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Copy of Questionable Payments Abroad :

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syafrina machfud

on 15 February 2014

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Transcript of Copy of Questionable Payments Abroad :

Business Ethic
Presentation week 6

Questionable Payments Abroad :
Gulf In Italy
Presented by:

Denny Prio Santoso – 1340001742
Felix – 1340001641
Puti Almanda – 1340001553
Shelly Gautama – 1340001484
Syafrina – 1340001654

Case Background

Gulf is American Company
which entered the Italian scene in the late 1940s and become
Italian National Oil Company.

Nicolo Pignatelli
as a head of operation, tries to establish and expand the company.

Pignatelli often travels to London and Pittsburgh to report back the progress activities in Italy.

Expansion of the Milan Refinery
(the “Plum Project”)
Option 1
he could ask his more-influential partners (for example, Mobil) to put pressure on government officials to grant quickly the two needed permissions.
Option 3

he could pay a large sum of money ($1 million deposited to a Swiss bank account) to a “consultant” who had “debottlenecked” problems like this before and who promised Pignatelli that he could fix the situation quickly
MNCs Managing ethical concerns

Observing home and host countries from legal and moral codes perspective
Bribery is illegal in italy. Even if bribes are common practice there, this does not justify paying them. There are Laws around the world frown upon bribing of government officials. Here are some of the example:

in Chapt. 4, it is stated that
“The FCPA made it illegal for employees of U.S. firms to corrupt the actions of foreign officials, politicians or candidates for office. Laws such as the Foreign Corrupt Practices Act (FCPA) exist in many countries.

Equitability of law.
From this, it does not justify continuing the cycle of justification for illegal actions as bribery or "under table payments. laws that are applied to one are "supposedly" always applied and this information should be considered when making such important decisions

Even more, the price associated with being caught (Utilitarian Approach or option 2) or the varied costs associated with compromising universal courses of action which should apply to all people, not just those who cannot afford to pay for the “debottlenecking.

in Chapt. 8, it is stated that;
according to International Business Law,
MNCs should not pay bribes or make improper payments to public officials
MNCs should avoid improper or illegal involvement or in interference in the internal politics of host countries

Option 1. based on
Moral and Ethical Approach
Playing it straight and abiding by government authorization

consider investigating past documents to find the milestones needed to achieve production at the refinery. If there were no obligations stated then the government may have an ulterior motive.

: this will not only building a positive character of a company but also the company will be viewed as trusting, reliable, and competent
he could play it straight and try to gain government authorization
Conceptual Framework
Right thing-to-do approach
Option 2
Main problems
The president of Gulf Italia, Nicolo Pignatelli was granted permission to build an oil refinery with the capacity of almost 6 million tons. However, he was later notified by the Italian government that he could only operate at slightly more than 50 percent capacity
Operating at 3.9 million tons would lose millions of dollars, and closing the plan would also cause significant losses
Pignatelli faced a few options when trying to think of the possible best solution to the problem, but he seemed to have narrowed his options down

What do you think?
what should
Pignatelly do?
Option 2
Based on common good Approach
Work cooperatively with Mobile in order to build a stronger relationship

Uphold business integrity and serve as an opportunity to encourage continued partnership with Mobile when partnerships. This is particularly important as these partnerships set a clear model for “shared burden”

Work together will save time due to the length of time, money and effort invested the first option (investigate the problem and provide supporting documentation if needed to officials to keep the ball rolling on the permissions)

Option 3 Hiring consultant
based on Utilitarian Approach
Option 4 based on Legal and Justice Approach
He could pay money “under the table” directly to government officials to obtain the permissions needed to run the refinery economically

If Pignatelly was leaning in the direction of hiring a consultant who might use part of the money for bribes, he would still be responsible for such dishonest behavior.

Although he would not directly pay the bribes directly, he would still be engaging in activities that violate the company’s code of ethical conduct which not only states that you should not do anything unlawful that will harm the organization, but it also asks to conduct business dealings in compliance with all relevant laws, regulations, and policies.
Common good/universalism approach
Utilitarian Approach
Legal and Justice Approach
Option 4
January 22, 1967
, Gulf obtained a license to install a refinery at Zelo Buon Persico near Milan despite they have much opposition from the locals due to anti-foreign sentiments and ecological issues.

By Decree dated
August 2, 1969
, Gulf was granted permission to move the location of the proposed refinery to bertonico in the Terranova Commune.

They started operations in
with a formal opening attended by citizens and officials

Thinking Ethically using 4 ethical decision-making principles
Dealing with moral issues we should ask:
How, exactly, should we think through an ethical issue?
What questions should we ask?
What factors should we consider?

A Framework for Moral Decision Making
The Rightness Approach
The Common-Good/ universalism Approach
The Utilitarian Approach
The Fairness or Justice Approach
The Ethical virtue approach to ethics assumes that there are certain ideals toward which we should strive, which provide for the full development of our humanity such
truthfulness, integrity, and honesty.
These ideals are discovered through thoughtful reflection on what kind of people we have the potential to become.
This approach to ethics assumes a society comprising individuals whose own good is inextricably linked to the good of the community. Community members are bound by the pursuit of common values and goals.
Suggested that ethical actions should determined by the
consequences of an act (result based result).
Therefore, this belief that the value of a thing or an action is determined by
its utility.
this is the approach that provide the greatest balance of good over evil.

To analyze an issue using the utilitarian approach we need to:
1. identify the various courses of action available to us.
2. identify who will be affected by each action and what benefits or harms will be derived from each.
3. we choose the action that will produce the greatest benefits and the least harm
The fairness or justice approach to ethics has its roots in the teachings of the ancient Greek philosopher Aristotle, who said that "
equals should be treated equally and unequals unequally."
The basic moral question in this approach is: How fair is an action? Does it treat everyone in the same way, or does it show favoritism and discrimination?
if we narrow down 2 out of 4 options, option 1 and 2, would be the most due able options based on the importance of ethical considerations.

However, of course, this ethical consideration does not provide an automatic solution to pignatelly's problems, considering money, effort and time (in business' perspective) pignatelly has invested on this project, of which It is not the nature of these ethical method considerations. The method it self is merely meant to help identify the most of ethically accepted options to be taken.

In the end, he still must deliberate on moral issues for him and his company it self, keeping a careful eye on both the business facts and on the ethical considerations involved.
Feed back?

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