Rolls – Royce Bribed Its Way Around the World

Case Study: Rolls – Royce Bribed its Way Around the World

1. After watching BBC’s documentary, I found out that Rolls – Royce is being accused of facilitating payments to “middlemen” or consultants who would deliver the money later on to other companies or governments from countries where corruption was more spread. The main ethical issues that the company is being accused of violating are: the above mentioned facilitation payments, corruption and bribery. These illegal practices allowed Rolls – Royce to close contracts with important organizations.

Facilitating payments may not be illegal in some countries but either way, it certainly is not part of the business ethics a company as big as the one at issue should be connected to. It is really similar to bribery that occurs when you give another person something such as money or goods in order to alter their behavior. In this case, a good example could be when Rolls – Royce gave the Indian government 400 million dollars in order to secure a contract with them in which the Indian government commits itself to buy 123 hawk jets from them.

Corruption occurs when someone who has the authority on a given organization carries out dishonest practices in order to obtain personal benefit just like when the executive manager of PetroGrass, Berushko, received 200 000 dollars after signing a 100 million dollar contract with Rolls – Royce.

I believe that the stakeholders that are most affected by these practices are their rival companies such as General Electrics because they cannot compete against Rolls – Royce who is closing deals through unfair competition. This pushes them out of the market as they may not be willing to sell their reputation by contracting with corrupt potential clients, most probably leading to not having enough projects which they can use to fight off Rolls – Royce.

Us, the society, and clients will also be affected as external stakeholders because on one hand, these decisions are being made because of their reward and not for the right reasons, which should be looking for the best value for the public. On the other hand, when bribing other companies or people, the company spends millions of dollars in bribes, so costs will higher for them and they would pass it on to consumers, which in this case its large companies and governments, in the form of higher prices.

Other stakeholders affected will be the stock holders as the stock price of Rolls-Royce can decrease a lot the moment that their corruption status comes to light leading to a significant fall of their portfolio value.

On another matter, workers from the company who know about their corrupted deals and don’t say anything, the middlemen, or the executives who start these type of fraudulent negotiations, can be investigated by the Serious Fraud Office and, if found guilty, accused of committing a crime. I would say this is a more than deserved outcome, but we can count them as internal stakeholders who may be affected by the corruption being taken part by this company.

I want to include in this list of stakeholders organizations who fight daily against corruption such as the SFO or the ICAC in Hong Kong, who were created in order to stop these kind of fraudulent issues. The SFO in particular started investigating in 2012 which leads to 5 years of hard work the, according to  Richard Whittam, QC from the SFO, “largest individual investigation conducted by the SFO to date”.

1. Developing countries are more corrupted because the rate of corruption is higher in countries where there exists more inequalities between citizens. Therefore, politicians or business men from these countries very likely have much larger incomes than the regular citizens.

That being said, in developing countries there is little to no legislation about these kind of matters. Mostly because the leaders are the ones who create the norms, and if all the leaders are corrupted, none of them will want to “tie their own hands” by creating laws against corruption and risking going to jail.

Given Transparency International’s data, the most corrupted countries can be found in the Sub Saharan Africa and the Middle East, where we can find Angola, Iraq or Kazajstan with whom there’s evidence of dishonest practices having taken part by Rolls – Royce. (http://www.transparency.org/cpi2016). This may be due to the fact that most of these developing countries are rich in petrol and oil, natural resources that they want to have at hand. This can help both, the engine manufacturer and the oil producing country as they can reach agreements on the prices that they are going to charge one or the other, which may be another reason that motivates their governments to play an active part in these operations.