Monday, August 08, 2005

Why Not Just Give Them Away

The problem underscored in this story, published in Friday’s Globe and Mail, is not that the U.S. Justice Department is investigating “allegations that DaimlerChrysler AG's Mercedes unit paid bribes in at least a dozen countries and that senior executives may have been aware of the practice.” Although, that is an important story and something that businesses shouldn’t do.

The big story here is whether multinational companies responsible for changing the way societies do business and if those societies are corrupt should these companies be prosecuted in the home countries, where the corruption may be a little lower.

Let’s take the case that we are talking about in this story. The Justice Department is investigating DaimlerChrysler’s operations in Latin America and Africa only. These aren’t the most transparent of societies. Corruption is rampant in these societies and if a company is to do business in these regions then it either needs to play the game or get out of these markets.

Prior to merging with Chrysler, and especially prior to 1997, this would not have been an issue. Why? Because prior to passage of the “Economic Co-operation and Development Anti-Bribery Convention in 1997” Germany, where Daimler Benz was based, allowed tax deductions for overseas bribery.

Okay, so at that time it was legal in the country and in the company. Then the convention passed. The company merged with Chrysler and became an American company. The U.S. has never shared this understanding on bribery so the company should have known better.

The problem is how should it have handled this change? Gotten out of the market? Something to think about.

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