Walmart And The Unethical “Mission Impossible” Instruction.

From the New York Times:

For more than a decade, Walmart used middlemen to make dubious payments to governments around the globe in order to open new locations, United States prosecutors and securities regulators said in a settlement agreement on Thursday. But even as employees frequently raised alarm, the company’s top leaders did little to prevent Walmart from being involved in bribery and corruption schemes.

That lack of internal control led to a seven-year inquiry that culminated on Thursday with Walmart’s Brazilian subsidiary pleading guilty to a federal crime. The guilty plea, and the $282 million in fines that Walmart has agreed to pay, capped one of the biggest investigations ever under the Foreign Corrupt Practices Act, which makes it illegal for American corporations to bribe overseas officials.

“Walmart profited from rapid international expansion, but in doing so chose not to take necessary steps to avoid corruption,” Brian A. Benczkowski, an assistant attorney general, said in a statement.The investigation, which was conducted by the Department of Justice and the Securities and Exchange Commission, came after The New York Times revealed in 2012 that Walmart had made suspicious payments to officials in Mexico and then tried to conceal them from top executives at the company’s headquarters in Bentonville, Ark. And even when the issues reached the main office, an internal investigation essentially went nowhere.

The remarkable story of how the road to Walmart’s international expansion was paved by bribes is fascinating, and perhaps especially so to me, as I have long identified and inveiged against the coercive and unethical technique among businesses, governments and law firms that I call the “Mission Impossible Directive.” You recall the way “Jim Phelps” (and before him, “Dan Briggs”) got his marching orders for his Impossible Missions Force, don’t you?

Your mission should you choose to accept it is to [………….]. As always, should you or any of your IM Force be caught or killed, the Secretary will disavow any knowledge of your actions. This tape will self-destruct in five/ten seconds.

In the business version, the “mission” is to meet impossible markers of financial success, with the penalty for failing being dismissal or demotion.  The goals are impossible, that is, unless corners are cut and laws are broken.

In more international markets than not, bribery is an accepted way of doing business. [I once taught an ethics course at the World Bank in which a questioner insisted that bribery was not unethical in countries where it wasn’t illegal. I explained that bribery is always unethical, always cheating, always dishonest. If it were not, then it would be transparent. The fact that a nation’s corruption is shameless doesn’t mean it is right. “I have paid bribes in situation where it was the only way to move a business arrangement forward,” he said. “Are you saying that this was corrupt no matter where I was or what the customs of the country were?” “That’s exactly what I’m saying,” I answered.] This places American businesses at a distinct competitive disadvantage because of the the Foreign Corrupt Practices Act, which holds U.S. companies to U.S. laws even in their dealings abroad.

To get around this, big corporations and smaller ones play an unethical game, putting the pressure on mid-level employees to meet goals that executives know can only be met by defying the Foreign Corrupt Practices Act. When the international bribing has the desired effect, the corporate leadership accepst the benefits no questions asked. When there are signs that the middlemen are breaking the law, the executives engage in contrived ignorance, and look the other way for as long as they can.

And when the pressured cheaters are caught, their bosses tell authorities, “Why, we never would have told an employee to engage in corrupt practices! No one asked or received our approval! We’re shocked and horrified!”

…the Secretary will disavow any knowledge of your actions.

This practice will continue until the fines for doing business this way exceed the profits—they never do—and the executives who use the “Mission Impossible Directive” go to prison.

That, however, appears to be a mission impossible.

 

24 thoughts on “Walmart And The Unethical “Mission Impossible” Instruction.

  1. Or, our government could level the playing field by imposing the same restrictions on foreign governments who do business in the US. All the US government has done is give companies an incentive to move their headquarters out of the US. Fiat Chrysler, for instance, is now a Netherlands company.

    • The European Union foreign corruption act was adopted 20 years ago so relocating to the Netherlands didn’t gain Chrysler anything. It is actually enforced there. Siemens and ABB received massive penalties a few years ago.

      There are other countries that claim to follow the same rules, but don’t enforce them. Moving there has some advantage, but the US or the EU can hit companies even then if they do business there.

      • So, the US and EU enforce this on Chinese companies? That is my point. What about Russian companies? Why should they be allowed to import goods into the US and compete if they don’t have to follow the rules?

  2. International corporate elites have made extreme profits at the expense of the American economy for decades, especially since Most Favored Nation Trading Status was given to China. Neither political party cared because those profits fattened their re-election campaigns. I hope they all rot in hell with their cheap labor and no environmental regulations production and distribution countries while selling out the US. Their SOP is to do whatever it takes to maintain the extreme margins they’ve had. Tough luck WalMart, among many others.

    • The only way to stop such corruption (and the illegal immigration it causes) is to see that the ones at the TOP suffer the penalties of law: looonnnggg prison time. Get caught employing an illegal, go to jail. Period.

      Until then, it will never stop.

  3. This practice will continue until the fines for doing business this way exceed the profits—they never do—and the executives who use the “Mission Impossible Directive” go to prison.

