Foreign Corrupt Practices - Nigeria

...

Why would Meadows and Owens engage in bribery practices?

Self Interest bias and utilitarian frame: In this scenario, Meadows and Owens are utility maximizers. As CEO of the company, Meadows has a fiduciary duty to maximize share-holder’s value. Also his compensation may be tied to operational performance of the company thus he may have a self-interest bias in wanting to maximize profit. Owens as director of the Nigerian arm of Mayfair also wants to maximize utility. His self-interest is in providing solid profit numbers out of the company he manages since compensation is usually tied to the performance. Also, both work in an industry used to taking high calculated risks for potential grand rewards. In this staged setting, Meadows and Owens might have been biased in taken a calculated risk by engaging in bribery knowing there was a probability that their actions might get caught and weighted the impact of being caught against the gains. However they are also exposed to over confidence risk where they fail to measure the total risk they are exposed to and the damage they may cause to their company’s reputation, their country’s reputation and to the shareholders of the company by narrowing their frame due to their self-interest and utilitarian bias. In my own decision making context I need to be aware that in some situations my narrow frame and self-interest bias may put me at risk in thinking that I am doing what is right, thus I may be overconfident, when in fact my actions may be immoral when expanded to a broader frame.

Agency projection: Mayfair has a subsidiary operating in Nigeria acting as agent for the US based Mayfair Corporation Company. Mayfair Drilling (Nigeria) Ltd. used a customs agent to pay for the bribes. The use of agents bias Meadows and Owens from thinking they are committing an immoral act since they are not directly engaged in the transaction. By removing themselves directly from the bribery transaction they create a sense of detachment and make it seem as if the bribery action is not as bad. Also, they used euphemisms to refer to the bribes and actually had their controller James book the bribe payments as legitimate expenses. The use of agents and euphemisms to mask an immoral action can act as a bias in our capacity to recognize or reinforce our unethical behaviors. With time we run the risk of thinking these unethical actions are business as usual since we may have detached ourselves from the moral dilemma. As decision makers we need to be cognizant of this bias and review the frame in which we initially made our decisions and trace our actions back to us and not let agents or euphemisms mask our own influence and participation in decisions that question the morality of our actions.

Market Asymmetry and Reframing: Owens may have argued that there is a market asymmetry in Nigeria and that bribes were necessary to be able to operate competitively. Owens may have been subject to the bias that if everyone else is doing it, why should I not do it, thus giving himself moral license to engage in bribery since his peers are also doing it. Owens might have framed this case to Meadows and asked permission to operate competitively in Nigeria, thus reframing the ethical underpinnings of engaging in bribery. Meadows as CEO may have recognized that his competitors would gain an edge and allowed Owens to operate in order to level the playing field. Both Meadows and Owens might have reframed the ethical morality of their actions and by doing so biased their ethicality. In their narrow frame, Meadows and Owens failed to view the expanded frame of their actions– that bribery damages US corporations’ reputation abroad, damages integrity of foreign markets and puts the shareholders of their company at risk. We need to be careful as decision makers on how we reframe our decisions and actions since reframing may bias our understanding of the ethical implications and reach of our actions. We also need to be careful to give ourselves moral license to act unethically in order to compensate for negative factors that already exist in the environment in which we operate, such as market asymmetries.

Common law: Did Meadows and Owens obey common law? The answer is no. There are centuries of common law precedent describing the act of bribery, from English courts to recent US adjudications affecting US corporations involved in international bribery schemes. Also US corporations are regulated by Federal Statutory Law which includes provisions addressing bribery of foreign officials by US corporations and representatives (FCPA law). Meadows and Owens knew they were subject to these regulations and also knew that bribery was wrong since they made efforts to hide the bribery payments done to Nigerian foreign officials. So they acted against the social norms and polities of the United States and against what society expected from them.

---------------------------------------------------------------

FINAL INTEGRATIVE CASE 2

Zimpel vs. trawick

Submitted by Andres Lucas

Zimpel vs. Trawick provides an interesting case where an information asymmetry exists between two parties willing to enter into a contract. One might be inclined to think that there is a market asymmetry in this case, but the market itself is not asymmetric. The information is out there. It just happens that Trawick and Brown are better trained, informed and have the connections to obtain it. Trawick and Brown are both trying to get the best deal they can. They will try to get the cheapest price for the mineral rights and maximize as much as they can their profit.

Hedwig comes from a farming family and the case describes that she is not a business savvy person. It seems all her family are farmers and lack the education and training level Trawick and Brown have. Trawick and Brown use this to their advantage in offering a low ball offer for the mineral rights Hedwig owns. It is clear they identified that the Zimpel family is out of touch with recent developments in the oil industry and they are exploiting this information asymmetry to their advantage. The question are they unethical in doing so?

I can see how Trawick and Brown may have been biased by their self-interest in maximizing their venture’s profit potential. We all seem to exhibit this bias and are wired to try and find “the best deal”. For example suppose you find a miss-tagged item at the store where it is marked at much cheaper price. Suppose you know the market price for the item. It is very likely that you could hide this information from the store attendant in an effort to maximize your utility by

...