Question

Question 1: Total 8 Marks 2017 December witnessed the government of Bandara inviting bids from eligible parties. The contract was about cell phone network construction. Youphone management got interested in the bid. Bandara had a poor land-line infrastructure and hence had a good potential for cell phone companies. If Youphone could successfully land few of these contracts, it would accomplish a high reputation for relevant expertise in the marketplace. Youphone management conducted extensive analyses before preparing and submitting a bid. Under the bid, the company kept only 50% of its normal profit margins and undertook a guarantee to complete the proposed project, worth several million dollars, in a maximum period of 2 years. The bid was submitted by the due date and the government acknowledged a timely receipt of it. Following this, despite lapse of the company did not received any news from the government, although it sent several reminders. The Director Operations at Youphone, Mr Joe Parker, sought advice from the relevant Australian High Commission representative in the country, who advised him to contact Bandara’s relevant minister and meet him in person. Joe went on for the meeting making sure he is fully prepared for it. The meeting was arranged in the Australian High Commissioner’s office. Joe was fully committed to win the bid. The minister after asking a couple of questions left the meeting, leaving his deputy with Joe. The assistant informed Joe about several other competitive bids that his office had received from several countries. However, towards the end of the meeting, the assistant told Joe that he will guarantee the acceptance of Youphone’s bid, without any change whatsoever, if Joe pays a commission of $900,000. From the discussion Joe clearly understood that the commission the assistant was asking for was actually a bribe. It was clear to Burns that the ‘commission’ was, in fact, a bribe. Joe, in a very subtle manner, signalling to the Australian applicable laws and regulations that strictly prohibited such payment transactions. The meeting was concluded with no positive outcome for Joe.

1. If you were a shareholder in Youphone, what would be your stance on the payment of the ‘commission’ to the government official by Joe? What may be the likely effect on the company’s market shares when shareholders come to know of any such payments made to secure such business contracts abroad? Which principle of ethical conduct for management accountants relates to this situation?

2. Joe discussed the whole issue with his friend Mark, an executive at another company, Mark said that he would have agreed to the payment of the commission as he treats such payments were in accordance with the country’s overall business/government culture. What would be your stance on Mark’s business approach in terms of the effects of such bribes on the overseas country? Explain. Which principle of ethical conduct for management accountants relates to this situation?

3. Why you think Youphone should have a clear corporate policy in place to guide its executives in such situations?

4. If you were Joe, what actions would you take next, within Australia as well as in Bandara?

Answer 1

Answer to point #1: If I was the shareholder of Youphone, my stance would be that Joe has done the right thing of not paying any such "commission" to the government official which is in real fact a "bribe"'. There would be a very adverse effect on company's market shares when shareholders come to know that their company is procuring abroad business contracts not because of its efficiencies and effective managment but because of paying bribe to the concerned parties. Its a matter of legal litigaton which the company may face as the consequences of fact which is no where favourable to company's future prospects.

Answer to point #2 I am not in afvour of Mark's business approach as he is thinking form a very short term perspective and not any long term objective. It will have an adverse effect on the overseas contry towards the integrity of the the company Youphone. One cannot compromise on the initigrety for procurring business contracts.

Answer to point #3: Yes, the comapny should have a clear defined corporate policy which guids its executives to deal with such situations. In fact, the good and prestigious companies takes a self declaration form their employees as part of their joining and onboarding formalities. Also, there are various training sessions and workshops the company can conduct to inculcate good Ethics & Integrity within their employees which deals with different stakeholders of the company.

Answer to point #4: If I was Joe, I would immidiately inform the top managment and the legal & compliance team of Youphone about the commission or bribe asked by the government offials. I believe that whenever any executive deals with any stakeholder of the company, that time he is actualy the offiial representative of the company, hence he should make sure that all his actions are in accordance with his companies policiew and procedures. By keeping in loop the top managemt and legal & compliance team of the company I can take care of the organisational interest at large.