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Some Businesses Can Afford to Ignore Ethics

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If the recession hasn’t battered the optimism for the business environment out of you, consider this: while small businesses and entrepreneurs could find themselves shut down over failing to have the wrong licences or filing the wrong paperwork, some of the biggest companies in the world can make more serious problems disappear. Even better, governments and regulators will help them do so.

Three bribery stories have followed each other in quick succession, suggesting that rather than the global downturn giving executives pause for thought, the rottenness at the heart of the way they do business has never been a priority concern for them.

On Monday, four employees of mining giant Rio Tinto pleaded guilty at the beginning of their trial on charges of taking bribes and violating commercial secrets. Last night, as I was drifting to sleep, I heard the radio tell me that Daimler — manufacturer of Mercedes vehicles — was reported to have agreed to a $185 fine as a condition of being allowed to continued operating in the United States. Then this morning, as I checked up on the Daimler story, I also learned that three UK directors of the French engineering conglomerate Alstom had been raided by the Serious Fraud Office and are currently waiting to have a cosy chat with investigators.

I hate to be cynical, but out of these cases, I think the only one global executives are worried about is Rio Tinto. As far as the other two are concerned, after a bit of posturing from all the protagonists, life will carry on as normal. We have been here before. Back in February, BAE agreed to a plea bargain in order to bring a halt to a long-running investigation into its corrupt purposes across the globe. In return for being allowed to admit to lesser charges of bad accounting, BAE stumped up one of the largest corporate fines in history and was able to avoid having to admit to anyting more serious. As people wisely noted, this was not what the man on the street would call justice.

Despite not having issued a formal statement, it appears that Daimler is going down the BAE route. They are essentially paying hush money to stop prosecutors from bringing serious charges against them. In return, they will be able to issue a bland statement that doesn’t actually admit any wrongdoing, and will continue being able to operate as normal. Will anything change? Well, they’ll swear blind that any bad behaviour is a thing of the past. Sceptics may interpret that as a sign that they have simply become better at hiding their misdeeds.

So, what to make of this? Well, it appears that just as with bank bailouts and government injections of cash into economy-critical companies such as GM, there are some companies that regulators and governments are willing to give far more leeway than they deserve, especially if the badly-behaved firms are able to frame being let off with a slap on the wrist as being in the “national interest.” They are able to say how many of hundreds of jobs will be lost if they are punished too severely, or intone darkly that they might have to move their operations to a friendlier regime. Governments, even harsh ones, hate losing elections.

The lesson to take from this is that your business must play buy the rules, at least until it is so large that it would have an effect on the economy. After that, just make sure that you have enough money to make any charges of malfeasance disappear. Of course, this assumes that you want to trade unethically. For those who believe in following the letter and spirit of the law, however, it might be less hassle stick with the good behaviour.

[Image Rbbaird]

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