Case Study: Geletx and Foreign Corrupt Practices Act

The implementation of the Foreign Corrupt Practices Act in 1977 aimed at the prevention of corruption practices not only in the US but also abroad, when American companies or its subsidiaries were involved. In such a way, legislators apparently attempted to prevent corruption and develop new business ethics which is free of corruption practices. At the same time, many companies, such as Geletx, faced the problem of the effective development of business because traditional American business practices do not always work effectively in highly corrupted environment abroad. In this respect, the case of Geletx is particularly noteworthy because, as the matter of fact, Jen faces a serious dilemma: on the one hand, he has to stop the violation of the FCPA and ban the high sales commissions, but, on the other hand, he has to stimulate the market expansion and business development abroad, which is consistently more difficult without the high sales commissions.

First of all, it is important to lay emphasis on the fact that the high sales commissions are a form of commercial bribery that is the violation of the FCPA. In this respect, it is obvious that the district manager of Geletx violates norms of the FCPA using the high sales commissions because the latter are bribes as the matter of fact. At first glance, it is possible to argue that the high sales commissions are not bribes. Instead, the high sales commissions are determined by specificities of the local market and have nothing in common with commercial bribery. However, the commissions Geletx’s salespersons receive are unreasonably high. This means that, firstly, the company can save costs reducing the high sales commissions and, secondly, the company can avoid the risk of being accused of the violation of the FCPA norms. In addition, the high sales commissions raise a number of ethical issues, among which the violation of the company’s Code of Ethic is the primary concern. Jen cannot ignore the fact that the use of high sales commission abroad or in one country will naturally provoke the dissatisfaction of salespersons working in other countries and units of the company because they will feel their disadvantageous position.

What is more important, the existence of high sales commissions raises the problem of the existing of double standards within Geletx because if the high sales commissions are acceptable in one country, then other units of the company should have the right to use this instrument to increase sales or get an advantageous position in the market. However, it is obvious that the high sales commissions will lead to the violation of FCPA en masse.

At this point, it is important to stress the fact that the high sales commissions do violate the FCPA, while any arguments justifying the high sales commissions are inconsistent. To put it more precisely, Geletx denies the use of methods which put under a threat the public image and business reputation of the company, while the high sales commissions will definitely put under a threat both the public image and especially business reputation of the company because, if Jen understands that the high sales commissions may be a form of commercial bribery, then business partners of Geletx will definitely interpret the high sales commissions as bribery used by Geletx to improve its position in the target market (Brown, 2003).

In addition, the bribery, even if it occurs abroad, makes Geletx vulnerable to the legal action because of the violation of the FCPA.

According to the act, any person can be subject to the FCPA, regardless of his or her location, position, status, etc. In other words, even though the district manager work abroad, he is still the subject to the FCPA as a professional working at Geletx and the violation of the FCPA by the district manager naturally makes the entire company guilty or, at least, suspect in using illegal means, namely bribery, to meet its commercial goals (Dessler, 2004).

In such a situation, Jen has to take decisions which could maintain the stable development of the company in the target market and, simultaneously, eliminate illegal practices. In other words, it is necessary to ban the high sales commissions and maintain the positive marketing performance, expanding the market share of the company using legal means solely. This goal is difficult to achieve but the reputation of the company and the risk of being accused of the violation of the FCPA makes the ban of the high sales commissions the only logical, reasonable and essential decision that Jen can make in the current situation. At the same time, to compensate potential losses for sales persons and customers, Jen should help the district manager to develop special loyalty programs which allow customers to participate in the discount system depending on their involvement in the company’s services. The loyalty program should motivate customers to buy products and services of Geletx. At the same time, Jen should recommend the district manager to participate in a training course to learn business ethic acceptable within Geletx to avoid violation of legal and ethical norms in the future.

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