were the new chief financial officer, what message would you most want to impress upon all Leslie Fay employees?
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e.Of what significance are the law firm's ties to the board's audit committee members? Did these ties set a poor tone at the top?

Question 73

What difficulties did Ikea encounter in its expansion into Russia?

A) The expectation of payments for obtaining utility services.
B) The inability to pay the high taxes imposed in Russia .
C) The need to pay for protection of employees .
D) All of the above

Question 74

What recommendations would you offer to companies to avoid violations of the FCPA?

Question 75

Price Waterhouse Coopers' situation with the Russian government's request for release of client information presents an ethical dilemma for PwC. However, apply the Laura Nash question:   How did they get into this situation in the first place? And discuss your observations about PwC.

Question 76

Chiquita officials said that they either had to make payments to a mercenary and terrorist group or its employees were in danger. Evaluate the company's reasoning.

Question 77

Discuss what business and strategic issues PwC and Chiquita missed in making their decisions on foreign operations.

Question 78

List three effects the Bhopal disaster had on Union Carbide.

Question 79

What does the statement "Americans focus on wages paid, not what standard of living those wages relate to" mean in the context of human rights?

Question 80

UBS, a bank based in Switzerland, has received a subpoena from the IRS for the bank records of 52,000 U.S. citizens. The IRS alleges that the U.S. taxpayers hid money in UBS accounts for the purpose of avoiding paying taxes. UBS had created a program that recruited tax advisers and their clients under the guise that they could protect their funds from the IRS.
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Swiss law prohibits banks, under privacy rights, from disclosing information about their customers and their accounts. However, the IRS has obtained a subpoena for the records and a federal judge has issued it because UBS is soliciting business in the United States. One banking minister in Switzerland has indicated, however, that Swiss privacy laws do not apply when there has been fraud.
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Evaluate the ethics of UBS as well as their customers. If you worked for the bank, would you release the information?   Would you place your money in Swiss accounts?