“When in Rome, do as the Romans do” [1] is a saying that exists in many cultures all over the world. Although it is very old – it can be traced all the way back to the days of St. Ambrose in the fourth century – it briefly describes on of the major challenges companies face in today’s globalized economy. Should they follow a universal code of business behavior or adapt to the customs in a particular country. A classic case for this question is the Lockheed Case. In the early 1970s Lockheed had serious economic problems. Facing bankruptcy it secured a government loan of $250 million in 1970. In 1972 and 1973, briberies of the Japanese government were revealed. It turned out that the President of Lockheed, A. Carl Kotchian, authorized secret payments of $12 million to representatives of the Japanese Prime Minister, Kukeo Tanaka, to secure sales contracts in the Japanese aircraft market. As a result, both Prime Minister Tanaka and CEO Kotchian had to resign. Lockheed’s contracts in Japan were cancelled. A consequence of these incidents is the Foreign Corrupt Practices Act of 1997 that prohibits American corporations making payments to foreign governments to advance their business interests. In this paper, I will discuss certain topics related to this case and show, why Kotchian did not exhibit ethical behavior in his role as President of Lockheed.
Table of Contents
- Introduction
- Ethical Dimensions of Bribery
- The Lockheed Case with respect to Milton Friedman
- The Drucker Analogy and Moral Imagination
Objectives and Key Themes
This paper examines the Lockheed bribery scandal of the early 1970s, analyzing the ethical dimensions of bribery in a global context and evaluating the actions of Lockheed's CEO, A. Carl Kotchian. It explores contrasting ethical perspectives, such as cultural relativism and universalism, and considers the implications of the Foreign Corrupt Practices Act.
- Ethical considerations of bribery in international business
- Comparison of cultural relativism and universal ethical principles
- Analysis of Lockheed's actions in light of ethical theories
- Examination of the Foreign Corrupt Practices Act
- The role of corporate responsibility and profit maximization
Chapter Summaries
Introduction: This introductory chapter sets the stage by referencing the proverb "When in Rome, do as the Romans do," introducing the central dilemma of navigating ethical conduct in a globalized business environment. The Lockheed case, involving substantial bribes paid to Japanese officials, is presented as a prime example of this dilemma. The chapter highlights the economic difficulties faced by Lockheed, leading to a government loan and subsequent bribery revelations that resulted in resignations and the cancellation of contracts. The Foreign Corrupt Practices Act of 1997, a direct consequence of such scandals, is also introduced, framing the context for the subsequent ethical analysis of Kotchian's actions.
Ethical Dimensions of Bribery: This section delves into the core ethical debate surrounding bribery, contrasting cultural relativism (where morality is context-dependent) with universalism (where objective ethical rules apply regardless of culture). While acknowledging the prevalence of bribery across various cultures, the chapter emphasizes its illegality almost everywhere and underscores the inherent unfairness of bribery to competitors, customers, and citizens. The text distinguishes bribery from commissions, highlighting the secrecy and competitive advantage inherent in bribery, which is paid before a deal is finalized, unlike commissions paid afterward. Finally, the chapter clarifies the three forms of bribery defined by the FCPA: bribery vs. extortion, bribery vs. lubrication, and bribes vs. agents' fees, concluding that Lockheed's actions clearly constitute unlawful bribery.
The Lockheed Case with respect to Milton Friedman: This chapter examines Lockheed's actions through the lens of Milton Friedman's theory of stockholder management, which posits that a business's sole social responsibility is to maximize profits while adhering to the rules of the game (fair and open competition without deception or fraud). While acknowledging that Friedman doesn't advocate for unlimited profit-seeking, the chapter explores attempts to justify actions like bribery within the context of "rules of the game." It argues that bribery, unlike bluffing in poker (a suggested analogy), fundamentally undermines fair competition by replacing competition for the best product with competition for the highest bribe. The chapter uses the example of Russia to illustrate how bribery can destroy competition.
