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Baker Hughes: Foreign Corrupt Practices Act Study Questions

1045 words - 5 pages

1. Describe the economic and social impact of bribes and other similar payments in emerging economics.
In emerging economies, bribes and other similar payments have a negative impact. Such
corruption, although appearing to provide short term growth, will not turn into long term growth. Corruption reduces the efficiencies of the operations of the market economy and a loss of direct foreign investment in countries where participation in corruption is how business is done. Politicians and government officials worldwide receive bribes valued between $20 billion and $40 billion annually. Companies that participate in bribing can face reputational damage and loss of investors. ...view middle of the document...

If a company wants to actively monitor and control corrupt practices, it must engage its employees at all levels and its board of directors to work together. Involving both the management and the board of directors in this issue facilitates accountability. If employees know that the board of directors are also paying attention and policing foreign corrupt practices, it will help deter employees from engaging in the practices.

4. Discuss the pros and cons of the two groups(independent investigators and blue-ribbon experts) used by Baker Hughes.
The pros of the independent investigators were that they were from a firm separate from
Baker Hughes, and did not provide any other legal work for the company. This allowed them to report to the board objectively. It is a pro that there is no conflict of interest because they have no other affiliation with the company aside from these investigations and therefore do not r eceive any other revenue from the company. A notable con of using the independent investigators is that they do not necessarily have extensive experience dealing with compliance/anti-corruption issues and the DOJ.

The pros of the blue-ribbon experts are that they have significant experience and a high level of integrity. The experts were familiar with the steps required to satisfy investigators from the Department of Justice. There is no notable con of using the blue-ribbon experts, at least from what I can read in the case study. However, it is probably safe to assume that hiring the blue- ribbon experts is quite costly, which is a con.

5. Discuss whether the payments outlined on pages 12 and 13 are foreign corrupt practices.
The payments outlined on pages 12 and 13 are in fact foreign corrupt practices. Although they ]
did not involve a direct attempt by the employees of Baker Hughes to pay or cover up bribes, it is the responsibility of the company to monitor agent behavior. It is not acceptable to give an agent money and assume that they will use that money in good faith and not bribe government officials. In legal terms, indirectly being involved means being an accessory, and that is...

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