Corruption

Question: Critically analyse the state of corporate governance in both the private and public sector in Zimbabwe.

Introduction

The definition of corporate governance most widely used is “the system by which companies are directed and controlled” (Cadbury Committee, 1992). More specifically it is the framework by which the various stakeholder interests are balanced, or, as the IFC states, “the relationships among the management, Board of Directors, controlling shareholders, minority shareholders and other stakeholders”. Ramman ( 2009) defined corporate governance as the practice by which companies are managed and controlled.

Corporate Governance is a set of processes, customs, value codes, policies, laws and institutions governing the way a corporation is directed, administered or controlled and held to account. Corporate Governance ensures that the organization is running properly, goals are being achieved and funds are being managed with high standards of propriety and probity. Policy makers in both developed and emerging economies face challenges in ensuring good corporate governance and the Principles of Corporate Governance originally produced by Organization for economic Cooperation and Development set out a framework for good practice.

The fundamental principles which drive corporate governance include the following: Accountability Organizations should recognize that they have legal and other obligations to all legitimate stakeholders. Organizations should develop a code of conduct for the directors and executives that promotes ethical and responsible decision making. Responsibility The roles and responsibilities of the board including structures and procedures must be clearly stated. The government must have in place an effective institutional and legal framework to support good corporate governance practices.

Fairness

There is need for a corporate governance framework that protects and facilitates the exercise of shareholders’ rights. They also strongly support the equal treatment of all shareholders, including minority and foreign shareholders.

Transparency

Transparency can be defined as a principle that allows those affected by administrative decisions, business transactions or charitable work to know not only the basic facts and figures but also the mechanisms and processes.

It is the duty of civil servants, managers and trustees to act visibly, predictably and understandably. If a company is transparent enough and reports material facts in real time, stakeholders will have more confidence in the management. Consequently, they will be more willing to invest in the company, thereby reducing the cost of capital. Transparency also helps those in charge to avoid fraud and put measures in place against it. All these factors put together enable the firm’s productive capacity and productivity to improve.

Social Responsibility

Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. (Richard Watts, 2004) Discussion Sound Corporate Governance is a prerequisite for the success of any entity, both in the public and private sector which in turn translates to sustainable socio-economic development for the country.

Whilst some of the companies in the private sector are subject to Corporate Governance compliance regulations and guidelines through the Zimbabwe Stock Exchange (ZSE), a real challenge arises from the fact that the bulk of SEPs and most small private sector companies are not listed and therefore not subject to the ZSE regulations. This leaves the Companies Act (Chapter 24:03) and the enabling Acts as the only Corporate Governance regulatory instruments for unlisted private companies and SEPs.

Given that the Companies Act and the enabling Acts only provide for broad Corporate Governance guidelines, there is no comprehensive and enforceable Corporate Governance instrument to regulate these entities, hence the need for a Corporate Governance Framework for public entities. The Ministry has drafted a Corporate Governance Framework. (Ministry of State Enterprises and Parastatals, 2013) For Dairibord Zimbabwe (Pvt) Ltd, the Board of directors is responsible for the direction and control of the company, setting its strategic aims, providing leadership to put them into effect, supervising management and reporting to shareholders on their stewardship. To that end it has established appropriate policies and procedures to govern the conduct of the company’s business and deliberations of the board. The company supports the Code of Corporate Practices as contained in the King 3 Report on Corporate Governance. Issues of corporate governance and ethics are taken very seriously at Dairibord Holdings. The group operates a “zero tolerance to corruption” policy. It also encourages employees to bring to the fore any incidents of corruption or theft in the company.

The Group values strong corporate governance ethics and it is one of the first private sector companies in Zimbabwe to have come up with its own corporate governance manual that seeks to ensure that group members continue to uphold the principles central to good governance namely, accountability, responsibility and transparency. The present Dairibord Holdings Board comprises of eight non-executive directors (including the chairman) and three executive directors. Econet wireless is one of the companies in Zimbabwe which has flourished due to upholding sound corporate governance principles.

As of now it has so many products to offer its valued customers thereby maintaining their position in the market. Econet believes its future depends on the sustainable development of our communities. They remain firm in their belief that a company’s success cannot be measured on financial performance alone. They believe the true measure of a successful company is its ability to positively transform its communities. Every business has a responsibility beyond its basic responsibility to its shareholders; it is a responsibility to the people of the communities in which it serves.

As a pioneering Company, they are moving beyond corporate social responsibility to social innovation. Econet believes that technology that does not transform lives is irrelevant. Econet’s involvement in the community is through one the following programme: Joshua Nkomo Scholarship Fund. The Fund is a Pan African Scholarship in honour of one of our country’s founding fathers, Joshua Mqabuko Nkomo. Each year, the scholarship sponsors hundreds of the country’s brightest high school and tertiary students, irrespective of social standing or race. The JNSF, which was launched in 2005, and issued its first scholarships in 2006, is administered through a registered independent trust that is governed by a board of trustees who are independent of Econet and its Management. Zimbabwe’s private and public sectors have experienced a number of corporate scandals involving senior management, obviously due to the absence of a binding corporate governance framework. During the first half of the year 2012, the transacting public was shocked after the ReNaissance Financial Holdings had underhand dealings that resulted in the bank being placed under curatorship.

Whatever happened at ReNaissance is a clear indication of lack of corporate governance as some shareholders of the company and directors worked in cahoots with pliant management to plunder ReNaissance Merchant Bank. Depositors funds were looted and inter-party transactions were rife. In the process, Rainbow Tourism Group and Afre Corporation were affected resulting in the two companies being suspended from trading on the Zimbabwe Stock Exchange. A number of companies have been involved in shareholder fights due to lack of transparency and accountability.

Executives are no longer transparent and accountable to shareholders. They lack responsibility and fairness whenever they are making decisions and implementing strategies. Companies have collapsed not only because of the prevailing liquidity challenges but lack of corporate governance. The composition of many boards has been queried, as they now comprise of people who are aligned to certain shareholders and their decisions would be biased. The National Railways of Zimbabwe (NRZ) is yet to have a fully constituted board of management.

Members of the board occupy positions beyond terms of appointments. Appointments to the board and management show visible preference for people with military background. NRZ also has an obese structure that is increasingly proving to be difficult to manage, given that it is yet to recover from most of the operational challenges inflicted by the socioeconomic meltdown, namely, aging traffic system, skilled manpower shortage, deteriorating infrastructure, theft and vandalism, poor signalling system, shortage of spares for locomotives and signaling equipment.