    Ever wonder why no prosecutor could make a case for gross negligence at least?

    • They aren’t going to have a case of gross negligence because all communications and training materials are reviewed by corporate council. Employees receive training stating that this law is there, detailed examples of what is illegal, and statements that breaking it will result in termination. Anyone caught will be canned.

      Middle managers aren’t stupid and will act accordingly. They’ll hide it well. When caught, punishment will happen and upper management will be “shocked” that it could have happened.

  4. I entirely agree with you about the ethical issues involved. In places where bribery, or something similar, is expected practice, it takes a lot of creativity and effort to get around it or avoid it; and if the middle managers aren’t supported in this by upper management, it will be nearly impossible. And sometimes it happens “behind your back in front of your face”, when Western representatives don’t know enough about the local language and culture to see what’s going on. A perfect example of this is laid out in this recent article in the NYT (https://www.nytimes.com/2019/06/14/business/china-ge-siemens-bribery-medical-devices.html), where the local middlemen were doing things the Western companies didn’t see. Unfortunately, this, also, is very common.
    As someone who has been in and around the apparel industry for years, I can vouch for this in terms of foreigners getting the wool pulled over their eyes, either because they’re willfully blind, or simply (in most cases, actually) don’t have cultural and linguistic competence and have little interest in or incentive for getting it. An example of this happened in 2001, when a shoe company got nailed in the press for their subcontracted factories in SE Asia treating the employees like slave labor. They clearly didn’t know what nearly every in-country expat knew, that the factories run by this other Asian country’s managers were nearly all like this. So they got blindsided and saw it in the press first.
    Of course, hiring “locals” out of the U.S. universities doesn’t solve the problem, either, as they’re going back into the same cultural pressure cooker they left to come here. And, since upper management also doesn’t have a clue, they get no understanding or support even if they were to bring up the problem. But they also get no prior direction, other than perhaps the admonition that such and such is “illegal”, as like I said above, the company management is often quite culturally clueless and the various possibilities for putting pressure on their middle managers don’t even show up on their radar.

    • Sounds like Western Union several years ago. Middle management was handed unrealistic goals, unless there was massive fraud going on. Upper management should have gone to jail for that little debacle.

        • What evidence was there that upper management was grossly negligent at least?

          Only three Board members that were there during the scandals were allowed by the Fed to remain. The Fed fired 4 others, and Wells Fargo itself fired over half the Board.

          They fired their CEO, John Stumpf, and took away 41 million in unvested stock. They took 19 million away from the head of the unit responsible for the scandal.

          From 2009 through 2015, in order to boost the bank’s stock price, Wells Fargo’s top managers pressured low-level employees to secretly foist more than two million unauthorized checking and credit-card accounts on customers, without their knowledge.?

          https://prospect.org/article/wells-fargo-gets-what-it-deserves-and-just-time

          I would say that constitutes evidence. *

          *Note that your question was easily answerable yourself with a simple search using the keywords ‘Wells Fargo executive scandal’

          • The employees claimed to have been “pressured”. Clearly, they were not alleged to have been ordered, or else they would have used that exact word.

            This article quotes Elizabeth Warren. Jack had already written about Elizabeth Warren’s demagoguery .

            Jack wrote this.

            4. What’s “the breaking point” where any employee has no choice but to break the law, steal money from customers and falsifying documents? There is none. This is the “I have no choice” rationalization for unethical conduct. Sure, there is a choice. Don’t cheat. Don’t be corrupted. There was no gun to the heads of any of those 5000+ employees. If an employer tells an ethical employee, “Cheat or you’re fired!” the response is, “I quit!” and also, “I’m going to talk to a local reporter and a lawyer about this.”

            the only evidence of the employees being pressured are claims from the employees themselves.

            • You sidestepped the point, Mike. PEOPLE WERE HELD ACCOUNTABLE.

              Employees at all levels were fired, including at the top. ‘Pressured’ or ‘ordered’ is semantics: the top execs and middle management were either 1) grossly incompetent (to not see this going on right in front of them) and needed to be fired, or 2) knew damn well what was being asked of their employees, and used the plausible deniability and should be fired (and go to jail, IMHO, but that did not happen.)

              This is the point I was addressing, from Philip and Matthew above: ‘In places where bribery, or something similar, is expected practice, it takes a lot of creativity and effort to get around it or avoid it; and if the middle managers aren’t supported in this by upper management, it will be nearly impossible.’
              ‘Middle managers aren’t stupid and will act accordingly. They’ll hide it well. When caught, punishment will happen and upper management will be “shocked” that it could have happened.

              Upper management set this up to profit off of the backs of their employees doing illegal deeds. This is unethical, and (I believe) illegal all by itself.

              Your stance that ‘only those who did as they were coerced to do’ to be unethical. Let me give an example in another realm.

              A politician tells a crowd that so-and-so’s store should be destroyed for such-and-such reason, but in such a way that they were not ‘ordering’ the act, just ‘pressuring’ through rhetoric. The crowd goes and destroys the store. The politician should be held accountable for instigating the act.

