Only sketchy news reports so far, but it appears Shanghai police authorities have detained 22 employees of multinationals, including McDonalds, ABB, Whirlpool, and McKinsey, on bribery charges. The charges appear to have stemmed from efforts to secure technology deals and the illegal payments appear to have been made to private companies, not to the government.
According to the New York Times, Bribe inquiry in Shanghai aims at firms from the West, two McKinsey employees were previously accused of accepting bribes:
A spokesman for McKinsey, the big consultancy based in New York, said the company has not been accused of any crime and that McKinsey was looking into the matter. But one McKinsey employee, who asked not to be identified, acknowledged that two people in the company’s computer procurement division were accused of accepting bribes and detained last May
An unidentified “U.S. company official” complained of how multinationals get “picked on” in China:
But one U.S. company official, who also asked not to be identified, complained that big multinational companies were being “picked on” by the Chinese government, even though corruption is widespread and perhaps much more prevalent among Chinese companies.
You think so?
And if I am sounding flippant in this post . . . I guess that I am.
In one of our previous posts, U.S. Company Bribery In China: Violate The Law, Go To Jail, we talked of how Western companies take an almost perverse pride in “going Chinese” by engaging in bribery and kickbacks:
One of the things I have always found troubling about Westerners doing business in emerging market countries is that they sometimes take an almost perverse pride in discussing payoffs to government officials. It is as though their having paid a bribe is a symbol of their international sophistication and insider knowledge. Yet, countless times when I am told of the bribe, I know the very same thing could almost certainly have been accomplished without a bribe.
I firmly believe paying bribes is not only bad for one’s sleep patterns, it is bad business. And go ahead and call me naive, but I also believe that most American companies agree with me on this. (I refer to American companies here because the overwhelming bulk of my conversations regarding bribery have been with those at American companies). If you are interested in reading more about corruption in foreign markets, and why it is to be avoided, I suggest reading Saying No To Corruption And Make It Your Market Advantage, an excellent post on the Going Global Blog.
He says don’t do it. I concur.
In another earlier post, entitled, Don’t Quote Me On China Law Enforcement Against Foreign Companies, I pulled the following quote from Diligence China Blog on how the Chinese government loves going after Westerners who violate China’s western style laws:
Chinese authorities may not have a great sense of humor in many respects, but they absolutely LOVE applying western-inspired regulations exclusively to foreign-invested companies. They think it’s hilarious ‘ and it goes over GREAT in the Chinese blogiverse.
So says Andrew Hupert of the Diligence China blog.The post is on how the New York Times delights in painting foreign companies in China as bad guys and the quote nicely dovetails with our recent posts (China Consultant, Protect Thyself, China’s Foreign Business Blame Game, and URGENT ALERT: Register Your Business In China NOW) on the Chinese government’s mounting crackdown on foreign companies seeking to skirt China’s laws.
Then, in our post, China’s Foreign Business Blame Game, Part II, we talked about how foreign companies everywhere in the world are more likely to be hit with legal problems than a similarly performing domestic companies and the choice is to try to change the government or not violate the local laws:
Foreign companies are always going to be more susceptible to legal problems than domestic companies; all that varies between countries is the extent to which this is true. You can spend time complaining about the unfairness of this, or you can protect your company by buckling down and complying with the law. Foreign companies doing business in China have no choice but to address this inequality of enforcement from a practical, as opposed to a moral or political perspective.
The saying, “when in Rome do as the Romans do” makes perfect sense in terms of etiquette, but when it comes to deciding whether or not to follow China’s laws, do NOT emulate what the Chinese are doing, just read and follow the laws. Or as we said China’s Foreign Business Blame Game:
So what’s a foreign company to do? You can get Beijing to change its policies and become even-handed — just kidding.
Or, you can come clean by following all rules. Register your company. The crackdown on this is already in full force. Pay your taxes. Do not pay bribes. Follow international environmental standards. In other words, forget about the so-called Chinese way, as that never really applied to you anyway, and it certainly does not apply to you now. Complain all you like but the wise thing to do is to heed the advice of my co-blogger/China lawyer, Steve Dickinson, and start recognizing there is a new paradigm in town and you as a foreign business must abide by it.
Those who ignore this advice and get caught should feel to contact any of our China lawyers as all of us have worked with absolutely superb Chinese criminal lawyers, experienced in defending foreigners. We recently finished a case with a Shanghai lawyer where we were thrilled our appeal led to our foreign client’s sentence being reduced from 15 to 3 years. This follows on the heels of a case where our Beijing lawyer did a superb job as well.
For more on this still breaking story, check out the following:
Busted for Blue-Chip Bribery, at China Business Service
Big Names Entangled in Shanghai Bribery, at China Herald