It is currently debt-ridden, operates below the 18 million tonnes of freight traffic per annum, has dilapidated equipment, and is struggling to pay its employees. Scenarios at the NRZ pose a serious threat to industrial production and the current national socioeconomic recovery drive. The Grain Marketing Board (GMB) is currently 100 per cent state owned and has National Strategic Reserve status. It has 44 depots in operation across the country. Despite its exposure to some commercialization in the post 1990s, GMB remains among the highest loss making and debt-ridden entities earmarked for robust restructuring.

It is struggling to service funds owed to various companies and countries in the region that supplied maize to Zimbabwe during the period of socioeconomic meltdown (2000 and 2008). Besides having a board and management that is questionable in terms of professional background and competence, its operational problems are deep-seated. GMB has since independence served as a patronage-dispensing mechanism. The Audit Report 2010 refers to several cases in which maize and subsidized inputs were looted by high ranking government officials and politicians (GoZ Audit Report, 2010).

Zimbabwe Electricity Supply Authority (ZESA) was unbundled in 2002 into five subsidiary companies (the Zimbabwe Power Company, the Zimbabwe Electricity Transmission Company, the Zimbabwe Electricity Distribution Company, the ZESA Enterprises and the Power Tel under ZESA Holdings. However, the benefit streams from the unbundling process are yet to bear fruits as most of the electricity supply problems experienced during the socioeconomic meltdown are still manifest. The supply of electricity remains erratic while its capacity to raise working capital is compromised by political patronage and inept management.

The entity is currently struggling to shrug off claims that some high profile government officials, some government departments, some party offices and some senior politicians have not been paying electricity bills for long periods while ordinary consumers have been subjected to billing systems that are not transparent. There are also claims that the entity is prioritizing paying huge salaries to its executives over service provision and serving of its financial obligations to power suppliers in neighbouring countries.

In Zimbabwe corruption is a menace especially in state owned enterprises and parastatals. Corruption is primarily a result of poor governance, thus a solid framework of administrative strategies to manage society’s needs is required across state public enterprises. When formal systems break down in governance, it becomes harder to implement and enforce laws and policies that ensure accountability and transparency (UNDP 2004:2) in the management of public activities. Corruption, in the case of state public enterprises in the Harare metropolitan area, is now systemic in nature.

The abnormal way of conducting business in state public enterprises is now normalised, and indeed something has gone wrong in the governance of these institutions. Public officials are up to personal enrichment. They are maximising their takings without regard to the impact corruption has on the well-being of the citizenry (Hope & Chikulo 2000:1 and Goredema 2000:2). The poor directing and control of public entities (weak corporate governance) is a source of corruption. Principally, corruption in public enterprises is a failure of governance and it results in unfair public resource manipulation (UNDP 2004:2).

Public enterprises are subject to manipulation in many ways, clear examples of resource manipulation in some public enterprises in the Harare metropolitan area are highlighted next. In 2003, Zimbabwe School Examinations Council (ZIMSEC) senior management crafted a vehicle policy which saw seven senior managers acquiring a vehicle each every four years of their employment at zero book value. ZIMSEC officials also awarded business contracts to unqualified bidders and in most cases these unqualified bidders were companies/organisations of their friends and relatives (Shana 2006:1).

In the same year, Zimbabwe United Passenger Company (ZUPCO) board of directors was involved in fraudulent dealings with a foreign company that supplied the enterprise with small passenger buses. These small buses were earmarked for servicing urban routes. The chairperson of the board, among others, received bribes in order to favour the company that supplied buses although they were not suitable for the required operations (Shana 2006:1). The Institute of Directors Zimbabwe (IoDZ) is the lead organization in promoting corporate governance in Zimbabwe.

The IoDZ launched a Midlands Chapter in Gweru, the first step in a process that will see other chapters established in Matabeleland, Manicaland and a Diaspora chapter to be based in the United Kingdom. Since inception in 1958 the IoDZ has played an important role in promoting good corporate governance, training and developing directors, influencing public policy, with a view to contributing to the creation of an environment that is conducive to the economic development and poverty reduction in Zimbabwe. (Newsday: 24 October 2011)

Conclusion

Following the much publicised global corporate governance failures and scandals, corporate governance has been concentrated on the activity of organisations deemed “systemically” important to the economy. Yet, comparatively minute conversations have been directed towards corporate governance in public sector organisations that debatably have as much impact on the lives of people globally. It is therefore, agreeable that though the origins of corporate governance reform lie in the private sector, attention should also be given to governance of public sector organisations.

Within the Zimbabwean context, there are still a variety of notable State agencies, enterprises and parastatals in operation such as Air Zimbabwe, Grain Marketing Board, National Railways of Zimbabwe, etc, the majority of which are generally funded by the Treasury. The idea of State enterprises is common across the world where various governments have been widely involved in the direct ownership of companies, production and distribution of a variety of goods and services. In Zimbabwe the State enterprises and parastatals have room for improvement when it comes to their performance and management.

Good governance structures within these SEPS can result in meaningful use of the taxpayers’ money and can help the Zimbabwean economy reach its full potential. It is therefore crucial to state at the onset that public money is not the same as private money; therefore the parameters of accountability should be more rigorous and stringent. Clearly from the discussion in this paper the state of corporate governance in the public sector is in shambles, as compared to the private sector.

As far as the private sector is concerned principles of corporate governance have been maintained to a larger extent as compared to the public sector. There is a need to ensure that there is accountability of a board and key overseeing management for the stewardship of resources. Therefore, there is no doubt that in any organisation good corporate governance is ultimately about effective leadership. The establishment of a national code on corporate governance will minimise corporate collapses, establish minimum standards for corporate leadership, attract and preserve investment for overall national economic turnaround and growth.

Donuts starting business in Argentina Till Penitence International Business Bachelor’s Thesis Supervisor: Joan Aloofer School of Business Bachelor’s Degree Program in International Business Nickel Campus Introduction Dunking’ Donuts is an American global coffee chain based in Massachusetts, U. S. It’s also known for its doughnuts. Dunking’ Donuts has positioned itself as a high quality but still affordable fast-food outlet with full-day dining opportunities. Dunking’ Donuts was founded by William Rosenberg in 1948, but its name was first Open Kettle.

After one year name was changed to Kettle Donuts and in 1950 many adapted Dunking’ Donuts as its name. Nowadays Dunking’ Donuts is one of the leading coffee chain brands with over 11,000 restaurants all over the world. Dunking’ Donuts was long time known mainly in America but in recent decades it has been opening cafe©s all around the world, operating now in 33 different countries – it serves daily over 3 million customers. Dunking’ Donuts have a great variety of different products, for instance 52 different donuts and over dozen different beverages. Dunking’ Donuts.

