MHR 841 Study Guide - Midterm Guide: Volkswagen, Interlocking Directorate, Toothpaste

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Chapter 1: Introduction to Organizations

Historical Perspectives

Henry Minceberg- one of the major researchers in organizational theory

-so for his PHD he selected a bunch of managers from organizations and followed them around and recorded their

actually activities

-so he described and categorized many of the activities they engaged in then he made roles

-industrial revolution is when we wanted to start understanding organizational theory more, Frederick Taylor

-he aalzed people ho ae’t eduated, ho ee oked efoe, ho a ou ig the ito a fato ad get

them effective in a short period of time

-keep jobs as simple as possile, edue tasks, ad it’ll let people lea easie : e assel lie i fatoies

-ost people ioled i agiultue duig this tie, ad the he tehiues ipoed the ee’t eeded as

much anymore, so moved into the city, and factories were a result of that

-then organizations started becoming more complex, products became more complex

-i 4’s ad so o- how do we organize large complex organizations?

-bureaucracy; used by government a lot back then, one of the overwriting rules in this term is overwriting, it over laps

rules

-so If e’e i the eeiig ed of ueaua e thik og h a o oe ake a deisio? – but its designed that

way so not one person can make the decision, it was designed to reduce corruption and slow down decision making,

so that people can think of their decisions

-bureaucracy is usually associated with Webber, he wrote about this a lot, it was all about safeguarding

-i 4’s people ee oe likel to hae eduatio, ette stadad of liig, ette uality of life, and attention

turned to people and that people had to be managed

-Taylor Fedrick believed it was all about the task, but then it became all about people, and managing them

-Hawthorne effect- a study done in Chicago, where a group of workers were studied, and the conclusion was when

you pay more attention to people they perform better and are more efficient

-so i the ’s thee as a huge shift, i hat e osideed to e a ogaizatio ad hat as ipotat i the

Organizational Theory in Action: Air Canada

-a lot of people do’t like ai Caada i geeal

-they have so many government regulations to deal with, their not free to do what they

-the’e ee oligated to follo etai outes hih is ot pofitale fo the

-its more complex for air Canada to survive because of the rules placed on them over

others

-overall, they did survive in the end

Current Challenges

Globalization: free air trade – where organizations are required to compete with organizations all over

the world

-Canada signed a lot of trade agreements, which made trade much easier (NAFTA)

-if your manufacturing a product here in Canada BEFORE you only had to worry about competition

without Canada, because tariffs protected you..not anymore

-information and finance- the financial system, in a short period of time it became really easy to move

money now, before it would take time

Ethics and social responsibility:

Speed of responsiveness: everything started speeding up, bureaucracy had to be changed, because

people would just go to another organization to come to a faster decision

-social media, email, we want everything addressed

The digital workplace: organizations expect their employees to be available all the time, this allows

people to work from home, the beach, anywhere, this is much easier and faster

-but with this comes the displacement of the jobs of the people who used to help with these things

Diversity: greater pool of diversity now

Social Entities that are

Goal Directed- people are brought together to carry out some sort of task, objective, goal, reason

Designed with structure- they work with structure and coordinated systems

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Linked to the external environment- ad thee’s soe sot of oetio to the eteal eioet

Types of Organizations

size -shifts how organizations function, etc

e do’t epet the sae thig of sall usiess (e people ould steal fo a lage opa ot a sall

one)

profit vs non profit: e’e oeed ith ogaizatios i a piate sese

What is an Organization? 1.3 Model

-create value for owners should be the biggest circle

-a eaple is the apple stoe, thei o loge goig to all the stoe, thei goig to all the to

etes hee ou joi thei old

-organizations have to please their stakeholders

Perspectives on Organizations

-1.4 in textbook

-examples of closed system organization: a country would be North Korea, an amish community,

monasteries

closed system- a system that is autonomous, enclosed, and not dependent on its environment

open system-a system that must interact with the environment to survive

-1.5A

5 Basic Parts of an Organization:

-technical core/line- the group of people who do the basic work in an organization (whatever that work

is: flying a plane, teaching kids, etc)

top management- STRATEGIC APEX, small group of people at the top who are responsible for strategy,

there supposed to have less activity in the organization on a daily basis

middle management- worried about ordering supplies, hiring employees, day to day functions

technical support staff/techno structure- what ever support is required for the rest of the organization to

function (ex the guy who fixed the powerpoint in class today)

administrative support staff- the support staff that assists others in stuff that is’t tehial (e Reso

receptionists)

