Japanese Bribe Case Study

THE CASE OF THE JAPANESE BRIBE I. BACKGROUND OF THE CASE 1976 Former lacquerese tip pastor Kakuei Tanaka was arrested on charges of taking bribes amounting to $1. 8 Million Dollars from Lockheed Aircraft Comp either. Tanakas secretary and several other political relation officials were arrested together with former Prime Minister Tanaka. Takeo Miki was ousted from office on suspicion of hiding Tanakas accomplishment with Lockheed Aircraft corporation. In Holland, Prince Bernhard resigned from 300 government posts held for allegedly having accredited $1. Million in bribes from Lockheed Aircraft Company in connection with the purchase of 138 F-104 Starfighter Jets. In Italy, Giovanni Leone, the Italian death chair in 1970 together with Prime Ministers Aldo Moro and Mariano Rumor were also accused of evaluate bribes from Lockheed in connection with the purchase of $100 Million worth of aircraft during the lately 1960s. Scandinavia, South Africa, Turkey, Greece and Nigeria were also among the 15 countries in which Lockheed admitted to having handed out payments and that at least $202 Million in commissions were made by the guild since 1970.Lockheed started victimisation bribes since 1958 in assign to outsell Grumman Aircraft, a competitor, for the Japanese Air aim contract. As per his testimony, William Findley of Arthur Young & Co. the auditors for Lockheed, engaged the services of Yoshio Kodama to act as contact lens between Lockheed and the Japanese Government in order to secure the government contract for the purchase of military aircrafts. Several bribes were made by the telephoner to check the contract in its favour.In 1972, Lockheed rehired Kodama as consultant to sell its aircraft to Japan. Lockheed was in dire deficiency to sell its aircraft owing to a series of fiscal disasters, cost overruns, pushing the guild to the brink of bankruptcy in 1970. A controversial loan guarantee awarded the high society amounting to $250 Million help ed the aircraft company in averting the bankruptcy. Lockheed President, Mr. Carl Kotchian anxiously anticipated making the sales since the company has not been making its projected sales of aircraft worldwide.Mr. Kotchian believed that Japan is a largely-untapped market and if Lockheed penetrates the Japanese market, the company can generate $400 Million and thus, improve the companys pecuniary status and ensure the jobs of thousands of the firms employees. Kodama finally succeeded in engineering a contract for Lockheed with the each Nippon Airways, beating McDonnell Douglas, its spry competitor. For the sale, Kodama askes and received $9 Million as pay-off silver from 1972 to 1975.Allegedly, a lot of the money went to then Prime Minister Tanaka and other government officials for interceding with All Nippon Airways on behalf of Lockheed Aircraft Company. Mr. Kotchian admitted full knowledge about where the money was going and that he was persuaded by the assurance that in maki ng the payoff, Lockheed was sure to get the contract with All Nippon Airways. Subsequently, Lockheed netted $1. 3 Billion from the contract. Mr.Kotchian defended the payoff as in c are with Japanese assembly line practices, meaning that I order to do assembly line in Japan, one has to unclutter payoffs, further, Kotchian reiterated that the transaction did not violate any American Laws and that Lockheed needed to adjust to the existing execution systems in order to be competitive and guarantee the jobs of thousands of its employees, as well as ensure continuing profitability. Otherwise, the company would be bankrupt and thousands will lose their jobs. In August 1975, after investigations conducted by the U. S.Government, Lockheed admitted to making $22 Million in secret payoffs and in subsequent Senate investigations in 1976, the deals were made public, causing Japan to cancel the billion dollar contract with Lockheed. In 1979, Lockheed pleaded guilty to concealing the bribes b y writing them off as marketing costs. Lockheed was not charged with grafting since the law took effect only in 1978. Mr. Kotchian was not indicted further was forced to resign from his office while in Japan, Kodama was arrested together with Tanaka. II. STATEMENT OF THE PROBLEM 1. What were the moral and licit implications of the actions of the Lockheed management? . What is the effect of the transaction with respect to fair competition in line of work? III. AREAS OF CONSIDERATION 1. The need to ensure the profitability of the company. 2. The need to ensure the welfare and well-being of thousands of employees of the company. 