Dunking’ Donuts got new owners in 2006 and those new owners outlined an extremely ambitious growth strategy, for example, they’re trying to triple the size of Dunking’ Donuts in next ten years. (M and S, 2009; http:// news. Dunderheads. Com, 2014) Argentina is one of the largest South American countries with population over 40 million. Its population is still growing, but fairly slowly because of the steadily declining birth rate. Argentina’s border countries are Bolivia, Brazil, Chile, Paraguay and Uruguay. Argentina has been a big country of immigration during its history – it has been attracting especially people from Italy and Spain. Wry. Counterparts. Org n. D. ) During its history Argentina has faced a lot of economical issues – Argentina was once one of the wealthiest countries in the world, but it has been facing several economical downsides. Though the country has since been recovering pretty well, the pace of growth is disappointing – Argentina is now lagging behind most other emerging economies. (http://economic. Blobs. Anytime. Com/ 2009; http:// atmosphere. Com/, n. D. ) In this paper I’ll be discussing about Dunking’ Donuts’ motivations for entering Argentina.

I’ll be using the PESTLE framework, which includes political, economical, social, technological, legal and environmental aspects f the business context. Political one in 1976. Elections in 1989 meant that first time in 60 years, there was a civil president in the country. Nowadays there isn’t a threat of military coups, but the democracy hasn’t reach a stabile phase. (The Economist, 2014) (The Global Economy. Com, 2012) Christina Fernando De Kerchief has been a president in Argentina for nearly seven years. She represents the Statistics Party, which is one of the largest political parties in Argentina.

Although there are two major parties in the congress of Argentina, there are all in all over 31 different political blocs. That makes having consensus extremely difficult. (www. Subcategories. Org/, n. D. ) Because of the big economical crisis in the beginning of 21st century, there was a period of civil unrest and rioting in Argentina. Reason for the uprising was president Fernando De la Rјa who failed to save Argentina from third year of recession – middle class started to upraise against him and his politics. There was a major social unrest growing because of the growing unemployment rates.

The crisis peaked on November 29, 2001 , when Argentines outdraw millions of dollars and pesos from their bank accounts. Argentina actually had five presidents in Just two weeks in 2001. Www. En. Wisped. Org, n. D. ) Corruption is a major problem in politics too. All from the president to lower power players have been included in corruption crises, which is the reason why Argentina is ranked at 10th in Corruption Index behind countries like Mexico and Greece. (http://polycrystalline. Org, 2012) Political situation in Argentina isn’t stabile or even near it.

Corruption is a major problem and as Argentina is lacking of political consensus, starting business might be something to think once again. ECONOMIC 100 years ago Argentina actually had the fifth- largest economy in the world. But after overall bad policies and governments Argentina is far away from the largest economies nowadays. During the last few decades Argentinean have been facing many economical swings, all the way from financial crisis and hyperinflation to recession and boom periods. Last major downside was in the 2001-2002, when everything from unemployment rates to criminal peaked. (Wry. Domesticate. Mom, Only way to survive even somehow from the crisis in 2001 was to default and devalue. It has been said that it might have been the most responsible thing ever in Argentina’s history. It did limit Argentina’s growth because defaulting cut it from the Actually Argentina has been recovering pretty well the past 13 years from one of its history hardest economical crises. Its GAP growth has been pretty high – especially before the international financial crises. (Wry. Marketing. Com, 2012) Even though Argentina has been recovering fairly well, its future doesn’t seem to be as bright as it could be.

High unemployment and inflation rates are likely to complicate future growth. And this summer 2014, Argentina defaulted once again. The situation isn’t that bad as 2002 as there are still ongoing discussions with banks about shoring up the situation. Http://Americanizes. Saturdays. Com, 2014) Political and economical situation are walking hand in hand as we speak about Argentina. Both are pretty instable, with their ups and downs. At the moment entering to Argentina’s markets might not be the best choice. Situation might be better after a few years as the international financial crisis is, or at least hopefully is getting better.

SOCIAL Argentina is one of the most urbanize South American countries with several metropolitan areas. Greater Buenos Aries metropolitan area is one of the largest urban areas in the world – there are over 13 million people. Argentina’s arbitration percent is over 90% and it has been growing by 1% each year, so it’s actually the most urbanize country in Southern America. (HTTPS://www. CIA. Gob, 2014) As the birth rate has been declining, Argentina’s growth of population hasn’t been so rapid in recent years. Also because of that same reason, amount of inhabitants under 15 years has been shrinking.

But fortunately population in ages 15-24 is nowadays largest in Argentina’s history. Thanks to that, the working-age population is at the moment very high and will also stay like that pretty long. The amount of working-age population makes it possible for Argentina to have some kind of economic boost in future. (HTTPS://www. CIA. Gob, 2014) Total population by age group and sex, 2010 and 2050 (http://superintendence. Org, 2014) Argentina’s education system is mandatory from age 5 to 17, which is one reason why the total adult literacy rate is 97,9%.

Nominally university studies are tuition – free and open for everyone, but hidden costs of education are often high, which causes that students need to have a full- time Job while they’re studying. (http:// en. Wisped. Org, n. D. ) Argentina actually has one of the highest university drop- out eats. This might cause problems someday, because Argentina will lose motivated and energetic people Just because they can’t finish their degrees in universities. (http://en. Wisped. Org, n. D. ) Food culture is very big in Argentina.

Thanks to the immigrants from Europe, European food is popular in Argentina – especially Spanish and Italian cuisine. Argentinean consumes the second biggest amounts of beef in the world as it’s considered to be the national food in Argentina. Also drink a drink called mate, which is a caffeine- infused drink, is very popular in Argentina. All in all the cafe© culture is gig in Argentina, people are meeting at cafe©s for a cup of mate or an espresso. Cafe©s are the heart and soul of urban culture in Argentina – those are places where people meet each other to discuss, watch soccer and socialize. (http://www. Vermiculite. Mom, n. D) Argentina used to have a very large middle class, but because of the recent downsides in the economics, a big part of the former middle- class people is now heading into poverty. Poverty in Argentina varies mostly according to region and provinces. Situations in the northern Argentina have been the worst. Nowadays the poverty rate is about 20% in average. Unemployment rate in Argentina has been extremely high – something near 20% – when the economical situation was in it’s worst in the beginning of 21st century. In those times especially low-class people and indigenous people were suffering of unemployment.

Nowadays unemployment rate stands between 7 – 8%. (http://www. Tragicomedies. Com, 2014; http:// en. Merciless. Com, 2014) All in all from a social aspect entering Argentina wouldn’t be that bad decision. As the cafe© culture is strong, a coffee chain brand like Dunking’ Donuts would probably be successful in Argentina. Cheap prices and cafe© culture would make it possible. Of course it would be important for Dunking’ Donuts to think carefully to which regions to enter as economic situation in Northern parts has been challenging. Technological Argentina has a long history and tradition of technology and science.

