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Learning Concepts – Chapter 19

1. Identify the main elements of the Multinational Enterprise code of conduct.

2. Identify characteristics of nations that predispose them to corruption.

3. Identify the drawbacks of corruption.

4. Identify the most common corrupt practices. in international business.

Ethics and Corruption in the Global Marketplace.

Ethics and Corruption in the Global Marketplace.

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Corruption and The Shell Group

The Shell Group operates in more than 130 countries. They frequently face demands for “facilitation payments” from junior officials, and for “bribes” from more senior people. Shell has a clear anticorruption policy: it does not sanction giving or receiving any type of bribery or illegal payment; an employee who is found to have done so is instantly fired and prosecuted.

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Corruption in International Business

Corruption is an exchange between two partners that has an influence on the allocation of resources and involved the use or abuse of public or collective responsibility for private ends. Corruption is difficult to measure, but The Economist projects that corruption may be measured at approximately $9 trillion per year.

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The Origin of Corruption

Corruption is proposed to come from two key factors: Developing or transitional economies which have

weak infrastructure, weak legal systems, and inadequate enforcement

A high level of government involvement with industry and business and a low public sector payment amount

Culture is also attributable to corruption. It correlates with receptivity toward questionable accounting practices, uncertainty avoidance, and masculinity

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Drawbacks of Corruption

Corruption slows progress Corruption obstructs firm growth Corruption causes misallocation of capital Corruption produced distorted information Corruption undermines trade and foreign direct

investment Corruption undermines trade liberalization

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Corruption Rankings

The CPI has these as the five highest and lowest corruption countries.

Highest: Bangladesh, Nigeria, Paraguay, Madagascar, Angola.

Lowest: Finland, Denmark, New Zealand, Iceland, Singapore. The United States rates 16th lowest, the United Kingdom 10th. Russia is 71st, and Mexico is 57th.

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Types of Corrupt Practices

Smuggling Money Laundering Piracy and Counterfeiting Bribe Paying

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The Foreign Corrupt Practices Act (FCPA)

The FCPA of the United States makes corruption and corrupt practices illegal in the United States.

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The Globalization of the Fight Against Corruption

The OECD has a policy statement in the OECD Guidelines outlawing corruption and corrupt practices.