What is Organization Design? (Video In class)

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-volkswagen was mentioned as a organization

-the issue with that company was that the emissions was priced higher, they knew about, and they made

so that the emissions would show a certain result, a car would operate differently while under a test as

opposed to really on the road, they designed a way to fake passing the emission test

-social responsibility concern

Dimensions of Organization Design

1. Formalization- refers to the amount of written documentation in the organization, this includes

procedures, job descriptions, etc

2. Specialization- the degree to which organizational tasks are subdivided into separate jobs

3. Hierarchy of authority-describes who reports to whom and the span of control for each manager

4. Centralization- hierarchical level that ahs authority to make a decision

5. Professionalism- the level of formal education and training of employees

6. Personnel ratios- the deployment of people to various functions and departments

Contextual dimensions- characterize the whole organization, including its size, technology, culture,

environment and goals and strategy

Performance and Effectiveness outcomes

Efficiency- refers to the amount of resources used to achiebe the organizations goals

-your more efficient if you can create more output with the same amount of input

effectiveness- the degree to which an organization achieves its goals

-effectiveness is more about doing more it is that you said to do, or what is right

-you can be efficient and not effective

stakeholder approach- integrates diverse organizational activities by looking at various organizations

performance

-please your stakeholders

-the environment: e usuall do’t see this, its outside of ou ie

Discussion Q and A

-usually their trying to get rid of middle management

-or people are outsourcing to save costs

-some organizations have outsourced pretty much everything (virtual organization) (nike is one of them) –

very few employees, they do manufacturing/distributing through subcontractors

-textbooks are biased

Chapter 2: Strategy, Organizational Design, and Effectiveness

Tim Hortons

-starbucks vs tim hortons mission statement

-tim hortons was very vague and starbucks focuses more on the product

Organizational Purpose

-the mission is more who you think you want to be, the goal may specifically be who you are

-because the organizational always tries to tell individuals who they think they are

-shares values and beliefs & reason for being & vision

Operative Goals- designate the ends sought through the actual operating procedures of the organization

and explain what the organization is actually trying to do – they describe specific measurable outcomes

and concerned with short run – what do employees work towards

Framework for Selecting Strategy and Design

Porters Competitive Strategies

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Document Summary

Henry minceberg- one of the major researchers in organizational theory. So for his phd he selected a bunch of managers from organizations and followed them around and recorded their actually activities. So he described and categorized many of the activities they engaged in then he made roles. Industrial revolution is when we wanted to start understanding organizational theory more, frederick taylor. He a(cid:374)al(cid:455)zed people (cid:449)ho a(cid:396)e(cid:374)"t edu(cid:272)ated, (cid:449)ho (cid:374)e(cid:448)e(cid:396) (cid:449)o(cid:396)ked (cid:271)efo(cid:396)e, ho(cid:449) (cid:272)a(cid:374) (cid:455)ou (cid:271)(cid:396)i(cid:374)g the(cid:373) i(cid:374)to a fa(cid:272)to(cid:396)(cid:455) a(cid:374)d get them effective in a short period of time. Keep jobs as simple as possi(cid:271)le, (cid:396)edu(cid:272)e tasks, a(cid:374)d it"ll let people lea(cid:396)(cid:374) easie(cid:396) : e(cid:454) asse(cid:373)(cid:271)l(cid:455) li(cid:374)e i(cid:374) fa(cid:272)to(cid:396)ies. (cid:373)ost people i(cid:374)(cid:448)ol(cid:448)ed i(cid:374) ag(cid:396)i(cid:272)ultu(cid:396)e du(cid:396)i(cid:374)g this ti(cid:373)e, a(cid:374)d the(cid:374) (cid:449)he(cid:374) te(cid:272)h(cid:374)i(cid:395)ues i(cid:373)p(cid:396)o(cid:448)ed the(cid:455) (cid:449)e(cid:396)e(cid:374)"t (cid:374)eeded as much anymore, so moved into the city, and factories were a result of that. Then organizations started becoming more complex, products became more complex.