Also the public support for research and development (R&D) has been intensifying in the last decades. Argentina got loan for $24 in 2013 to fund scholarships for master’s degrees and doctoral studies, and another loan for $200 to increase investments in innovation, research and development to improve competitiveness. There is actually a science and technology complex in Buenos Aries. Http://www. Dab. Org, 2011) development and expand its knowledge in science and technological development. Argentina is considered to have a great knowledge in biotechnology and that’s actually one of the fields that Argentina is having cooperation with U.

S. (http:// Argentina. Assembles. Gob, n. D) In the recent years there has been growth in the IT sector in Argentina, mainly thanks to U. S based companies that has been exploring the talent available in other countries such as Argentina, India and Israel. U. S companies have been extremely interested in Argentina’s large number of well-trained engineers and advantages in outsourcing to Argentina. Technological and science situation in Argentina is highly positive. It is also expected to have a boost in near future because of the increasing amount of investments.

Dunking’ Donuts shouldn’t have a problem with technological aspect in Argentina – highly educated people, investments and state support are positive things. (Wry. Marketing. Com, 2011) LEGAL Argentinean public confidence in Judiciary is fairly low because of the high level of corruption. The population in Argentina is pretty skeptical about the power of the judicial system to control crime, and they’re seeing the police to be a part of the rime problems in Argentina. (http://www. Vermiculite. Com, n. D. ) Foreign investors have equal rights as the domestic investors to own business in Argentina.

But because of the high rate of corruption among the high players, foreign companies prefer to include funds for private rather than deal with Argentina’s courts. According to the World Bank and International Finance Corporation Enterprise Survey (2010), senior managers in Argentina have faced some problems and difficulties with the requirements of government regulations. Recently these kinds of regulations have been related to import and foreign exchange restrictions. Wry. Liberated. Com, 2011) As Dunking’ Donuts rely mostly on franchising, Argentina’s legal framework related to franchising is good for Dunking’ Donuts.

The parties can together reach agreements without any governmental intervention. The law doesn’t specifically regulate these agreements – they’re called UN-nominated agreements”. Franchising is an exception in Argentina among notary publics; usually there are always specific formalities or registration requirements. (HTTPS://www. Waynesboro. Com, n. D. ) The main problem in Argentina’s legal situation is related to corruption and problems that it’s causing. Courts aren’t so trusted and police is considered to be one of the reasons for high crime rates.

As the corruption has been increasing lately, Dunking’ Environmental Environmental issues in Argentina are typical for developing countries: poor water and air quality, deforestation, and soil degradation. However there are many authorities that are trying to make things better. Also the government is trying to influence environmental issues; Argentina made a pledge with Paraguay to save one of the most threatened forests. Two governments agreed to work towards zero net deforestation in the Atlantic Forest. For instance Argentina will implement new land- use plans that are hoped to protect 1. 1 million hectares of the forest.

There is also an environmental education program included in Argentina’s primary and secondary education. The main reason for the environmental education program is to teach people some environmental awareness from the early ages. (http://WFM. Panda. Org/) (Wry. Marketing. Com, 2011 ; Poor water is probably one of the biggest problems in Argentina; there are several areas in Argentina that are lacking of non-polluted drinking water. There’s still 11% of the population lacking without piped water. Buenos Aries has spent all of its aquifers and is now relying on the river ROI De La Plat to supply water needs.

Unfortunately that river is threatened by significant pollution. Recently people in Argentina have been putting pressure on the government because of the poor condition of the country’s water supply. (http://www. Disheartening. Com, 2011; (http:// www. Observational. Org/) Dunking’ Donuts states in its corporate social responsibility: We are dedicated to serving the basic needs of our local communities – from providing food for the hungry and support for children’s health and wellness, to ensuring our spinsterhood are safe and secure” and ” We recognize that everything we do has an impact on the environment.

Introduction

The economic crisis of recent years has lead to a heightened focus on tackling financial criminality, also known as ‘white collar crime’. According to D.Leigh and R.Evans, “Ministers are publicly committed to merging the Serious Fraud Office, plus part of the Financial Services Agency … into one large economic crime agency that would tackle bribery, fraud and insider trading.” This essay will critically examine that statement; consider the specified forms of financial crime and determine the potential impact of the Economic Crime Agency.

Background

Financial crime is not a recent development; however, it could be argued that it occupied a secondary position in the public’s perception of criminality. That is, more focus and police attention went to crimes against persons which involved violence for example, than corporate crime like Fraud which often went undetected. Even when the latter was identified, prosecutions were few which would have undoubtedly led unscrupulous individuals to believe they could escape punishment.
The advent of the recession and the revelation that financial crime was costing the UK economy over ?30bn a year lead the Tories to unveil plans to combat financial corruption though an Economic Crime Agency (ECA). The proposal was to combine the efforts of the Serious Fraud Office (SFO), The Financial Services Authority (FSA) and the Office of Fair Trading (OFT) into a single agency in a bid to tackle economic crime and reduce the duplicity of work often arising between the agencies.

Financial Crime

Definition

There is no clear definition of financial crime; it varies depending on the context of the situation. It includes a number of corrupt activities from relatively ‘simple’ frauds like the over inflation of expense claims by an employee to complex ‘Ponzi’ schemes like that of Bernard Madoff which defrauded investors of billions of dollars.
For the purposes of this essay, the definition in section 6(3) of the Financial Services and Markets Act 2000 will be employed. This states that financial crime includes any offence involving fraud or dishonesty; misconduct in, or misuse of information relating to, a financial market; or handling the proceeds of crime. In recent years, reducing ‘white collar crime’ has become a key priority for regulators, government, corporate bodies and even individuals as it has a number of ramifications for the economy as a whole. A recent report by the National Fraud Agency found that “the public sector was the biggest fraud victim, at ?17.6 billion, followed by the private sector at ?9.3 billion (including ?3.8 billion from the financial services sector alone) and the individual and charity sector at ?3.5 billion.”

At the start of the century the government took a tougher stance on the issue with the establishment of agencies like the Financial Services Authority (FSA) and the Serious Organised Crimes Agency (SOCA). Even still, the UK penalty rates for such crimes are relatively low in comparison to countries like the US with long established anti corruption policies in place . That said, the recession of 2007-2008 and the damaging effect the activities of unscrupulous bankers had on the financial markets led to a revival of financial crime regulations.

Types of Financial Crime

What follows is brief analysis of the crimes specified in the article on which this essay is based.

Fraud

Again, this is a term not expressly defined in legislation or determined by common law. Prior to the Fraud Act 2006, fraudulent behaviours were those identified by the Theft Acts of 1968 and 1978. The 2006 Act now states that fraud is committed where section 2-4 is breached. Summarily, it occurs where a person makes a representation which he knows is false , dishonestly fails to disclose information which he is under a legal duty to disclose and abuses his position . Succinctly, fraud may be defined as the use of deception to obtain an advantage at the detriment of another.