              • Employees at all levels were fired, including at the top. ‘Pressured’ or ‘ordered’ is semantics: the top execs and middle management were either 1) grossly incompetent (to not see this going on right in front of them) and needed to be fired, or 2) knew damn well what was being asked of their employees, and used the plausible deniability and should be fired (and go to jail, IMHO, but that did not happen.)

                Any ideas on why they were not prosecuted?

                Upper management set this up to profit off of the backs of their employees doing illegal deeds. This is unethical, and (I believe) illegal all by itself.

                Explain how they set this up.

  5. ” “Are you saying that this was corrupt no matter where I was or what the customs of the country were?”

    A student of the Marion Barry school of ethics?

    • No, a student of multiculturalism. Remember, this idea that corruption is bad, bribery is unethical is a Western concept. It has roots in Judeo-Christian culture. To try to impose those values on others is cultural imperialism. It wouldn’t surprise me if students at universities today weren’t protesting for corruption just like they protest against the concept of absolute truth.

  6. As long as the sole and only duty of a company is to maximise profits for its shareholders, it will be regarded as unethical to obey the law if the costs of compliance exceed the costs of breach.

    Even until 1981, the Business Roundtable trade group understood the need to balance these different stakeholders.

    “Corporations have a responsibility, first of all, to make available to the public quality goods and services at fair prices, thereby earning a profit that attracts ­investment to continue and enhance the enterprise, provide jobs, and build the economy,” the group said at the time, in a document cited this year in an article in the publication Daedalus.

    It continued: “The long-term viability of the corporation depends upon its responsibility to the society of which it is a part. And the well-being of society depends upon profitable and responsible business enterprises.”

    But changes were already afoot in the academic world that would reshape the fundamental relationship between this country and its companies.

    Lynn Stout, a professor of corporate and business law at Cornell University Law School, traces the transformation to the rise of the “Chicago school” of free-market economists.

    In 1970, Nobel Prize-winning economist Milton Friedman wrote an article in the New York Times Magazine in which he famously argued that the only “social responsibility of business is to increase its profits.”

    Then in 1976, economists Michael Jensen and William Meckling published a paper saying that shareholders were “principals” who hired executives and board members as “agents.” In other words, when you are an executive or corporate director, you work for the shareholders.”

    https://www.washingtonpost.com/business/economy/maximizing-shareholder-value-the-goal-that-changed-corporate-america/2013/08/26/26e9ca8e-ed74-11e2-9008-61e94a7ea20d_story.html?noredirect=on&utm_term=.7eb2f2bb196d

    What started as an innocuous idea – that the *prime* responsibility of a company was to maximize shareholder value has devolved into the pernicious doctrine that the *only* responsibility is to maximize shareholder value, regardless of legality or social cost. And that it is unethical to act otherwise.

    Just as it is easier and cheaper to bribe a corrupt judge than to hire expensive lawyers, it is easier and cheaper still to bribe legislators to craft laws to maximize shareholder profits.

  7. I don’t like the Foreign Corrupt Practices Act. I wish it was repealed. Now it’s just yet another tool of another racket for tyrants’ benefit. Whoever is in power, gets to enforce the law at will. Or I should say, at whim. Gee…there isn’t any political corruption involved in enforcing the FCPA, is there? Just like there isn’t any media bias. How utterly wrong of me to oppose the existence of the FCPA! How utterly pro-corruption of me! Riiiiiggghhht…

    But, hey, we Americans have allowed a corrupt government to get bigger and fundier and more intrusive into people’s lives every year. That trend isn’t going to change, except for going ever more whole-hog, total-control, and all-centralized over time.

    So, let’s just celebrate the unaccountability of our governments and their officers! And let’s make that FCPA even more sweeping and loaded with punishment for (government-disapproved) achievers than ever. PARTY TIME! (As long as you’re in the Democrat Party.) Let’s puff our chests and virtue-signal and sneer at the irredeemable idiots who face insurmountable FCPA obstacles while attempting to win business and increase profits. What suckers those wannabe “circumventers” are! How dare any American company make money, ever; they’ll never get it. I guess political campaign money can’t get any more corrupt, anyway. We wouldn’t DARE want to allow an American-bribed foreign company to have any leverage over any domestic political campaign!

    • I simply don’t accept the right of the US to rule how I, a non American, do business with a non American client (such as an Iranian company.) I will therefore use whatever powers I have to evade any such pressures or restrictions, using any deceptions or guile that I can mobilise. Does anyone see that as ‘unethical’?

  8. Situations like those are why I stay out of Mexico. The widespread corruption there sometimes makes it impossible for people to survive and act in an upright and ethical fashion.

    The way these situations are rigged by corrupt officials, a business may only be able to choose between cheating and losing out. How can a company survive in such a situation without becoming part of the corrupt system? Is it more ethical for a company to instead use its economic muscle to pressure US officials to act on their behalf (while their smaller competitors may not be able to manipulate events in that manner)?

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