Foreign Corrupt Practices Act
Allison Yancy and Ginger Boggs just finished playing four hours of board games
following a contentious meeting with top management over the responsibility of
Monosystems International, a company each had worked for from 1999-2009, for
instituting a program of due diligence to prevent any further violation of the Foreign
Corrupt Practices Act (FCPA). The CEO of the company was recently fired following the
disclosure of a $10 million bribe paid to the president of Jumungy, a small country in east
Africa, for the exclusive rights to market board game products in that country. The
company was fined $2 million and the CEO was sent to jail for five years and also fined
$100,000.
Valerie Uno is the current CEO of Jumungy. Uno told Yancy and Boggs in no
uncertain terms that the company would not appoint a director of business ethics or
establish an office of business ethics in the company. Uno contends it is not required
under the FCPA. Yancy and Boggs believe that while the Act may not specifically
require it, the company should, in the spirit of compliance, elevate the business ethics
function to the vice president-level. The meeting ended after Uno told Yancy and Boggs
to prepare a memorandum that would outline ethical support for their position and how it
might facilitate compliance with the Caremark standard discussed in the chapter.
This case discusses compliance with Foreign Corrupt Practices Act and the spirit of the
Law.
Ethical Issues
Monosystems International is coming off a violation of FCPA with a significant fine and
penalty for the CFO. The new CEO and the board are trying to determine how to meet the
Caremark standard of due diligence and affirmative factors to prevent further violation of
FCPA. The ethical issue is whether the firm has to meet the spirit of the law or can do the
minimum only. The CEO thinks meeting the spirit of the law costs too much and will
agree to do the minimum.
Questions
1. In Chapter 3 there is a discussion of the provisions of an effective system of
corporate governance. How should a company that is serious about fostering
ethical behavior build ethics into its corporate governance system?
Some methods to build ethics into a corporate governance system include written
policies and procedures; regular reviews of reports on compliance, potential
problems, and employee training; internal controls systems and reports reviewed on a
2. Assume Yancy and Boggs approach you as a trusted advisor, CPA and overall
good person, and they ask you to identify the five most important points they
should include in their memo to Uno. What would you say? Why?
Some points that could be included in the memo are arguments along Kohlberg moral
reasoning levels. At the Pre-conventional level the emphasis should be made on the
fact that the company cannot afford the fines, penalties and reputation damage that
could result from an additional conviction. The company and officers have to be
aware that that the company will probably be being watched closely after the CEO
3. Assume Yancy and Boggs do exactly as you had advised and are quite
confident the steps they have outlined in their memo meets both the technical
requirements and spirit of the FCPA. Uno, however, decides not to adopt any
of these suggestions claiming they would cost too much and provide too little
benefit in combating wrongful acts. Is a cost-benefit analysis a proper way to
evaluate the advisability of implementing an ethics program? Explain the
reasons for your answer.
A cost-benefit analyst is reasoning at stage 2 of Kohlberg. Ethical arguments go
beyond whether it is worth it in the short term or even long term. Research has shown