Insider trading

Insider trading, synonymous with insider dealing, is defined as dealing with securities on the basis of inside information that is not yet publicly known and which would affect the price of the securities if it were made public . It is a criminal offence under the Criminal Justice Act 1993 (CJA) and a civil offence under section 118 of FSMA 2000.
In the context of financial services, the FSA Handbook refers to section 52 of the Criminal Justice Act 1993 which extends the offence to encouraging another to deal in the securities in question, or disclosing the information outside the proper performance of employment or professional duties .

Bribery

Bribery is the receiving or offering of any undue reward by or to any person whatsoever, in a public office, in order to influence his behaviour in office and incline him to act contrary to the known rules of honesty and integrity . The crime of bribing an official was previously governed by the Public Bodies Corrupt Practices Act 1889, The Prevention of Corruption Act 1906 and the Prevention of Corruption Act 1916. These laws have now been repealed by the Bribery Act 2010 which came into force on 1 July 2011. Sections 1, 2 and 3 clarify the law in relation to bribing another person, offences relating to being bribed and the functions or activities to which bribery relates respectively.

Regulation

The responsibility for preventing financial crime, including the types listed above is split between the following principal agencies;
Serious Fraud Office (SFO):

The SFO is an independent government body empowered by Section 1(3-5) of the Criminal Justice Act 1987 to investigate and prosecute cases involving serious fraud and corruption. With a budget of over ?43 million, it examines complex frauds which are politically sensitive, could significantly affect the economy and involve a loss of over a million pounds. These include investment fraud, bribery, corruption, corporate fraud and public sector fraud .
In recent years, the agency has been criticised for its low conviction rates as well as its overall failure to reduce the rate of serious fraud in the UK. In a comparison of the SFO with two similar institutions in the US (The US Attorney’s Office for the Southern district of New York (SDNY), and the Manhattan District Attorney’s Office (DANY)), Jessica de Grazia reported the striking differences between the conviction rates of the different bodies . The SFO had only managed to secure a 61% conviction rate in the period of 2003-2007 in a striking difference to its US counterparts who achieved 97% and 92% respectively.
Furthermore, the efficiency of the agency was questioned as it expends far more resources than its US equals while achieving a much lower productivity rate in terms of convictions . In a case which further questions SFO case management, it was found that it took approximately ?40 million, 184 days and more than 1 million documents to charge the directors of Wickes plc with fraudulent trading. In the end, all were acquitted despite admitting knowledge of fraudulent activities in their company .
Financial Services Authority (FSA)

Established under the previous labour government, the FSA is the sole regulator of the UK financial markets. Its powers are derived from the Financial Services and Markets ACT 2000 (FSMA), which also imposes a statutory objective on the organisation to reduce financial crime . In contrast to the SFO whose sole remit is complex fraud, the FSA has more extensive responsibilities. It needs to protect consumers by ensuring that market participants are compliant with the rules in place and do not engage in any activity which might affect the public’s confidence in the financial markets or disrupt the UK monetary system.
Inevitably, the responsibilities of the SFO and FSA overlap as cases on malpractice are rarely restricted to one type of crime. This often leads to longer case management times, as both agencies have to work together to collate evidence and decide the best manner and under which regulation to prosecute.
Several criticisms have been made against the FSA. Similarly to its counterpart the SFO, the FSA has been accused of a light touch approach to prosecuting offenders for economic crime. In another comparison with the US, John Coffee, a leading US academic, found that in 2005/2006, the financial penalties meted out by the United States Securities and Exchange Commission (SEC) surpassed that of the FSA by a 30 to 1 ratio .
Other enforcement agencies

There are a substantial number of agencies involved in the fight against financial crime. The quote on which this essay is based only mentions the two considered above. However, other agencies include; the Office of Fair Trading (OFT), CPS (Fraud Prosecution Service), CPS Revenue and customs Division, City of London Police Economic Crime Directorate amongst others.
Regulatory Reform –The Economic Crime Agency (ECA)

According to Jonathan Fisher QC, the barrister responsible for shaping the Tories thinking on the corporate crime landscape, the current system for tackling economic crime is “lamentably deficient” . This comment was based on an appraisal of the aforementioned agencies and their failures at identifying and prosecuting perpetrators as identified above. In a report entitled ‘Fighting Fraud and Financial Crime – A new architecture for the investigation and prosecution of serious fraud, corruption and financial market crimes’, Jonathan Fisher suggested a solution. That is, “a single Financial Crimes Enforcement Agency to tackle serious fraud, corruption and financial market crimes, either by consolidating the existing investigative and prosecutorial powers of the disparate agencies (SFO, FSA, CPS, FPS & RCD, OFT) into a new body, or by enlargement of the Serious Fraud Office.”
The former consolidation proposal was chosen by the new coalition government. In its coalition programme , the government announced plans for an Economic Crime Agency which would take over the investigatory work of the Serious Fraud office and the prosecution powers of the Financial Services Authority and the Office of Fair Trading. Furthermore, this strategy was seen as a way to “simplify the confusing and overlapping responsibilities in this area in order to improve detection and enforcement” . Crucially, the ECA would be responsible for “serious economic crime”. This term was not expressly defined but based on the conservatives pre-election document, could reasonably be considered to include “large scale fraud, bribery, corruption and Madoff style pyramid schemes” .
Potential Impact

