Busted for Blue-Chip Bribery

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Corruption stories in China often focus on the misdeeds of officials – such as the Shanghai Party Secretary – but there is plenty of traditional commercial corruption about as well. The recent case of Zhang Enzhao is a case in point (and one that straggles both worlds, as such senior people in the banks are political appointees). But it is not just Chinese officials, managers and companies that are involved. As noted in a previous post, IBM and Lucent have both been the subject of corruption headlines and may, until now, have been feeling a bit lonely. So they at least must welcome the news that a whole slew of new multinationals are in the frame. According to the New York Times (h/t Asia Business Intelligence:

    “The Shanghai police have detained 22 people in a bribery investigation that has ensnared some of the world’s biggest companies, including McDonalds, Whirlpool, McKinsey and ABB, according to reports in the state-run news media.”

The case reportedly involves bribes of US$500,000 related to procurement of equipment. While details of the case are not yet clear, it is interesting to note that it is yet another high-profile anti-corruption charge against foreign firms. Surely nobody is suggesting that they are the worst offenders…but perhaps a message is being sent both to business at large, and to big foreign ones in particular.

Foreign companies in China would be wise to take note, and to proactively review their procurement and management oversight processes. The things that routinely go on in the local offices of foreign companies would scare the hell out of a lot of directors back home (if they did not close their eyes to it). Procurement kickbacks are common, as I noted in a piece about procurement audits, but that is the tip of the iceberg.

And it is not just the Chinese authorities that foreign companies should be wary of. A big story in the UK at the moment relates to corruption around a major Saudi arms deal (seems we just have to live with that one – well, it did secure a Very Big deal). While in the US there are moves to target companies that use agents to do their dirty work. So some of those conveniently loose agency agreements may have to be re-drafted with rather more restrictive terms.

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One Response to “Busted for Blue-Chip Bribery”

  1. Chinese Nationalism: Want Jail Time With That? | China Law Blog Says:

    […] “Busted for Blue-Chip Bribery,” at China Business Service […]

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