HP, already reeling from the ethics crisis culminating with the casting out of Mark Hurd last week, faced new problems on Thursday. The US Department of Justice has stepped in to assist German investigators of alleged bribery of Russian government officials by HP according to the Wall Street Journal. HP have now been formally asked by the DOJ to cooperate with the German investigators and provide key records. HP had complained that the disclosure burden would cause 'undue hardship' because the files sought date back 5 years or more and as a spokesperson told the WSJ, most of those involved have since left the company.
This move doesn't bode well for a good long term outcome for HP especially in the US where Federal Sentencing Guidelines provide for much reduced penalties where the defendant is seen to cooperate. The DOJ has its own case on this matter riding shotgun in the slow lane to the German case and you can expect this to speed up once the German case has been disposed. This was the pattern of Siemen's bribery case which resulted in a whopping $1.6 billion in fines.
According to the analysis of at least one major sustainable investment screen, FTSE4Good, HP along with most global tech hardware and software vendors carry a high risk profile for bribery due to complex sales cycles with the public sector in risky markets such as Russia. This sort of corruption can be a two way street - there is a risk that a company is tempted to offer inducements to prospective buyers and there is also a risk that company employees might take a bribe from an eager prospective supplier.
Case in point - an Apple global supply chain manger was arrested on Friday accused of accepting more than $1 million in bribes from 6 Asian companies supplying Apple. The company responded to the arrest in the WSJ:
Apple is committed to the highest ethical standards in the way we do business,"....... it has "zero tolerance for dishonest behavior inside or outside of the company."
Unfortunately we can't judge these standards for ourselves because, unlike HP, Apple does not make public its code of conduct for employees. Yet setting the tone tone through transparency can do much to innoculate a company from bribery and corruption risk.
Meanwhile, as Michael Krigsman reported last month, Dell is being sued for knowingly supplying 11.8 million faulty computers over a three year period which malfunctioned 97% of the time according to a suit filed by Advanced Internet Technologies Inc. This week, the New York Times reports, the plaintiff stepped up the pressure on Dell to be more open in discovery:
Advanced Internet Technologies filed a motion in Federal District Court in North Carolina asserting that Dell had deliberately violated a court order by failing to produce documents written by its executives, including the company’s chief executive and founder, Michael Dell. .........Dell disputes the accusation. “We disagree with A.I.T.’s contention that we violated the discovery order and will be filing our response with the court soon,” said David Frink, a spokesman at Dell. “We take all court orders and our obligations to comply with them very seriously.”
Yet, both HP and Dell have very strong public commitments to business ethics. Dell's most recent sustainability report:
In our global business environment of varied cultures, we’ve got to go beyond simply following the law — we must act with integrity...........Now, more than ever, our shareholders and other stakeholders expect us to run our operations profitably, safely, legally and ethically.
WE COOPERATE WITH INVESTIGATIONS
- Cooperate with all internal investigations and audits.
- Work with HP Legal to respond to litigation or requests from government and other external agencies.
- Tell the whole truth when responding to an investigation or audit.
- Never alter or destroy records in response to litigation, an investigation or audit, or when one of these is anticipated.
- Do not discuss an investigation with anyone, unless instructed to do so by the investigators.
WE DO NOT BRIBE
- Do not offer or provide bribes or kickbacks to win business or to influence a business decision anywhere on anything.
- Use agents and distributors only after they have passed our due diligence process to ensure that our commissions or fee arrangements will not be used as bribes on our behalf.
Business ethics concerns are more often than not tried in the court of public opinion. While legal tactics can stunt openness of communications leading to a perceived gap between corporate rhetoric, policy hygeine and the image portrayed in the news cycle during a crisis. Crisis PR managers will increasingly command fat retainers to salve if not solve these PR problems.