Enhanced Prosecution Powers – Deferred Prosecution Agreements

Amalgamating the various agencies would pave way for a new method of prosecuting offenders. According to Jonathan Fisher QC, “consolidation of existing powers would enable a unified agency to impose financial penalties in serious fraud and corruption cases as well as financial market crimes in appropriate cases where an alternative to immediate criminal prosecution is preferred”. This could be achieved using US method called Deferred Prosecution Agreements (DPA).
Under these sorts of agreements, prosecutors, in this case the ECA, would be able to file criminal prosecutions against offending companies, with the understanding that they would not “pursue a trail on the charges and eventually drop the charges so long as the corporation involved aids public officials in investigations of the individuals responsible for the offenses charged and the corporation institutes reforms to ensure that similar offenses are not committed in the future” .
This has a number of advantages for both parties. The ultimate aim of prosecuting offenders for financial crime is to punish the companies and individuals involved, deliver a penalty which provides an adequate deterrent for would-be duplicators and gives the public faith that such dishonest behaviour is being managed. The ECA could achieve this through a DPA as financial fines set at an adequate level could achieve the punitive and restrictive goal. DPAs also provide a social benefit as evident in an appraisal of settlements in the US. Siemens for example, was fined in excess of $800 million dollars for bribery and corruption in its global activities . The money received from the fine was used in the further pursuit of financial crime. Were the ECA to be given such powers, money recouped from offenders could be used for the continued maintenance of the body as opposed to funding from the public purse.
Furthermore, a DPA is an admission of culpability by the company involved; settling with conditions attached allows the regulator to avoid a situation where the criminal prosecution fails at trail, meaning a waste of manpower at public expense. A DPA also assures change in the company as the regulator could impose conditions on the defendant which they would need to uphold to prevent the charges being resumed, e.g. getting rid of culpable directors, adequate monitoring procedures and censorship from certain activities. The US experience shows that offenders rarely ever default on a DPA as the threat of the charges being upheld is an adequate disincentive. From the company’s perspective, it avoids the high level of publicity that a criminal trial would invariably entail and the uncertainty about the level of punishment to be meted out if it were found guilty.
Conversely, DPAs are not without risk to the companies involved. The use of Deferred Prosecution Agreements to prosecute corporations is still relatively new, even in the US where it is now commonly used in place of civil and criminal litigation. Therefore, therefore its application lacks uniformity on a case by case basis. Furthermore, evidence revealed or disclosed during the investigation process could incriminate the company and its employees to other offences.
As Jonathan Fisher points out in his report, “Individual company directors or senior employees who caused a company to act unlawfully are frequently not afforded the benefit of a DPA. More often than not, directors or senior employees are prosecuted in a criminal court and following conviction it is not unusual for lengthy sentences of imprisonment to be imposed” . Certainly it would be unacceptable for companies to use their directors as ‘scapegoats’ to avoid prosecution and this is a criticism that is often levied against DPAs.
This concept of unfairness extends to the treatment of individual companies, DPAs are an option which the regulatory body concerned can choose to employ or disregard. Therefore not all companies will be offered the option of an agreement. There is concern as to whether large companies are able to tempt regulators into forgoing a criminal or civil litigation by paying large fines, a luxury which smaller companies might not be given or indeed afford .
Although the power to enter deferred prosecution agreements would be very useful to the ECA in combating financial crime, the process requires thorough consideration and guidelines need to be set before it is employed in the UK.
Economies of scale:

Recently, the Court of Appeal held in R v Rollins & McInerney that the FSA would be able to bring criminal prosecutions for economic crimes like bribery and misrepresentation of financial accounts. This means that the FSA’s work could overlap considerably with that of the SFO, the body currently responsible for the investigation and prosecution of bribery offences. Therefore, combining the efforts of the two bodies under the umbrella of the ECA would increase efficiency and reduce the duplicity which could arise out of cases based on the aforementioned decision.
Fees:

Currently the FSA is funded by the levy it charges the companies that it regulates. On the other hand, the SFO and other similar agencies are maintained from the public purse. Having a single consolidated agency could have a number of outcomes. Depending on the size and remit of the agency, the government would have to pay out more for the maintenance of the ECA. However, the economies of scale mentioned above could equally translate to cheaper running costs as the concerned agencies would be streamlined with fewer personnel needed for example. Alternatively, the government would need to consider developing a new funding structure to maintain the organisation. It is unlikely that financial institutions would agree to increased fees due to the presence of a single regulator.
Regulatory upheaval:

Most of the agencies concerned operate under different legislative parameters. For example, while the FSA derives its powers from FSMA 2000, the OFT’s anti-money laundering powers is given by the Money Laundering Regulations 2007 . Therefore, the creation of a new agency, albeit an amalgamation of existing organisations, will inevitably require new laws governing its remit.
Impact on affected companies and individuals:

Many organisations and people have structured their businesses to meet with their existing obligations under the current system. For example, the FSA imposes regulatory obligations on some financial services firms to report any trading activity on regulated markets – to identify potential instances of market abuse . If a new arrangement involving the FSA comes into place it will create uncertainty about how to manage the reporting requirements. Furthermore, reporting to a new body could mean increased costs for those companies who have automated reporting facilities.
Reception

As expected, the proposal received mixed responses. A number of observers identified the plans as identical to that proposed by Lord Roskill, chair of the Fraud Trails Committee over 25 years ago. Roskill had recognised “the need for a new unified organisation responsible for all the functions of detection, investigation and prosecution of serious fraud cases… ”. The report had lead to the formation of the Serious Fraud Office; however, a truly unified approach to tackling corporate crime has never been achieved. The creation of the ECA was therefore seen as a practical application of a sensible theory. Having a single entity creates clarity, defines the remit of the various regulators, could improve efficiency and avoid situations such the failure of the FSA’s first criminal prosecution for insider trading where the defendants were acquitted due to evidential failures.
The various institutions all have different specialties; therefore, some commentators contend that a unified agency like the ECA would combine the strengths of all the agencies involved and make it easier for successful convictions to be brought. For example, the OFT was blamed for the collapse of a price fixing trail against four British Airways executives amid claims of incompetence. The prosecution had offered no evidence to support its argument of collusion despite having spent four years and millions of pounds preparing the case . Responding to the coalition’s plans to bring the OFT under the umbrella of the ECA, Jon Lawrence of Freshfields Bruckhaus Deringer stated that the plan is “ a move in the right direction….it is about making sure prosecutions aren’t brought and cases not pursued that have no merit. It’s better for everyone to have these cases run properly and for prosecutions to be assessed and brought on a consistent basis” .
On the other hand, most of the agencies affected were not in agreement with the proposal. The FSA made it clear that as the body responsible for market protection, it should retain the criminal enforcement powers which currently enable it to prosecute offenders for insider dealing and market abuse. The government has recently proposed that the FSA’s responsibility for market conduct would be taken over in 2012 by a new agency called the Consumer Protection and Markets Authority. Therefore, Margaret Cole, the FSA’s director of enforcement and financial crime argued that as a specialist regulator, CPMA’s ability to prosecute criminals would be essential to “maintain a strong and effective enforcement function” .
It is difficult to disagree with this statement as the knowledge that an organisation has not only the ability to investigate, but to prosecute criminal activity has been proven to be a somewhat effective deterrent . A number of financial commentators align with this view, stating that “if credible deterrence is to work and act as a genuine disincentive to market abuse, then, the joined up use of criminal as well as civil enforcement powers in one body is necessary” .Margaret Cole also pointed out the upswing in successful FSA actions, such as the fine of almost half a million pounds handed out to Malcolm Calvert for market abuse, the extradition of an individual from Mayotte for insider dealing, and the compounding of almost ?35m of suspect property.
Academic commentators also weighed in on the proposal with Professor Ellis Ferran, professor of Companies and Securities Law at Cambridge University saying that “There are strong arguments for leaving responsibility for the prosecution of crimes against the market with the CPMA as the successor markets authority. This would allow for the seamless, close co-operation between supervision, markets and enforcement that has reputedly been crucial to the FSA’s recent successes in enforcement to continue, and minimise the wastage of the expertise that the FSA has built up in making use of the wide range of enforcement tools at its disposal. At a time when at least one senior markets regulator in another country has spoken out in favour of being given authority to bring criminal prosecutions, it would seem perverse for the UK to consider stripping its markets supervisor of that power.’
SFO director Richard Alderman also debated the merits of splitting up the organisation in a bid to integrate it with the proposed ECA. In his view, ‘the prosecution-led approach with integrated teams of lawyers and investigators is needed in this very specialist and complex area. No evidence has been produced to show that separating investigators and prosecutors will improve the approach to complex economic crime. In my view, the effect will be damaging .” The reasoning behind his opinion is apparent when one considers the nature of the SFO’s organisation. It is comprised of a number of lawyers, finance professionals and consultants who have experience in the corporate world and knowledge of the markets. Announcements of a structural overhaul at the SFO lead to the exodus of a number of key personnel from the agency. Therefore, there is no guarantee that the specialist knowledge which lead the agency to increase its conviction rate to a credible 84% in 2011 from a mere 61% would transfer to the ECA.
In light of recent legislative developments, the UK Bribery Act in particular, Richard Alderman also stressed the need for the SFO to remain the prevalent body for fraud and corruption. Companies already have existing channels of communication with the SFO and disbanding the agency at the same time as new laws are introduced risks leaving the companies with little or no guidance. Alderman said that the “SFO would be there to help companies navigate their way through the legislation and said that the new rules, which take effect on July 1, would hopefully create a “ripple” effect through the economy and lead to better corporate behaviour .
Furthermore, the need for a new agency could be questioned where the cost of creating a new agency could be saved by providing existing bodies with enhanced powers. Richard Alderman expressed a desire for the US style deferred prosecution agreements discussed above. According to him, “the US has had about 20 years experience dealing with big corporate cases and the judicial and criminal justice system there has developed greatly over that period…. I am particularly interested in deferred prosecution agreements”. Therefore, rather than giving these powers to the ECA, an alternative would be to expand the powers of the SFO.
Current Position