Related Questions

Three-Dollar Chicken: The Ethical Dilemma of the Food Pantry Black Market By Albert SamahaWednesday, June 19, 2013

"How much? How much?" asks a reporter in a checkered button-down and a pair of Air Jordans. He's pointing at a box of Rice Krispies cereal.

The elderly Chinese woman in the blue fleece picks up a plastic bag with two cereal boxes and says, holding up three fingers, "Three dollars! Three dollars!" She stands in a row beside eight other elderly Chinese women, behind a bus stop on Market Street near the corner of Seventh. All of them have paper bags and plastic bags and metal carts at their feet, all filled with food: Juice cartons, bags of coffee, packaged pretzel bites, and a bunch of other items.

"Nah, I don't need two. Just one.One dollar? One dollar?" counters the reporter. But the woman pushes the bag into his chest. The woman next to her in a green visor, sensing the opportunity, steps between the bartering pair holding a single box of cereal. "One dollar! One dollar!" she says.

The reporter furrows his brow, in deep thought. "You got that in chocolate?" he asks.

The underground food bazaar is in full swing. It's 1 p.m. and the lunchtime crowd bustles by. Several people stop to peruse the selection. No better food deal in the city. It's cheap because the women got most of the goods at food pantries around the city. So a dollar for a box of cereal is a dollar of profit.

The people who run the food pantries are certainly aware of this. While the majority of the tens of thousands of San Franciscans who receive the charitable goods take the food straight to their refrigerators, cupboards, and dining tables, there are others who instead take the food to Market Street. This creates a complex ethical dilemma, of course. On one hand, the sellers are exploiting the charity to turn a profit. But, then again, the sellers who benefit from this underground market, low-income immigrants who barely speak English, are the exact demographic the pantries are trying to help.

"It's a question for people to ask themselves about what they think a gift means," says Sara Miles, a spokesperson for St. Gregory's food pantry service. "If I gave you a gift, is it yours to do with what you want?"

The food pantries' range of sentiments illustrates the complexities of the dilemma. As Amy Jones, a spokesperson for Fill Up America, says, "All we can do on our end is try to do the most good we can for people in San Francisco. And if they're choosing to sell the food for whatever reason, that's between them and their conscience." Blaine Johnson, of San Francisco Food Bank, is less ambivalent. "The majority of our donations come from individual people. Their intention is that we feed people, not that we enable folks to have a side business to resell our food."

Miles, however, appreciates the impulses that created the underground charity food market. "It's not as if the reason people are hungry is that the food bank doesn't have enough food," she says. "I don't think that this is a problem. I think the problem is that it's impossible for poor people to live in San Francisco."

Some food pantries give out fliers discouraging the reselling of the goods. Some try to identify the offenders, warning them to stop before they are prohibited from the handouts. But the market lives on.

And as the reporter turns down the $1 cereal, he immediately encounters more offers. "Chicken!" says a woman in a white jacket, pointing to a whole, raw chicken wrapped in plastic at her feet.

"Chicken?" says the man. "How old? How old? Week old?"

"No, no," the woman replies. "This morning!This morning!"

"So it's been laying out here in the sun all day?"

The woman chuckles."Three dollars."

A police officer on a bike rolls past, carefully maneuvering around the crowd of buyers before accelerating up the sidewalk. He barely glances at the scene. What the women are doing is definitely illegal peddling without a permit, a violation of municipal code 869. And when police dole out citations to them, the officers confiscate the goods and re-donate them to the pantries. But enforcement, says SFPD officer Albie Esparza, is based on complaints, which are rare and usually stem from nearby business owners. "If there are no calls for service," he says, "we respond to more serious crimes in progress."

