HP, Dell and Apple keeping schtum amidst fresh ethics crises

HP, Dell and Apple keeping schtum amidst fresh ethics crises

Summary: 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.

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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.

HP's Standards of Business Conduct:

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.

Topics: Emerging Tech, Apple, CXO, Dell, Hewlett-Packard, IT Employment

James Farrar

About James Farrar

James has more than 15 years of experience working on corporate sustainability issues from both the corporate and NGO campaigning perspective.

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18 comments
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  • FUD

    the usual FUD from zdnet. you have a corporate policy of bribery at HP and shipping faulty low quality products by the millions at dell at one hand and a middle manager at apple that has tried to enrich himself at the cost of apple and its suppliers. <br><br>ethics? i call that piece of drivel unethical trying to lump together an individual crime of a manager at the expense of his company at apple with systematic, corporate crimes at the highest levels of HP and dell.
    banned from zdnet
    • RE: HP, Dell and Apple keeping schtum amidst fresh ethics crises

      @banned from zdnet

      Thanks for reading but you might be missing the point. First Dell and HP haven't been found guilty of anything so I dont want to pre judge it. In Apple's case it was the actions of a rogue employee and I have described the risks of how that can happen. One thing is clear with Dell and HP is that they have made a public commitment to a standard they are willing to be held accountable to. We just don't have the visibility to Apple's code or how its implemented. there is a good article here about the specific risks of that. http://www.pcworld.com/businesscenter/article/203305/apple_kickback_scheme_dont_let_this_happen_to_you.html?tk=hp_new
      jamesfarrar.1@...
      • Visibility is a tissue.

        @jamesfarrar.1@... According to the HP code, [i]taking[/i] bribes isn't proscribed-just paying them, so technically Phil Devine would be OK at HP. So much for having a public "code of conduct for employees."
        matthew_maurice
    • It must be satisfying to someone like you

      as to know that the official corporate policy at HP and Dell are. Please enlighten the readers here with the proof I assume you are ready to share with them.

      Though you have to admitt that it is very likely that Apple knew, and approved, the bribes from the suppliers, as the official corporate policy at Apple is to procede with these unethical behaviors, with the managers knowing they will be required to "fall on the sword" as you humans put it, should the deeds be uncovered.
      :|
      Tim Cook
      • RE: HP, Dell and Apple keeping schtum amidst fresh ethics crises

        @Mister Spock check the links in the post.

        I disagree, I doubt very much Apple management approve of kick backs. Their spokesperson said they had zero tolerance and that Apple is committed to the highest standards. I believe that to be the case. It would be helpful to Apple's public stakeholders to share those standards.
        jamesfarrar.1@...
    • Wait a second...

      @banned from zdnet

      Last time I checked the HP thing was one guy as well... As for the Apple thing, as if their products aren't already over priced right? Yeah, they need somebody else driving the costs up!

      Oh wait, what about the iPhone Antenna thing? The way they handled that before Consumer Reports got involved was Ethical wasn't it?

      Look, you don't have to get your panties in a bunch every time somebody points out things wrong with Apple... Steve will still give you a yearly raping with his products.
      slickjim
      • no

        @Peter Perry
        not really, the hp guy was bribing customers to get business for the company. whether hp officially admits it or not, it is quite common business practice in these countries. there is no other way to get institutional business in russia for instance. apple can't bribe anyone because they sell to end customers and not huge institutions that buy thousands of systems as hp does.

        the apple manger was damaging apple itself by giving away confidential company information to the supplier. as another poster already stated: his crime was discovered by apple, itself. it was apple that alerted the FBI to investigate it.

        so yes, it is the usual FUD at zdnet, badmouthing apple wherever they can.

        and please stop the bs with your overblown antenna issue already. as there aren't any issue with other smart phones that none of these companies dealt with in any way: the gps problems of the captivate, the screen separation and battery problems of the evo, the software problems of the bold, the screen problems of the droid x, the random reboot and screen responsiveness problems of the incredible etc. etc.
        banned from zdnet
  • RE: HP, Dell and Apple keeping schtum amidst fresh ethics crises

    The usual crap from zdnet i.e. badmouthing Apple
    AdanC
  • RE: HP, Dell and Apple keeping schtum amidst fresh ethics crises