The coalition government seems to have abandoned its plans for the creation of an Economic Crime agency. Rather, the Home Secretary Theresa May announced that the SFO would remain as it stood, with a new agency called the National Crime Agency to be set up to tackle organised fraud. Perhaps in consideration of the criticisms levied against separating the enforcement powers of the FSA and the OFT, both organisations had managed to be removed from the coalition’s later plans for the ECA. The SFO was the only agency which faced being scrapped until the 2011 announcement. Commentators have observed however that ‘once the NCA is fully up and running, which should take two years, the government will review whether the anti-fraud agency should remain independent. ’
Conclusion

The government’s plan for the ECA was weak in the sense that it lacked detail and certainty. Executed effectively, the agency had the potential to clean up financial crime through streamlined procedures and enhanced powers.
Whether the ECA comes into place or not, financial regulation in the UK is undergoing an overhaul. The conviction rates at the FSA, SFO etc lend credence to their effectiveness at policing the system and any plans by the government to change their organisation structure could ruin future progress. This sentiment is echoed by Elizabeth Robertson, the corporate crime head at Addleshaw Goddard. As she puts it, “There has been a lot of momentum to prosecute white collar crime, the Bribery Act is gaining momentum, and with the credit crunch there is a real appetite to deal with these things, The Government risks damaging effective prosecution of business crime if it introduces too many changes at once.”

Bibliography
Table of cases

Rollins, R. v [2009] EWCA Crim 1941 (09 October 2009)
Table of Legislation

• Financial Services and Markets Act 2000 c.8
• Proceeds of Crime Act 2002 c.29
• The Money Laundering Regulations 2007 (SI 2007/2157)
• Criminal Justice Act 2003 c.44
Secondary Sources

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Nigeria, in global perspective, is faced with many threats. Firstly, there exist countless competitors to the Nigerian industries which are still weak on global platform. The Nigerian companies do not have much capital to invest, are short of material resources and have low standards of products and services. They are not equipped with advanced machinery, newer and innovative production methods and educated and skilled labor. Thus, most of them almost fail when going on international platforms. For example, there are no big Nigerian companies in United States; they are either at the level of fringe stores or the home businesses.

This is because of various factors. Nigeria is not counted as the key market in many foreign countries. Moreover, Nigeria consists of people belonging to different cultures, communities and civilization who come from different backgrounds and languages. They are not able to understand and analyze the needs and wants of a luxurious European society. The Nigerian companies do not have access to extensive allocation of financial resources on Research and Development programs. Moreover, they may lack funds to enter into new market segment, geographic segment or new product modifications in order to cope up with the threatening competition.

Thus, they will have to incur large production costs and costs of doing business if they want to go global. As an ultimate, they will have to forgo the economies of scale and any other incentives attached with going global concept. Threats Increasing crimes, frauds, scams and corruption Threat of import substitution effect to the local markets Increasing competitors in the local markets and tougher competition globally Lack of funds, higher costs of doing business, higher opportunity costs and lower economies of scale while opting for globalization Conclusion

Nigeria is the largest economy and second largest democratic state. It is one of the N-11 countries and a member of Commonwealth. The country is rich in oil resources and is the 8th largest producer of petroleum in the world. It possesses great potential of becoming the world’s largest economy by exploiting the unexploited resources and undertaking the ignored business ventures. However, the country has, unfortunately, become a victim to the mismanagement, corruption, inadequate and dysfunctional infrastructure, weak leadership and lack of cohesion.

There are more risks of doing business in Nigerian country than chances of succeeding as an entrepreneur. Even if the Nigerian company goes global, it may not be recognized for its products and services except for its oil and gas sector.

References

CIA, (2010, June 24). Nigeria. Retrieved July 29, 2010, from < https://www. cia. gov/library/publications/the-world-factbook/geos/ni. html> Value Based Management, (2010). SWOT Analysis. Retrieved July 29, 2010, from < http://www. valuebasedmanagement. net/methods_swot_analysis. html>

These possible solutions target the inefficiencies within the internal structure of the KPC. As I reckon, the most effective solution amongst these involves providing the KPC with complete independence. In a sense, it involves enabling the privatization of the KPC. The reason for the effectiveness of this solution is evident if one considers that privatization is able to target almost all the internal problems of the KPC. KPC may be privatized through delegation.

As was stated in the initial part of the paper this involves the “transfer of management and control of state assets or activities to agents operating in accordance to market indicators…with the introduction of private sector managerial autonomy and incentives” (Bennett, 1997, p. 4). Privatization through delegation of the KPC thereby involves the transfer of management and control of the KPC and its subsidiaries to the heads of the subsidiaries of the KPC. Privatizing the KPC will prove to be beneficial for both KPC and the Kuwait economy for the following reasons.