The underground food bazaar, after all, operates on a block littered with peddlers without a permit. This is Mid-Market, home to the city's vibrant outlaw bazaar. A dozen feet from the women, a man hawks old VHS tapes and beat-up ball caps on a picnic blanket. An older woman sells bootlegged DVDs. A middle-aged man offers discounted jewelry. Another man sells bus transfer passes. Another cigarettes. And then there's the pack of young men at the corner of Market and Jones Street slanging weed. The women with bags of food are hustlers on a block full of hustlers. Capitalists seizing the chance to improve their lot.

After the reporter passes on the chicken, the woman in the green visor waves him over. She pulls from her bag a bottle of Sierra Nevada beer. The reporter's eyes, naturally, widen, and he smiles. Food pantries don't serve beer. "Two dollars!" says the woman. The reporter peeks in her bag and sees a second bottle. "Two dollars for both!" he says. "Two fifty," the woman counters. And he nods.

The woman drops the bottles into a red plastic bag and hands it to the man. She doesn't charge 10 cents. The reporter gives her three dollar bills. But as she fishes for the change, he points to a container of apple juice and says, "I'll take the apple juice and you keep that." The woman nods vigorously.

Suddenly there is a shout. "She took my food! She took my food!" One of the elderly women has become frantic. Several witnesses eagerly announce what happened: A "community ambassador," working for a local economic development agency to help monitor Market Street, snagged a juice container from the lady's cart.

"You shouldn't be selling this!" the ambassador, a young woman, says to her. "This isn't right!" The crowd, drawn to the spectacle and expanding by the second, begins to choose sides. "They shouldn't be doing that," a middle-aged woman whispers to the man beside her. "What is this, a police state?" another voice exclaims.

The buzz of debate grows louder the ambassador justifying her action, the seller repeating, "She took my food," and the bystanders trying to sort out the philosophical conflict until a pair of police officers, walking their beat, arrives at the scene. They speak to the woman (in either Cantonese or Mandarin), then address her peers. The crowd watches as the women pack their goods into carts and file away, around the corner of Seventh Street, out of sight. Source: http://www.sfweekly.com/sanfrancisco/three-dollar-chicken-the-ethical-dilemma-of-the-food-pantry-black-market/Content?oid=2826417

Answer all questions.

1. What are the relevant facts? (10 marks)

champagneworm968

Three-Dollar Chicken:

The Ethical Dilemma of the Food Pantry Black Market By Albert SamahaWednesday, Jun 19, 2013 "How much? How much?" asks a reporter in a checkered button-down and a pair of Air Jordans. He's pointing at a box of Rice Krispies cereal. The elderly Chinese woman in the blue fleece picks up a plastic bag with two cereal boxes and says, holding up three fingers, "Three dollars! Three dollars!" She stands in a row beside eight other elderly Chinese women, behind a bus stop on Market Street near the corner of Seventh. All of them have paper bags and plastic bags and metal carts at their feet, all filled with food: Juice cartons, bags of coffee, packaged pretzel bites, and a bunch of other items. "Nah, I don't need two. Just one.One dollar? One dollar?" counters the reporter. But the woman pushes the bag into his chest. The woman next to her in a green visor, sensing the opportunity, steps between the bartering pair holding a single box of cereal. "One dollar! One dollar!" she says. The reporter furrows his brow, in deep thought. "You got that in chocolate?" he asks. The underground food bazaar is in full swing. It's 1 p.m. and the lunchtime crowd bustles by. Several people stop to peruse the selection. No better food deal in the city. It's cheap because the women got most of the goods at food pantries around the city. So a dollar for a box of cereal is a dollar of profit. The people who run the food pantries are certainly aware of this. While the majority of the tens of thousands of San Franciscans who receive the charitable goods take the food straight to their refrigerators, cupboards, and dining tables, there are others who instead take the food to Market Street. This creates a complex ethical dilemma, of course. On one hand, the sellers are exploiting the charity to turn a profit. But, then again, the sellers who benefit from this underground market, low-income immigrants who barely speak English, are the exact demographic the pantries are trying to help. "It's a question for people to ask themselves about what they think a gift means," says Sara Miles, a spokesperson for St. Gregory's food pantry service. "If I gave you a gift, is it yours to do with what you want?" The food pantries' range of sentiments illustrates the complexities of the dilemma. As Amy Jones, a spokesperson for Fill Up America, says, "All we can do on our end is try to do the most good we can for people in San Francisco. And if they're choosing to sell the food for whatever reason, that's between them and their conscience." Blaine Johnson, of San Francisco Food Bank, is less ambivalent. "The majority of our donations come from individual people. Their intention is that we feed people, not that we enable folks to have a side business to resell our food." Miles, however, appreciates the impulses that created the underground charity food market. "It's not as if the reason people are hungry is that the food bank doesn't have enough food," she says. "I don't think that this is a problem. I think the problem is that it's impossible for poor people to live in San Francisco." Some food pantries give out fliers discouraging the reselling of the goods. Some try to identify the offenders, warning them to stop before they are prohibited from the handouts. But the market lives on. And as the reporter turns down the $1 cereal, he immediately encounters more offers. "Chicken!" says a woman in a white jacket, pointing to a whole, raw chicken wrapped in plastic at her feet. "Chicken?" says the man. "How old? How old? Week old?" "No, no," the woman replies. "This morning!This morning!" "So it's been laying out here in the sun all day?" The woman chuckles."Three dollars." A police officer on a bike rolls past, carefully maneuvering around the crowd of buyers before accelerating up the sidewalk. He barely glances at the scene. What the women are doing is definitely illegal â peddling without a permit, a violation of municipal code 869. And when police dole out citations to them, the officers confiscate the goods and re-donate them to the pantries. But enforcement, says SFPD officer Albie Esparza, is based on complaints, which are rare and usually stem from nearby business owners. "If there are no calls for service," he says, "we respond to more serious crimes in progress." The underground food bazaar, after all, operates on a block littered with peddlers without a permit. This is Mid-Market, home to the city's vibrant outlaw bazaar. A dozen feet from the women, a man hawks old VHS tapes and beat-up ball caps on a picnic blanket. An older woman sells bootlegged DVDs. A middle-aged man offers discounted jewelry. Another man sells bus transfer passes. Another cigarettes. And then there's the pack of young men at the corner of Market and Jones Street slanging weed. The women with bags of food are hustlers on a block full of hustlers. Capitalists seizing the chance to improve their lot. After the reporter passes on the chicken, the woman in the green visor waves him over. She pulls from her bag a bottle of Sierra Nevada beer. The reporter's eyes, naturally, widen, and he smiles. Food pantries don't serve beer. "Two dollars!" says the woman. The reporter peeks in her bag and sees a second bottle. "Two dollars for both!" he says. "Two fifty," the woman counters. And he nods. The woman drops the bottles into a red plastic bag and hands it to the man. She doesn't charge 10 cents. The reporter gives her three dollar bills. But as she fishes for the change, he points to a container of apple juice and says, "I'll take the apple juice and you keep that." The woman nods vigorously. Suddenly there is a shout. "She took my food! She took my food!" One of the elderly women has become frantic. Several witnesses eagerly announce what happened: A "community ambassador," working for a local economic development agency to help monitor Market Street, snagged a juice container from the lady's cart. "You shouldn't be selling this!" the ambassador, a young woman, says to her. "This isn't right!" The crowd, drawn to the spectacle and expanding by the second, begins to choose sides. "They shouldn't be doing that," a middle-aged woman whispers to the man beside her. "What is this, a police state?" another voice exclaims. The buzz of debate grows louder â the ambassador justifying her action, the seller repeating, "She took my food," and the bystanders trying to sort out the philosophical conflict until a pair of police officers, walking their beat, arrives at the scene. They speak to the woman (in either Cantonese or Mandarin), then address her peers. The crowd watches as the women pack their goods into carts and file away, around the corner of Seventh Street, out of sight. Source: http://www.sfweekly.com/sanfrancisco/three-dollar-chicken-the-ethical-dilemma-of-the-food-pantry-black-market/Content?oid=2826417

