Business Ethics - Cross Border Business

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Under section 9(2) of the Prevention of Bribery Ordinance (Cap 201), Qinghua offered the money to Keemark without the permission of Kitchen Best as an inducement to adjust the testing result in relation to the HdM’s order. Although Qinghua was a subcontractor regard to the case, Kitchen Best was still liable for offence committed by Qinghua.

Honghua Applicance: New Management

Honghua Appliance, a giant enterprise in home appliance retail chain in southern China, also a key customer occupied around 5% revenue of Kitchen Best. To maintain a relationship with Honghua, Ma Luk, the operations director and head of greater China business of Kitchen Best manipulated wining and dining and kickbacks paid to Eddie Lau, who was the general manager for greater China of Honghua, for the award of placing order of kitchen appliances with Kitchen Best.

Under the Article 4(1) of the Law on Prevention and Suppression of Bribery in the private sector, Macao Sepcial Administrative Region, Ma Luk offered the entertainment and kickbacks for the purpose of an appliance deal was liable to imprisonment for a maximum term of 6 months or a fine. Moreover, under the Article 4(2) of the same provision stated that the act of Ma Luk possibly being sued because such act induced an unfair competition against the competitors of Kitchen Best, which the weakness of delivery time and product development capacity comparatively low. Ma Luk and Kitchen Best might be liable to imprisonment for a maximum term of 1 years or a fine.

Management and Governance Mechanism

Without an effective management and governance system applied in Kitchen Best, several of unethical and malpractices occur which lead new CEO Henry Chan, and Kitchen Best fell into the dilemma. Poor governing systems cannot restrict employee and senior management to behave themselves in ethical way, which everyone emphases on self-benefit maximization rather than the benefit of company. But more worse was the affection on reputation. Different negative news would definitely influence the confidence of business partners and customers on the quality of the goods, as well as the integrity of Kitchen Best.

The Shago Incident

In the business with the Shago, it could see that Kitchen Best lack of a comprehensive procedure to outsource the project in order to prevent the designation by its top management in their favorite. During outsourcing the work, person who seizes the power of designation would probably attracts different business partners or parties to discuss the cooperation. Nonetheless, some illegal act like corruption would occur that induce the authorized person to bias on particular party. Sometimes, the person who in charge might not resist the temptation and the conflict of interest happen. To avoid the power unbalance, Kitchen Best can recruit the subcontractor publicly with a diligent check on the background on each applicant, and prevent an unfair bid.

Beside, lack of escalation procedure would also make the witness refuse to report the malpractices that they would worry about the revenge afterwards. Like most of the large companies, Kitchen Best should establish a whistleblower channel. Low hierarchical staffs are encouraged to tip-off what unethical behavior and malpractices they meet during work anonymously.

Haus de Metro: Testing and Certification Issues

On the matter of subcontract problem, the project was directly assigned by Kitchen Best to Qinghua which without a conflict of interest involved. Nevertheless, it was questionable that whether Kitchen Best conducted due diligence on Qinghua’s background before the designation.

For the sake of lower the cost, Qinghua corrupted HdM to adjust the testing result and pass the RoHS standard. It raised a big unethical problem that unsatisfied products will obviously or potentially harm human health no matter how serious it is. Although Qinghua was a subcontractor, Kitchen Best had a responsibility to monitor their subcontractor during the manufacturing processing and quality assurance on the goods Qinghua produced.

To make sure the subcontractors reach a consistent standard as Kitchen Best, operational procedure manual accompanies regular coaching should be introduced towards their employee. It is not only teaching them how to work, but to implant the importance of quality awareness and goods safety in their mind. On-going monitoring and refreshing are required instead of simply notice them in one meeting.

In addition, to secure the quality of goods is up to standard, Kitchen Best can arrange two independent testing institutions to conduct the product testing. It is suggested to employ those well-known and reputational institutions due to their professionalism and firm standpoint that not easy being affected by corruption and bribery.

Lastly, a suitable training should provide among different level of employee, from the low level staffs to the board members. Keep silence and do nothing does not mean it is a good practice. Everyone in the Kitchen Best should be trained when they face an unethical and inappropriate act, and react alert that without consideration of own benefit. That is the reason why an effective escalation channel is essential for Kitchen Best. Top management also needs to be trained as thoughtful and brave leaders which sometime decisive corrective measure is needed.

Honghua Applicance: New Management

As the market of home appliance is very large and supports large portion of the economic development, competition between the appliance enterprises is keen. To secure the order from Honghua, bribe is offered by Ma Luk to the general manager of Honghua, in term of wining, dining and kickbacks. Offering bribe is a serious crime that it produces an unfair business condition to the society and other companies.

Although two Mr. Chan, the founder and current CEO of Kitchen Best knew this issue, they did not take any corrective action. More badly, Ma Luk was discovered to embezzle the company’s assets by inflated the reimbursement for expenses, for his own personal gain. This phenomenon reflected Kitchen Best did not contain a robust Check and Balance mechanism to scrutinize the financial usage of top management, as well as avoid the embezzlement. If Kitchen Best keeps going with a loose governance system it implemented, the financial risk would become larger and larger due to ineffective internal control on the way colleagues spend the resource, and possibility to take forcible possession of the company’s assets.

To remedy the weakness