“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
1. Introduction
2. Ethical Dimensions of Bribery
3. The Lockheed Case with respect to Milton Friedman
4. The Drucker Analogy and Moral Imagination
5. Corporate Culture and Leadership
6. Conclusion
Objectives and Topics
This paper examines the ethical failures associated with the Lockheed bribery scandal of the 1970s, analyzing the event through various ethical frameworks to determine whether CEO A. Carl Kotchian’s actions can be justified within a global business context.
- Cultural relativism versus universal ethical principles in international business.
- Distinction between legitimate commissions and illegal bribery.
- Evaluation of the case under Milton Friedman’s stockholder management theory.
- Critique of Peter Drucker’s analogy regarding corporate duress and moral imagination.
- The role of corporate culture and leadership in fostering ethical behavior.
Excerpt from the Book
3. The Lockheed Case with respect to Milton Friedman
Nobel laureate Milton Friedman is well-known for his theory of stockholder management. On the social responsibility of companies, he wrote the following:
“There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits as long as it stays within the rules of the game, which is to say, engages in free and open competition without deception or fraud.” [4]
It is important to notice that Friedman does not promote the unlimited pursuit of profits. The important words here are “the rules of the game”. There are attempts to derive a role morality for managers from this expression. An example for this is Chris Provis with his poker analogy [5]. He says business, particularly in labor negotiations, is like poker, where bluffing is not unethical but a part of the game. However, it is impossible to justify with Friedman bribery as part of the rules of the game, because Friedman defines these rules more precisely: “engaging in fair and open competition without deception or fraud”. What if not bribery undermines the principles of fair and open competition that is paramount for Friedman? Bribery reduces the completion for the best product to the competition for the highest bribe and is therefore suitable to destroy competition, as it can for example be seen in Russia right now [6].
Chapter Summary
1. Introduction: This chapter introduces the Lockheed bribery case and the Foreign Corrupt Practices Act, framing the central question of whether global companies should follow universal ethical codes or adapt to local customs.
2. Ethical Dimensions of Bribery: This chapter contrasts cultural relativism with universalism and argues that bribery is fundamentally unfair because it violates competitive principles and consumer autonomy.
3. The Lockheed Case with respect to Milton Friedman: This chapter analyzes Lockheed's actions through Friedman's theory, concluding that bribery violates his prerequisite of fair and open competition without fraud.
4. The Drucker Analogy and Moral Imagination: This chapter critiques Peter Drucker’s defense of the Lockheed case, suggesting that the company lacked "moral imagination" by failing to seek alternatives to bribery.
5. Corporate Culture and Leadership: This chapter explores the historical context of Lockheed and argues that the company’s leadership failed to foster an ethical culture, ultimately leading to scandalous behavior.
6. Conclusion: This chapter synthesizes the arguments to conclude that the Lockheed bribery case cannot be ethically justified by any of the presented frameworks, including relativistic or utilitarian perspectives.
Keywords
Lockheed, Bribery, Business Ethics, Cultural Relativism, Universalism, Milton Friedman, Stockholder Management, FCPA, Peter Drucker, Moral Imagination, Corporate Culture, Ethical Leadership, Corruption, Foreign Corrupt Practices Act, Compliance
Frequently Asked Questions
What is the primary focus of this paper?
The paper focuses on the ethical implications of the 1970s Lockheed bribery scandal and whether such actions can be justified in a global business environment.
What are the central themes discussed in this work?
The central themes include the conflict between cultural relativism and universalism, the distinction between commissions and bribes, the application of Milton Friedman's management theories, and the importance of ethical leadership.
What is the core research question?
The research explores whether CEO A. Carl Kotchian exhibited ethical behavior and if his decision to bribe Japanese officials can be defended under standard ethical business frameworks.
Which scientific methods are utilized to analyze the case?
The author uses normative ethical analysis, comparing the case against established theories such as Milton Friedman's "rules of the game," Werhane’s concept of "Moral Imagination," and general principles of business law.
What does the main body cover?
The main body examines the legal and moral definitions of bribery, contrasts it with commissions, evaluates the case against Friedman's economic theories, assesses the validity of the Drucker analogy, and reviews the history of Lockheed’s corporate culture.
Which keywords characterize the work?
The work is characterized by terms such as Business Ethics, Bribery, Corporate Culture, Moral Imagination, and the Lockheed Case.
How does the author define the difference between a commission and a bribe?
The author notes that commissions are standardized, transparent, and due after a deal, whereas bribes are secretive, intended to provide an unfair advantage, and are typically paid before a deal is finalized.
Why does the author consider Peter Drucker's "mugger" analogy flawed?
The author argues that the analogy is flawed because it equates a human life with a corporate entity and incorrectly implies that Lockheed was in a situation of unavoidable duress, ignoring other available business strategies.
What conclusion does the author reach regarding Kotchian’s leadership?
The author concludes that Kotchian failed to demonstrate ethical leadership, as he ignored the autonomy of employees, bypassed shared decision-making, and opted for illegal shortcuts instead of seeking sustainable solutions.
- Arbeit zitieren
- Klaus Schütz (Autor:in), 2011, The Lockheed Case - International Business or Bribery?, München, GRIN Verlag, https://www.grin.com/document/198663