7. What action (s)would you suggest to San Francisco food bank providers to take?
(10 marks)

ambermanatee897

CASE 2-3: Starnes-Brenner Machine Tool Company: To Bribe or Not to Bribe?

The Starnes-Brenner Machine Tool Company of Iowa City, Iowa, has a small one-man sales offi ce headed by Frank Rothe in Latino, a major Latin American country. Frank has been in Latino for about 10 years and is retiring this year; his replacement is Bill Hunsaker, one of Starnes-Brennerâs top salespeople. Both will be in Latino for about eight months, during which time Frank will show Bill the ropes, introduce him to their principal customers, and, in general, prepare him to take over. Frank has been very successful as a foreign representative in spite of his unique style and, at times, complete refusal to follow company policy when it doesnât suit him. The company hasnât really done much about his method of operation, though from time to time he has angered some top company people. As President Jack McCaughey, who retired a couple of years ago, once remarked to a vice president who was complaining about Frank, âIf heâs making moneyâand he is (more than any of the other foreign offi ces)âthen leave the guy alone.â When McCaughey retired, the new chief immediately instituted organizational changes that gave more emphasis to the overseas operations, moving the company toward a truly worldwide operation into which a loner like Frank would probably not fi t. In fact, one of the key reasons for selecting Bill as Frankâs replacement, besides Billâs record as a top salesperson, is Billâs capacity to be an organization man. He understands the need for coordination among operations and will cooperate with the home offi ce so that the Latino offi ce can be expanded and brought into the mainstream. The company knows there is much to be learned from Frank, and Billâs job is to learn everything possible. The company certainly doesnât want to continue some of Frankâs practices, but much of his knowledge is vital for continued, smooth operation. Today, Starnes-Brennerâs foreign sales account for about 25 percent of the companyâs total profi ts, compared with about 5 percent only 10 years ago. The company is actually changing character, from being principally an exporter, without any real concern for continuous foreign market representation, to having worldwide operations, where the foreign divisions are part of the total effort rather than a stepchild operation. In fact, Latino is one of the last operational divisions to be assimilated into the new organization. Rather than try to change Frank, the company has been waiting for him to retire before making any signifi cant adjustments in its Latino operations. Bill Hunsaker is 36 years old, with a wife and three children; he is a very good salesperson and administrator, though he has had no foreign experience. He has the reputation of being fair, honest, and a straight shooter. Some back at the home offi ce see his assignment as part of a grooming job for a top position, perhaps eventually the presidency. The Hunsakers are now settled in their new home after having been in Latino for about two weeks. Today is Billâs fi rst day on the job. When Bill arrived at the offi ce, Frank was on his way to a local factory to inspect some Starnes-Brenner machines that had to have some adjustments made before being acceptable to the Latino. government agency buying them. Bill joined Frank for the plant visit. Later, after the visit, we join the two at lunch. Bill, tasting some chili, remarks, âBoy! This certainly isnât like the chili we have in America.â âNo, it isnât, and thereâs another difference, too. The Latinos are Americans and nothing angers a Latino more than to have a âGringoâ refer to the United States as America as if to say that Latino isnât part of America also. The Latinos rightly consider their country as part of America (take a look at the map), and people from the United States are North Americans at best. So, for future reference, refer to home either as the United States, States, or North America, but, for gosh sakes, not just America. Not to change the subject, Bill, but could you see that any change had been made in those S-27s from the standard model?â âNo, they looked like the standard. Was there something out of whack when they arrived?â âNo, I couldnât see any problemâI suspect this is the best piece of sophisticated bribe taking Iâve come across yet. Most of the time the Latinos are more âhonestâ about their mordidas than this.â âWhatâs a mordida ?â Bill asks. âYou know, kumshaw , dash , bustarella , mordida ; they are all the same: a little grease to expedite the action. Mordida is the local word for a slight offering or, if you prefer, bribe,â says Frank. Bill quizzically responds, âDo we pay bribes to get sales?