Tetreault (2003) argues that privatizing state-owned corporations in Kuwait will prove to be beneficial as it will (1) enable increase in market share and greater terms of access, (2) lessen if not eradicate the possibility of interstate disputes, (3) enable greater income and wealth management, and (4) lessen corruption (p. 78-82). Increase in market share and greater terms of access is achieved if one considers that greater market share and terms of access are made available to non-state owned enterprises the limitations of which might have been set by the state’s dealings with other countries.

Privatizing KPC will thereby enable it to reach markets which have once been prohibited due to its connection to the Kuwaiti government. Privatization of the KPC will also lessen if not eradicate interstate disputes for the sole reason that the decisions made by the corporation may not be directly linked to the Kuwaiti government. Such a move will also enable greater income and wealth management on the part of the KPC.

As was mentioned in the initial part of the paper, privatization ensures the economic efficiency of a firm due to its hard budget. It is thereby necessary to ensure the continuous growth of the capital in order to ensure the continuation of the corporation. For the same reason, the decisions [e. g. in terms of the employment or the hierarchy of power] within the KPC may be less tainted by corruption. Positions and contracts granted within the company may be done out of a feasible plan as opposed to being a result of a political favor.

This will thereby minimize if not eradicate the cases of corruption within the corporation. Conclusion The problems faced by the KPC may be seen as the result of the management problems within the corporation which is evident in the hierarchy of power within the KPC. As I reckon, enabling the privatization of the KPC through the delegation of its management to the executives of its various subsidiaries will enable the KPC to solve its internal problems as well as expand its reach in the international market.

During the period of globalization, adherence to a vertical integrated system proves to be dangerous as such a system tends to enable dysfunctionalities within its management system hence there is a necessity to privatize in order to ensure the continuous growth of the KPC which will enable the growth of the Kuwaiti economy.

References

1. Bennett, A. (1997). The Measurement of Privatization and Related Issues. How Does Privatization Work? : Essays on Privatization in Honour of Professor V. V. Ramanadham. Ed. A. Benett. London: Routledge.
2. Marcel, V. & J. Mitchell. (2005). Oil Titans: National Oil Companies in the Middle East. Washington: Brookings Institution Press.
3. Praeger, J. (1997). Banking Privitization: How Compelling is the Case? How Does Privatization Work? : Essays on Privatization in Honour of Professor V. V. Ramanadham. Ed. A. Benett. London: Routledge.
4. Tetreault, M. (2003). Pleasant Dreams: The WTO as Kuwait’s Holy Grail. Critique: Critical Middle Eastern Studies, 12. 1, 75-93.

In the end the CEO of the Pegasus Inc. found easier to pay a local agent in China to obtain this license and pass it for the Pegasus Inc. so that they can start trading in the local areas in China. The example case of bribery above is of great occurrences in the business world, which can be difficult for laws and international institutions to oversee thoses practices. In the proposed sample of corruption above, one of the solutions to the problem would have been to contacting the companies that operate wirelessly in China and propose the benefits for allowing Pegasus Inc. operating in the country. Pegasus would ethically be providing a much faster link of communication without the need of cabling, would improve the services in B2B and will also open job vacancies with higher pay than the local service providers. The opportunity for Pegasus Inc. will also arise as a form merging to the local service providers and by stating the benefits if doing so.

Ethics and morality follow two different concepts. Ethics regards the individual character including what is meant to be a ‘good person’ and is the social rules that governs and limit our conduct, especially the ultimate rules concerning right and wrong, which is called morality, (Shaw & Barry, 2001). Even though the word ethics is used mainly in academic circumstances, both words – ethics and morality have been used interchangeably in many occasions. Organisation cultures may find normal the practice of accepting gifts from suppliers, or any other business. It is of the responsibility of the leader of the organisations as ho identify what is reasonably acceptable and create official rule to limit the number of cases, which can be interpreted as bribes or corruption.

A realistic example of bribery was confirmed by Exxon when paid politicians to introduce their business objective in Italy. The amount was a staggering $59 million. (Shaw & Barry, 2001). A second case of corruption was found only after the suicide of a United Brands chairman which revealed that bribes amounting to $1.25 million was paid to a Honduran official so that export taxes were reduced.

Participating on the sharing of any unregistered income as part of bribery practices are usually not discussed in organisations. Managing directors and CEOs would (for the sake of stability) not mention such practices in their meetings of any kind. These practices occur without being noticed by the top management. However, no matter how sad it may sound, business practices overseas that may sound impossible to go well, in fact do succeed are because they are likely to have been integrated in any sort of bribery.

This is when laws that supervise the international trade must examine carefully the transactions. A good deal between two major companies from different countries or region upon the acceptance of bribery will definitely promote system of monopolies between favourable companies and subsequently the creation of Cartel. In conclusions the conduction of bribes in foreign corporations could put out of business firms, which have laws stopping them from accepting bribes (ethics ignored). The non- participation in bribes can lead companies in a position being left out in the international trade which can result the loss of billions a year in income. However, the money made through the system of corruption are normally never taxed and therefore, not accounted as an indicative of a nation’s wealth by the end of a financial year.

The 1977 Foreign Corrupt Practices Act FCPA invigilates the US for any practices considered as form of bribes. In the history of the U.S. trading, companies used to pay off foreign officials for business favours. Since then the practice became a crime. An average of $300 million were paid to officials and the money were may have certainly be invested overseas, (Shaw ; Barry, 2001)..

In short, the main issue for accepting unregistered cash is that a country loses out with financial contributions that never are reinvested in the country where the money came from. International institutions must act in a way to enforce the authentication of transactions through the supervision of reliable entities. Business ethnics can only be achieved if each individual regulates common sense, not because it is said to be right to pursue the decision but because the solution will promote a reasonable good effect in everyone.

References:

Daniels, J ; Radebaugh, L, International Business, Environmental and Operations, 2nd edition, New Jersey, Pearson Education, Inc, 2004, p. 3.

David Hume (1711-1776), Moral Theory. Retrieved, June 16, 2007 from http://www.iep.utm.edu/h/humemora.htm

Ehrenfeld, J, The Roots of Sustainability, MITSloan Management Review, Vol. 46, no 2, Winter 2005, pp. 22-26.

Ethics and Business, 2004. Retrieved June, 17 2007, from http://216.239.59.104/search?q=cache:GjUPHJ7dk7sJ:www.wipro.com/pdf_files/Ethics_Business_PPT.pdf+http://www.wipro.com/pdf_files/Ethics_Business_PPT.pdf;hl=en;ct=clnk;cd=1

Hackworth, M ; Shanks, T, 2007, The Case of the Million-Dollar Decision. Retrieved June 17 2007, from http://www.scu.edu/ethics/dialogue/candc/cases/million.html.