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Starnes-Brenner Machine Tool Company – To Bribe or Not to Bribe
The Starnes-Brenner Machine Tool Company of Iowa City, Iowa, has a small one-man sales office headed by Frank Rothe in Latino, a major Latin-American country. Frank has been in Latino for about 10 years and is retiring this year, his replacement is Bill Hunsaker, one of Starnes-Brenner’s top salesmen. Both will be in Latino for about eight months, during which time Frank will show Bill the ropes, introduce him to their principal customers, and, in general, prepare him to take over.
Frank has been very successful as a foreign representative in spite of his unique style and, at times, complete refusal to follow company policy when it doesn’t suit him. The company hasn’t really done much about his method of operation, although from time to time he has angered some top company men. As President McCaughey, who retired a couple of years ago, once remarked to a vice-president who was complaining about Frank, “If he’s making money—and he is (more than any of the other foreign offices)—then leave the guy alone.” When McCaughey retired, the new chief immediately instituted organizational changes that gave more emphasis to the overseas operations, moving the company toward a truly worldwide operation into which a loner like Frank would probably not fit. In fact, one of the key reasons for selecting Bill as Frank’s replacement, besides Bill’s record as a top salesman, is Bill’s capacity as an organization man. He understands the need for coordination among operations and will cooperate with the home office so the Latino office can be expanded and brought into the mainstream.
The company knows there is much to be learned from Frank, and Bill’s job is to learn everything possible. The company certainly doesn’t want to continue some of Frank’s practices, but much of his knowledge is vital for continued, smooth operation. Today, Starnes-Brenner’s foreign sales account for about 25 percent of the company’s total profits, compared with about 5 percent only 10 years ago.
The company is actually changing character, from being principally an exporter, without any real concern for continuous foreign market representation, to worldwide operations, where the foreign divisions are part of the total effort rather than a stepchild operation. In fact, Latino is one of the last operational divisions to be assimilated into the new organization. Rather than try to change Frank, the company has been waiting for him to retire before making any significant adjustments in their Latino operations.
Bill Hunsaker is 36 years old, with a wife and three children; he is a very good salesman and administrator, although he has had no foreign experience. He has the reputation of being fair, honest, and a straight shooter. Some, back at the home office, see his assignment as part of a grooming job for a top position, perhaps eventually the presidency. The Hunsakers are now settled in their new home after having been in Latino for about two weeks. Today is Bill’s first day on the job.
When Bill arrived at the office, Frank was on his way to a local factory to inspect some Starnes- Brenner machines that had to have some adjustments made before being acceptable to the Latino government agency buying them. Bill joined Frank for the plant visit. Later, after the visit, we join the two for lunch.
Bill, tasting some chili, remarks, “Boy! This certainly isn’t like the chili we have in America.”
“No, it isn’t and there’s another difference, too…the Latinos are Americans and nothing angers a Latino more than to have a “Gringo” refer to the United States as America as if to say that Latino isn’t part of America also. The Latinos rightly consider their country as part of America (take a look at the
map) and people from the United States are North Americans at best. So, for future reference, refer to home either as the United States, States, or North America, but, for gosh sakes, not just America. Not to change the subject, Bill, but could you see that any change had been made in those S-27’s from the standard model?”
“No, they looked like the standard. Was there something out of whack when they arrived?”
“No, I couldn’t see any problem—I suspect this is the best piece of sophisticated bribe-taking I’ve come across yet. Most of the time the Latinos are more “honest” about their mordidas than this.” “What’s a mordida ?” Bill asks. “You know, kunshaw, dash , bustarella, mordida ; they are all the same; a little grease to expedite the action. Mordida is the local word for a slight offering or, if you prefer, bribe,” says Frank.
Bill quizzically responds, “Do we pay bribes to get sales?”
“Oh, it depends on the situation but it’s certainly something you have to be prepared to deal with.” Boy, what a greenhorn, Franks thinks to himself, as he continues, “Here’s the story. When the S-27’s arrived last January, we began uncrating them and right away the jefe engineer (a government official)— jefe , that’s the head man in charge—began an extra-careful examination and declared there was a vital defect in the machines; he claimed the machinery would be dangerous and thus unacceptable if it wasn’t corrected. I looked it over but couldn’t see anything wrong, so I agreed to have our staff engineer check all the machines and correct any flaws that might exist. Well, the jefe said there wasn’t enough time to wait for an engineer to come from the States, that the machines could be adjusted locally, and we could pay him and he would make all the necessary arrangements. So, what do you do? No adjustment his way and there would be an order cancelled, and, maybe there was something out of line, those things have been known to happen. But for the life of me, I can’t see that anything had been done since the machines were supposedly fixed. So, let’s face it, we just paid a bribe, and a pretty darn big bribe at that--about $1,200 per machine. What makes it so aggravating is that that’s the second one I’ve had to pay on this shipment.”
“The second?” asks Bill.
“Yeah, at the border, when we were transferring the machines to Latino trucks, it was hot and they were moving as slow as molasses. It took them over an hour to transfer one machine to a Latino truck and we had 10 others to go. It seemed that every time I spoke to the dock boss about speeding things up, they just got slower. Finally, out of desperation, I slipped him a fistful of pesos and, sure enough, in the next three hours they had the whole thing loaded. Just one of the local customs of doing business. Generally, though, it comes at the lower level where wages don’t cover living expenses too well.”
There is a pause and Bill asks, “What does that do to our profits?”
“Runs them down, of course, but I look at it as just one of the many costs of doing business—I do my best not to pay, but when I have to, I do.”
Hesitantly, Bill replies, “I don’t like it, Frank, we’ve got good products, they’re priced right, we give good service, and keep plenty of spare parts in the country, so why should we have to pay bribes? It’s just no way to do business. You’ve already had to pay two bribes on one shipment; if you keep it up, the word’s going to get around and you’ll be paying at every level. Then all the profit goes out the window—you know, once you start, where do you stop? Besides that, where do we stand legally? The Foreign Bribery Act makes paying bribes like you’ve just paid illegal. I’d say the best policy is to
“Look,” Frank continues almost shouting, “we are getting off on the wrong foot and we’ve got eight months to work together. Just keep your eyes and mind open and let’s talk about it again in a couple of months when you’ve seen how the whole country operates; perhaps then you won’t be so quick to judge it absolutely wrong.”
Frank, lowering his voice, says thoughtfully, “I know it’s hard to take; probably the most disturbing problem in underdeveloped countries is the matter of graft. And, frankly, we don’t do much advance preparation so we can deal firmly with it. It bothered me at first; but then I figured it makes its economic contribution, too, since the payoff is as much a part of the economic process as a payroll. What’s our real economic role, anyway, besides making a profit, of course? Are we developers of wealth, helping to push the country to greater economic growth, or are we missionaries? Or, should we be both? I really don’t know, but I don’t think we can be both simultaneously, and my feeling is that, as the country prospers, as higher salaries are paid, and better standards of living are reached, we’ll see better ethics. Until then we’ve got to operate or leave, and if you are going to win the opposition over, you’d better join them and change them from within, not fight them.”
Before Bill could reply, a Latino friend of Frank’s joined them and they changed the topic of conversation.