â âOh, it depends on the situation, but itâs certainly something you have to be prepared to deal with.â Boy, what a greenhorn, Frank thinks to himself, as he continues, âHereâs the story. When the S-27s arrived last January, we began uncrating them and right away the jefe engineer (a government offi cial)â jefe , thatâs the head man in chargeâbegan extra-careful examination and declared there was a vital defect in the machines; he claimed the machinery would be dangerous and thus unacceptable if it wasnât corrected. I looked it over but couldnât see anything wrong, so I agreed to have our staff engineer check all the machines and correct any fl aws that might exist. Well, the jefe said there wasnât enough time to wait for an engineer to come from the States, that the machines could be adjusted locally, and we could pay him and he would make all the necessary arrangements. So, what do you do? No adjustment his way and there would be an order canceled; and, maybe there was something out of line, those things have been known to happen. But for the life of me, I canât see that anything had been done since the machines were supposedly fi xed. So, letâs face it, we just paid a bribe, and a pretty darn big bribe at thatâabout $1,200 per machine. What makes it so aggravating is that thatâs the second one Iâve had to pay on this shipment.â âThe second?â asks Bill. âYeah, at the border, when we were transferring the machines to Latino trucks, it was hot and they were moving slow as molasses. It took them over an hour to transfer one machine to a Latino truck and we had ten others to go. It seemed that every time I spoke to the dock boss about speeding things up, they just got slower. Finally, out of desperation, I slipped him a fi stful of pesos. and, sure enough, in the next three hours they had the whole thing loaded. Just one of the local customs of doing business. Generally, though, it comes at the lower level where wages donât cover living expenses too well.â There is a pause, and Bill asks, âWhat does that do to our profi ts?â âRuns them down, of course, but I look at it as just one of the many costs of doing businessâI do my best not to pay, but when I have to, I do.â Hesitantly, Bill replies, âI donât like it, Frank. Weâve got good products, theyâre priced right, we give good service, and keep plenty of spare parts in the country, so why should we have to pay bribes? Itâs just no way to do business. Youâve already had to pay two bribes on one shipment; if you keep it up, the wordâs going to get around and youâll be paying at every level. Then all the profi t goes out the windowâyou know, once you start, where do you stop? Besides that, where do we stand legally? The Foreign Bribery Act makes paying bribes like youâve just paid illegal. Iâd say the best policy is to never start: You might lose a few sales, but let it be known that there are no bribes; we sell the best, service the best at fair prices, and thatâs all.â âYou mean the Foreign Corrupt Practices Act, donât you?â Frank asks, and continues, in an Iâm-not-really-so-out-of-touch tone of voice, âHavenât some of the provisions of the Foreign Corrupt Practices Act been softened somewhat?â âYes, youâre right, the provisions on paying a mordida or grease have been softened, but paying the government offi cial is still illegal, softening or not,â replies Bill. Oh boy! Frank thinks to himself as he replies, âLook, what I did was just peanuts as far as the Foreign Corrupt Practices Act goes. The people we pay off are small, and, granted we give good service, but weâve only been doing it for the last year or so. Before that I never knew when I was going to have equipment to sell. In fact, we only had products when there were surpluses stateside. I had to pay the right people to get sales, and besides, youâre not back in the States any longer. Things are just done different here. You follow that policy and I guarantee that youâll have fewer sales because our competitors from Germany, Italy, and Japan will pay. Look, Bill, everybody does it here; itâs a way of life, and the costs are generally refl ected in the markup and overhead. There is even a code of behavior involved. Weâre not actually encouraging it to spread, just perpetuating an accepted way of doing business.â Patiently and slightly condescendingly, Bill replies, âI know, Frank, but wrong is wrong and we want to operate differently now. We hope to set up an operation here on a continuous basis; we plan to operate in Latino just like we do in the United States. Really expand our operation and make a long-range market commitment, grow with the country! And one of the fi rst things we must avoid is unethical . . .