3. The ethical and legal standpoint that binds entities in the conduct of their business. IV. ANALYSIS OF THE CASE The flake revolves around several issues that confront todays modern business practice/s basically, every company aspires to achieve continuing outgrowth and profitability as its major policy.Secondly, the company as an organization is augmen t and composed by people who are performing each of their single tasks in order to achieve the goals and objectives of the firm. In the expression of Lockheed Aircraft Company, there is a dire need to rebound from near bankruptcy and the core by which it can be achieved is to get hold of the contracts for the company to build and communicate aircrafts to their intended buyers. The Japanese market offers a potential target for the aircraft company, much as the other companies are likewise aware of.The airline business and aircraft effort is a highly competitive industry. Each company needs to modify its existing technology, requiring continuous investments in retooling and research. Such an activity requires continuous come down of funds considering the immense requirement for funding the expenditures. Should the company let up on continually improving its product and technology, the result would be smutty for the company since competitors could easily overtake the company a nd its market. All of these predicaments compounded the financial woes of Lockheed Aircraft Company during the 70s.It is under this duress that management was forced to rein a mode by which the company can stay afloat, make profit and support its large workforce. The decision to make extraordinary means to ensure sales was at the moment, imperative for management. Using the argument that during those days, a business sub-culture existed in Japan, that is, that the company needed to abide by the functioning system to get the All Nippon Air Contract. In simple terms, payoffs are needed to facilitate the sale of the companys aircraft to the Japanese airline company.Ethically, a payoff to facilitate a contract at the cost of other competitors deviates from existing moral values that should govern the conduct of business. However, assumptive that a system of patronage existed in Japan during the time much(prenominal)(prenominal) a system constrained the management of Lockheed to use extraordinary means to go through channels as conduits to their intended client in order to seal the contract. Prior to investigations conducted and the subsequent admission of the company regarding the payoffs, land the contract with All NipponAirways, did not only guarantee profits for Lockheed but also, a continuing support for its thousands of employees. V. CONCLUSION Based on the foregoing, it is effected that Lockheed acted within the sphere of corporate culture overriding of the times. From a business mans point of view, the payoffs could indeed be classified as marketing costs since from the point of view of the company, the money that was used was partly in promotion of its product, by todays standards. However, the crux of the conundrum was that those who received the payoffs were government officials who had control of the affairs of their country.As such, these officials were in a position to exert unjustified influence on the airline company to purchase the aircr aft from Lockheed. It is this undue influence that made the act unethical and from a legal standpoint, criminal in nature since, the resulting transaction is now a case of bribery on the part of Lockheed and extortion on the part of the government officials who received the payoff. As for Mr. Kotchian, I believe that as CEO of Lockheed Aircraft Company, he acted in the best interest of the company and for everyone who are immediately involved with the company (employees, technicians, management, etc. As CEO, he is tasked with ensuring a profitable direction for the company and provide a continuing means of livelihood for all those sedulous by the company. Likewise, it is his duty to ensure the competitiveness of the company. VI. RECOMMENDATION Despite the arguments of utilitarianism in this case, wherein the interest of the majority is deemed primordial over the interests of the few, I/We believe that Mr. Kotchian, in behalf of the management of Lockheed Aircraft Company acted with in the bounds of corporate culture prevalent of the time.Arguably, using ethics and morality as a gauge, I/We recognize that Lockheed and Mr. Kotchian were guilty of unfair competition as they undermined their competitors through the use undue influence instead of marketing a superior product. Although the immediate results could gull benefitted all those concerned within the sphere of the company, the means by which it was achieved were spoil with fraud and the wilful distortion of facts (reporting payoffs as marketing costs), hence, providing the other stakeholders such as its investors and stockholders a false representation of the financial affairs of the company.Although, bribery was not yet classified as corporate crime introductory to 1978, the act of Lockheed Aircraft Company and Mr. Kotchian should be regarded as unethical, immoral and illegal as well as promoting unfair competition with respect to other aircraft manufacturers in the industry. The decision of the Board of Directors to force the resignation of Mr. Kotchian as CEO of Lockheed Aircraft Company is deemed proper herein and the subsequent arrest of Mr. Kodama and former Prime Minister Tanaka is likewise appropriate under the circumstances.