Case 2 3

Starnes-Brenner Machine Tool Company of Iowa City, Iowa, has A small office
Of integrated sales by a single person, Krank Rothe, in Latin, an important
country of Latin America. Frank has been in Latin for 10 years and is retiring
this year; His replacement will be Bill Hunsaker, one of the best sellers of
Starnes-Brenner. Both will live in Latin for about eight months, during which
time Frank will update Bill, pre-sit his main clients and, in general, prepare
him to take over the business. Frank was very successful as a sales
representative abroad despite his particular style and sometimes his
complete reluctance to abide by company policies when they did not suit
him. The company did not do much in front of its way of proceeding,
although from time to time it got to get mad some directors of the company.
As President Jack McCaughey, retired two years ago, pointed out to a vice
president who complained about Frank: "If you are making money, and it is
(more than any other office from abroad), Then do not bother him. "
When McCaughey retired, the new boss immediately introduced
organizational changes that placed more emphasis on overseas operations,
making the company a truly global operation, to which it was very likely that
a loner like Frank would not adapt . In fact, one of the key reasons Bill was
chosen as a substitute for Frank, as well as his optimum sales agent
performance, is his ability to adapt to the organization.

Starnes-Brenner Machine Tool Company: To bribe or not bribe?

Case analyze
Differences between Frank and Bill
Frank

Bill

Frank pays mordidas to get

equipment passed by government
officials.
State business will fail without the
payment of mordidas.

Bill absolutely opposes the idea of

mordidas

Believes they are not encouraging

bribery to spread but rather just
accepting the Latinos ways of doing
business.

To bribe is unethical.

State business will be successful

without paying mordidas

Answers
1.
Is what Frank did ethical? By whose ethics those of Latino or the US?
Bribing is not ethical. In this case its ethical for Frank, because Latino bribery is
seen as normal. What did Frank not justified, since no matter the part of the world
in which they do, bribery is totally unethical.
2.
Are Franks two different payments legal under the Foreign Corrupt
Practices Act as amended by the Omnibus Trade and Competitiveness Act of
1988?
The first payment of Frank is legal, because as a payment to the chief of the border
workers to expedite the transfer, the statutes concerning the payment of these have
softened. The second payment to government officials, to repair the machines is
illegal.
3.
Identify the types of payments made in this case; that is, are they
lubrication, extortion or subornation?
In both case, the types of payments are identified subordination because
subordination is defined as someone with corrupt money, gifts or some kind of
favor, in order to get something for that person.
4.
Frank seemed to imply that there is a similarity between what he was
doing and what happens in the US. Is there any different? Explain.
Frank says that when you have big dinner parties where different treatment or
close businesses and stakeholders pay the bill, is a tipe of bribery. The different is
that in the US these are normal business dinners and Latino bribes are large
amounts of money being paid directly.
5.
Are there any legal differences between the money paid to the
dockworkers and the money paid the jefe (government official)? Any ethical
differences?
Yes, there are legal differences. First, the payment to a government official is
illegal, while bribery dock workers are considered legal under Foreign Law on
Corrupt Practices. If we analyze the ethical part, there arent differences, because
it evades honestly and in both cases there is bribery.
6.
Frank's attitude seems to imply that a foreigner must comply with all
local customs, but some would say that one of the contributions made by U.S.
firms is to change local ways of doing business. Who is right?

The reality of the world tells us that when we enter or do business in other
countries, we must know their culture, their traditions, their profile negotiator,
among other things. This doesn't mean that we have to mold it entirely. There is a
difference between adapting to certain rules or customs and depend or be enslaved
them.

U.S. companies are trying to establish a new business system, without bribery and
honest practices, regardless of whether the country you're working with is illegal
working methods, make use of bribes and this is seen as normal.

Ethics must be above everything.

7.
Should Frank's behavior have been any different had this not been a
government contract?
Frank's attitude would have been different, as with any client, ethical principles
should be the same. Bribes not be admitted under any circumstances.
8.
If Frank shouldnt have paid the bribe, what should he have done, and
what might have been the consequences?
Frank had to wait for American mechanics or find another solution within the
same country. If I had done this, you probably would have lost the client and their
profits, but had established a more clean and proper business conduct.
9.
What are the company interests in this problem?
Within the policies of the company there is no possibility of bribing, but if this
happens, as in the case of Frank, former president of the company preferred to skip
this, because he gave more importance to the profits it was generating Frank, no
matter how it was generated.
10.
Explain how this may be a good example of the SRC (self-reference
criterion) at work.
Frank has a reference about himself and his way of manage the business, and he
thinks that he is the best doing his job and that the others are wrong, but he doesnt
know that he is making a mistake doing the things without ethics.