The Drucker Analogy and Moral Imagination: This chapter analyzes CEO Kotchian's justification for the bribery, highlighting his attempt to frame the situation as a choice between bribery and bankruptcy. The chapter introduces Peter Drucker's flawed analogy comparing Lockheed's actions to a mugging, arguing that Drucker incorrectly equates the life of a company with a human life and fails to acknowledge the existence of alternative solutions for Lockheed beyond bribery. The chapter concludes by suggesting that Werhane's concept of "Moral Imagination" could have provided Kotchian with tools to explore alternative courses of action, thereby avoiding the unethical choice of bribery.
Keywords
Bribery, Lockheed, ethical dilemmas, cultural relativism, universalism, Foreign Corrupt Practices Act (FCPA), Milton Friedman, corporate social responsibility, profit maximization, fair competition, moral imagination, business ethics, international business.
Frequently Asked Questions: A Case Study of Lockheed's Bribery Scandal
What is the main topic of this document?
This document is a comprehensive analysis of the Lockheed bribery scandal of the 1970s. It examines the ethical dimensions of bribery in international business, contrasting different ethical perspectives and evaluating the actions of Lockheed's CEO, A. Carl Kotchian. The analysis incorporates relevant ethical theories and legal frameworks, such as the Foreign Corrupt Practices Act (FCPA).
What are the key themes explored in this case study?
The key themes include the ethical considerations of bribery in international business; the comparison of cultural relativism and universal ethical principles; an analysis of Lockheed's actions through various ethical lenses; an examination of the Foreign Corrupt Practices Act; and the role of corporate responsibility versus profit maximization.
What ethical frameworks are considered in the analysis of the Lockheed case?
The document contrasts cultural relativism (where morality is context-dependent) with universalism (where objective ethical rules apply regardless of culture). It also examines Milton Friedman's theory of stockholder management, which prioritizes profit maximization within legal bounds, and Peter Drucker's concept of moral imagination, which emphasizes exploring alternative solutions to ethical dilemmas.
How does the document analyze Lockheed's actions?
Lockheed's actions are analyzed in light of the ethical frameworks mentioned above. The document assesses whether their bribery could be justified under the "rules of the game" as proposed by Friedman, and it critiques the justifications offered by Lockheed's CEO. The analysis also considers whether alternative solutions existed that would have avoided the unethical choice of bribery.
What is the significance of the Foreign Corrupt Practices Act (FCPA)?
The FCPA is presented as a direct consequence of scandals like the Lockheed case. The document uses the FCPA to define and categorize bribery, distinguishing it from other forms of payments like commissions and agents' fees. The analysis clarifies how Lockheed's actions clearly violated the FCPA.
What is the role of "moral imagination" in this case study?
The concept of "moral imagination," as proposed by Patricia Werhane, is introduced as a potential tool that could have helped Lockheed's CEO explore alternative courses of action and avoid the unethical choice of bribery. The document suggests that a lack of moral imagination contributed to the decision to resort to bribery.
What are the key takeaways from this case study?
The case study highlights the complexities of navigating ethical conduct in a globalized business environment. It emphasizes the importance of considering various ethical perspectives, understanding the legal frameworks governing international business practices, and cultivating moral imagination to find ethical solutions even under pressure. The Lockheed case serves as a cautionary tale about the potentially devastating consequences of prioritizing short-term profits over ethical conduct.
What are the chapter summaries included in this document?
The document provides chapter summaries for an introduction, a chapter on the ethical dimensions of bribery, a chapter analyzing the Lockheed case through Milton Friedman's lens, and a chapter discussing Peter Drucker's analogy and moral imagination. These summaries offer a concise overview of the main arguments and findings of each chapter.
- Quote paper
- Klaus Schütz (Author), 2011, The Lockheed Case - International Business or Bribery?, Munich, GRIN Verlag, https://www.grin.com/document/198663
