Reaction paper 2 – SNC-Lavalin case
Case Overview
In December 2011 the board of directors of Montreal-based SNC-Lavalin, the largest engineering and construction company in Canada, received a whistleblower letter that alleging Riadh Ben Aissa, an executive vice-president, had secretly funneled money to members of Libya’s Gaddafi family.
In March SNC issued details of its own independent review, which found that president Pierre Duhaime breached the company’s code of ethics in approving more than $56 million of improper payments after the chief financial officer had declined to approve them.
In April the RCMP searched SNC-Lavalin’s head office in Montreal. Later that month Ben Aissa was arrested in Switzerland in connection with allegations of corruption of a public official, fraud and money laundering related to business dealings in North Africa.
Class discussion
The main issue raised in class was “what alternatives the company has when it has to pay bribes in some countries to do business”.
This was a tough question, because we needed to first define the types of payments that can constitute bribes. Since, different countries have different ethical norms, the definition of a bribe is not universally accepted. In Canada facilitation payments are considered to be bribes while in other countries these are a part of a business transaction. If we offer benefits to officials, it is definitely bribe. If we go to agents who facilitate our business – in those countries this will be part of business operation.
What should companies doing business in corrupt countries do when they refuse to pay bribes? What if such companies assist in building hospitals, schools, recreation centres – do such activities constitute bribes? Or are these activities a legal and ethical way of contributing to the development of communities? Are these activities any different from the charity activities that many large Canadian corporations such as RBC or CIBC do on a regular basis? There were many opposing opinions offered
In December 2011 the board of directors of Montreal-based SNC-Lavalin, the largest engineering and construction company in Canada, received a whistleblower letter that alleging Riadh Ben Aissa, an executive vice-president, had secretly funneled money to members of Libya’s Gaddafi family.
In March SNC issued details of its own independent review, which found that president Pierre Duhaime breached the company’s code of ethics in approving more than $56 million of improper payments after the chief financial officer had declined to approve them.
In April the RCMP searched SNC-Lavalin’s head office in Montreal. Later that month Ben Aissa was arrested in Switzerland in connection with allegations of corruption of a public official, fraud and money laundering related to business dealings in North Africa.
Class discussion
The main issue raised in class was “what alternatives the company has when it has to pay bribes in some countries to do business”.
This was a tough question, because we needed to first define the types of payments that can constitute bribes. Since, different countries have different ethical norms, the definition of a bribe is not universally accepted. In Canada facilitation payments are considered to be bribes while in other countries these are a part of a business transaction. If we offer benefits to officials, it is definitely bribe. If we go to agents who facilitate our business – in those countries this will be part of business operation.
What should companies doing business in corrupt countries do when they refuse to pay bribes? What if such companies assist in building hospitals, schools, recreation centres – do such activities constitute bribes? Or are these activities a legal and ethical way of contributing to the development of communities? Are these activities any different from the charity activities that many large Canadian corporations such as RBC or CIBC do on a regular basis? There were many opposing opinions offered
References: [1] SNC-Lavalin scandal: a timeline. Toronto Star, 2012. [2] Nicolas Van Praet. SNC-Lavalin loses its fourth senior executive in a year. Financial Post, 2013. [3] SNC-Lavalin agrees to 10-year ban from World Bank projects. CBC News, 2013. [4] Henry Meyer. Corruption halts IKEA in Russia. The Age, 2011. [5] Mihnea Moldoveanu. Managerial Models and Methods for Moral Reasoning: Foundations for Business Ethics. September 2013