This is a perfect example of the SRC, because he closed his view to himself and
nothing else, and belittles the work of the other people.
11.
Do you think Bill will make the grade in Latino? Why? What will it
take?
Bill will succeed in Latin as honest working methods establish and implement the
strategy that worked well in the United States. He will need strong strategies based
on cost or differentiation to compete healthily without bribes.
12.
How can overseas manager be prepared to face this problem?
Any manager that aims to work abroad in the future, you will need excellent
training. This training should address issues such as practices, norms, lifestyles,
culture, etc.., the country where you are going, so that when exercising, that
person can know what will face problems and scenarios. Your skills and abilities
will give you the tools to resolve conflicts that may arise.
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Case Study 2.3 Starnes-Brenner Machine Tool Company

1. Is what Frank did ethical? By whose ethicsthose of Latino or the United
States?
Before you decide whether or not it is ethical, you have to decide by whose
ethics you are judging upon. In the United States, what Frank did was illegal
and unethical. However because it was done in Latino, where providing a
little lubrication to get things moving is a cultural norm, Franks actions where
perfectly fine.

2. Are Franks two different payments legal under the Foreign Corrupt
Practices Act as amended by the Omnibus Trade and Competitiveness Act of
1988?
Franks first payment Frank made to the dockworkers was legal under both
acts, because it was a small bribe, or lubrication, just to get things moving.
However his seconded payment to the jefe, or government official, is still
illegal under the acts. Even though it was a relatively small bribe, it is still
illegal under both acts to bribe government officials.
3. Identify the types of payments made in the case; that is, are they
lubrication, extortion, or subornation?
In the case of both of Franks payments they are examples of lubrication,
because he was just greasing the wheels for the transaction to move forward.
Extortion is where you make a threat to get things moving and subornation is
where you force someone to do an unlawful act. However if we were looking
at the second payment from the jefes point of
commerce

Inside Scoop of Business in Latino

Specific Situations
Training Bill
For the next 8 months, Bill will observe Frank's daily routine and get oriented
in Latino
Upon arriving in Latino, Bill meets with Frank for lunch to begin the training
process
As the only employee in Latino, there is a lot to be learned from Frank
A Lesson in Business Ethics
by Adam, Daniella, and Eric
Starnes-Brenner Machine Tool Company of Iowa City
An international company
Small sales office in South American country of Latino
Frank Rothe
Worked in Latino for 10 years
Retiring in 8-months
Other employees have mixed opinions of Frank
Being replaced by Bill Hunsaker Mordidas
(bribes) are common amongst both laborers and government officials
Frank has handled many business deals for Starnes-Brenner that have
involved bribery & other under the table exchange
The company is unaware of these dealings, with the exception of those who
are not in favor of Frank, as aforementioned
Frank views these exchanges of money on the same level as dealing with
clients in the U.S.
Taking clients to dinner

Giving them gifts

Lobbying
Frank tells Bill his first hand experiences of bribery in Latino
When transferring machinery into trucks at the port, Frank slips dock
manager as lubrication to expedite process.
A shipment arrived at its final destination, the government engineer told
Frank that there are major defects with the machinery and if they are not
fixed, he cannot accept the product He insists Frank pays him $1,200 per
machine to fix them, as opposed to allowing Starnes-Brenner's engineers to
inspect the machines
Bill's Reaction
Bill struggled to believe this was the only way of handling business
exchanges
Questioned Frank's morality
Believes company administrators would disapprove
Contested Frank that the company would not approve of such dealings
Uncomfortable with Frank's methods because the company's products are
high quality and correctly priced, thus accepting bribes or lubricating is an
unnecessary obstacle
Concepts of Int'l Marketing
Entering a market with a corrupt or unstable government
The dangers of globalizing a company and having minimal oversight of
employees
Self Reference Criterion (SRC)
Foreign Corrupt Practices Act
Lubrication, Extortion, Bribery
Going Foward
Bill will have to evaluate whether Frank's methods can be avoided or if he
must adopt those practices
Would losing sales be worth making ethical business decisions?
Is it possible to be successful without participating in corrupt practices?
Conclusion
Frank's practices are unethical, and in some instances illegal, regardless of
the societal norms. Given Bill's ethical stance prior to meeting Frank, he will
most likely uphold honest business practices while working in Latino, but may
lose sales during his time working there.

1)
Bribing is not something that is accepted as ethical anywhere in the world
and that is Bill's vision. For Frank if he sees it as ethical because it
accommodates the culture of the country and that for Latinos this is correct
and normal, but given that way of thinking can justify many atrocities
committed in history as those involved were convinced they were right An
extreme case would be Hitler and his slaughter of Jews.

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