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Study Questions:

1. Discuss the economic and social impact of bribes and other similar payments in emerging economies.

* Multinational corporations that conduct business in developing and less-than developing nations face a considerable risk that they will be exposed to corruption. Almost 40 percent of executives in multinational corporations have been asked to pay a bribe when dealing with government and qusia-government offices. Politicians and government officials worldwide revive bribes valued between $20 billion and $40 billion each year. * Industries involving major capital expenditures in which large dollar amounts trade hands-such as constructions, airline manufacturing, power plants, and oil and gas production—are likely to encounter corruption as individuals attempt to use their positions of authorities to siphon money for personal gain. * Companies that do not pay bribes face the risk that business will be awarded to competitor. * Some companies reports their bribes as tax deductible in the country they operate.

2. Is the “optimal” amount of bribery payments for a company equal to zero?

3. Should the board of directors be actively involved in policing foreign corrupt practices or is this a management issue?

4. Discuss the pros and cons of the two groups (independent investigators and blue-ribbon experts) used by Baker Hughes.

5. Discuss whether the payments outlined on pages 12 and 13 are foreign corrupt practices.

6. Evaluate whether the changes in Exhibits 4 and 5 are likely to stop future foreign corrupt practices at Baker Hughes.

7. Discuss how the compliance and governance changes are likely to impact the future profits and shareholder value at Baker Hughes.
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