â Frank interrupts, âBut really, is it unethical? Everybody does it, the Latinos even pay mordidas to other Latinos; itâs a fact of lifeâ is it really unethical? I think that the circumstances that exist in a country justify and dictate the behavior. Remember, man, âWhen in Rome, do as the Romans do.ââ Almost shouting, Bill blurts out, âI canât buy that. We know that our management practices and relationships are our strongest point. Really, all we have to differentiate us from the rest of our competition, Latino and others, is that we are better managed and, as far as Iâm concerned, graft and other unethical behavior have got to be cut out to create a healthy industry. In the long run, it should strengthen our position. We canât build our future on illegal and unethical practices.â Frank angrily replies, âLook, itâs done in the States all the time. What about the big dinners, drinks, and all the other hanky-panky that goes on? Not to mention PACsâ [Political Action Committee] payments to congressmen, and all those high speaking fees certain congressmen get from special interests. How many congressmen have gone to jail or lost reelection on those kinds of things? What is that, if it isnât mordida the North American way? The only difference is that instead of cash only, in the United States we pay in merchandise and cash.â âThatâs really not the same and you know it. Besides, we certainly get a lot of business transacted during those dinners even if we are paying the bill.â âBull. The only difference is that here bribes go on in the open; they donât hide it or dress it in foolish ritual that fools no one. It goes on in the United States and everyone denies the existence of it. Thatâs all the differenceâin the United States weâre just more hypocritical about it all.â âLook,â Frank continues, almost shouting, âwe are getting off on the wrong foot and weâve got eight months to work together. Just keep your eyes and mind open and letâs talk about it again in a couple of months when youâve seen how the whole country operates; perhaps then you wonât be so quick to judge it absolutely wrong.â Frank, lowering his voice, says thoughtfully, âI know itâs hard to take; probably the most disturbing problem in underdeveloped countries is the matter of graft. And, frankly, we donât do much advance preparation so we can deal fi rmly with it. It bothered me at fi rst; but then I fi gured it makes its economic contribution, too, since the payoff is as much a part of the economic process as a payroll. Whatâs our real economic role, anyway, besides making a profi t, of course? Are we developers of wealth, helping to push the country to greater economic growth, or are we missionaries? Or should we be both? I really donât know, but I donât think we can be both simultaneously, and my feeling is that, as the company prospers, as higher salaries are paid, and better standards of living are reached, weâll see better ethics. Until then, weâve got to operate or leave, and if you are going to win the opposition over, youâd better join them and change them from within, not fi ght them.â Before Bill could reply, a Latino friend of Frankâs joined them, and they changed the topic of conversation.

QUESTIONS

1. Is what Frank did ethical? By whose ethicsâthose of Latino or the United States?

2. Are Frankâs two different payments legal under the Foreign Corrupt Practices Act as amended by the Omnibus Trade and Competitiveness Act of 1988?

3. Identify the types of payments made in the case; that is, are they lubrication, extortion, or subornation?

4. Frank seemed to imply that there is a similarity between what he was doing and what happens in the United States. Is there any difference? Explain.

5. Are there any legal differences between the money paid to the dockworkers and the money paid the jefe (government offi cial)? Any ethical differences?

6. Frankâs 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. fi rms is to change local ways of doing business. Who is right?

7. Should Frankâs behavior have been any different had this not been a government contract?

8. If Frank shouldnât have paid the bribe, what should he have done, and what might have been the consequences?

9. What are the company interests in this problem?

10. Explain how this may be a good example of the SRC (selfreference criterion) at work.

11. Do you think Bill will make the grade in Latino? Why or why not? What will it take?

12. How can an overseas manager be prepared to face this problem?

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