Conducting International Business in an Ethical Manner

With the growing global interest in sustainable business practices, Panting Steel's profits eve risen considerably, and it has expanded into new international markets for purchasing scrap metal and selling its products. It has a strong business code of conduct and Is committed to conducting global business In a professional and ethical manner. Managers and employees are encouraged to take personal responsibility for ensuring that Panting Steel's business code of conduct is adhered to.

The company has even set up a confidential hotlist for employees to report any suspicions they have of unethical behavior.

Making new deals in China The scrap metal market In Asia has become Increasingly profitable in recent years. To take advantage of this, Panting Steel purchased a scrap metal processing company In South Korea called USN International. This takeover provided Panting Steel with an Asian base without having to make substantial investments in new manufacturing sites and processing equipment.

All Ken's managers and employees were retained after the takeover, and Panting Steel sent over two senior US employees to oversee operations and make sales.

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A new way of doing business The US employees were treated very hospitably by the USN team and worked hard to forge business links and develop interest in Painting's used car parts and reprocessed tell. They targeted other companies in South Korea, as well as steel mills and car parts dealers in Japan and China.

Representatives from a Japanese company, Hokiest, a refurbished car parts dealer, were invited to South Korea to meet with Painting's management team.

Hokiest wanted to negotiate a business deal In which USN, as a subsidiary of Panting, would become Hookworm's preferred supplier. The business negotiations went very well, and Ken's management suggested that Hookworm's representatives would enjoy a day of golfing at Ken's golf club at their expense. Painting's two US employees agreed that this would be a nice gesture, although a very expensive one, and also arranged for business dinners that evening.

The following day, as Hookworm's representatives were leaving for the airport, they were presented with gifts of perfume to take to their wives. They reciprocated with this, but was reassured that, in Asia, important relationships were always cemented with gifts. Panting Steel's US employees also visited a steel mill in China to discuss the export of processed steel products. The management of the mill were very impressed with Paintings prices and the quality of the processed steel pieces. They were also aware of Ken's excellent business reputation and eager to do business with Paintings subsidiary.

However, the Chinese management explained that they would find importing the processed steel from South Korea problematic. They informed Paintings representatives that, when they had imported steel previously, customs officials regularly requested a substantial payment in order to process the shipments in a timely fashion. These facilitation payments would result in Panting Steel's prices not being such a good deal for the steel mill after all. Disheartened, the Panting Steel employees returned to South Korea and discussed the meetings with their USN counterparts.

The USN managers were clear about what action should be taken. They proposed making annual payments of $50,000 to the managers of the steel mill to cover future facilitation payments to Chinese customs officials. One US employee was adamant that this would be bribery and could not happen. The other employee pointed out that the payment was to cover facilitation payments and so was not illegal. It was obviously a small price to pay to do business in Asia. Case Study Discussion