    @matthew_maurice good point but its always better to see the standards in public so we can spot the gaps and know the company's public commitment. Transparency is always the first step
    jamesfarrar.1@...
    • RE: HP, Dell and Apple keeping schtum amidst fresh ethics crises

      let me get this straight, having an "open" code of conduct, like HP, would prevent the problems HP just had? even though they are already open? do you know how stupid as an author you sound when you say: "setting the tone tone through transparency"???<br><br>as if we had to have it written somewhere "transparent" that you shouldn't bribe people, or take bribes.... geesh man, catch a clue.... and HP's case is case in point, that your statement is clueless.
      honkj
      • RE: HP, Dell and Apple keeping schtum amidst fresh ethics crises

        @honkj I think you need to read the post again. I'm not saying transparency on codes would have preveneted HPs problems. Far from it. The gap between code and recent events is concerning but at least HPs stakeholders can engage in that debate because everyone knows what the baseline is.<br><br>I happen to believe it is important to have it written somewhere. If its so obvious why does it continue to happen? A code can protect the employee from an employer who pays lip service but expects business to be done by 'any means possible'.....
        jamesfarrar.1@...
  • Setting the Tone

    Setting the tone through transparency? How about setting the tone through lying about transparency? The dishonesty is the issue here, not whether companies lift their skirts for bloggers. Ethics accountability in a closed loop could very well be more compelling not less. HPs empty platitudes are looking like so much smoke at the moment. Why so happy about having it blown at you directly? Let's talk about the tone set by an NDA and the list of legal ramifications if any Apple employee engages in industrial espionage. Let's talk about a multi billion dollar industry that waits, poised, for what this company does next so they can knock it off. Let's talk about their prerogative to protect their IP. Set this "tone" against your touchy-feely "right to know" and see which comes out ahead.

    I agree with my fellow posters. This is another ZDNet request for technology to owe you a living. Apple is least likely to accommodate you. It shows. In this way, you set a little tone yourself. It will not be your sacred right to know the fine points of ethical policy until you have an employee card, and then, you will be prevented from disclosing it. If you have a problem with this, take it up with the thieves, who are the real reason measures are in place, and see how ethically virtuous they turn out to be.
    norgate
    • RE: HP, Dell and Apple keeping schtum amidst fresh ethics crises

      @norgate Thanks for reading and the feedback, you raise a lot of issues. I agree, there is a gap between rhetoric and reality -- thats a theme I will come back to in a future post. I too am concerned with closed loop ethics -- thats a good term.

      Now, protecting IP is a different matter entirely. Read the post again -- at no stage am I suggesting that any of these companies go transparent w proprietary information.

      On the other hand, bribery & corruption is in the public interest because (i) it damages the commons, (ii) its illegal, (iii)it damages shareholder value of any firm that engages. Opacity that protects unethical business practices such as this will be exposed and public interest disclosure laws will trump any company confidentiality agreement.
      jamesfarrar.1@...
  • This article is bull

    No matter what ethics policies a company may have, no matter how transparent, if an employee feels he or she can get away with a crime, he or she will commit it, particularly when it is for millions of dollars.

    There is no ethics problem with Apple's employee. His crime was discovered by Apple, itself. It was Apple that alerted the FBI to investigate it. Duh.
    jameskatt
  • RE: HP, Dell and Apple keeping schtum amidst fresh ethics crises

    I disagree. Most employees don't commit crimes and not because they think they cannot get away with it. Only a small minority do. The tone set is therefore is incredibly important.
    jamesfarrar.1@...
  • RE: HP, Dell and Apple keeping schtum amidst fresh ethics crises

    There's a stop light at the foot of my street. It's obvious that when it's red, drivers are obliged to stop and wait until it turns green.

    But I see drivers slow down and then go right through. Does that mean that my city has not made it clear what the law is?

    No, it means that individuals make decisions about what to do all the time, using social rules, fear of a nasty fine/sentence, etc in a mix that varies from one individual to another. I suspect the author considers the honesty of trumping up stories, playing fast-and-lose with logic ("If its so obvious why does it continue to happen??) and a whole host of less-than-highest standards of his profession.

    PS: anybody who thinks taking bribes is an acceptable way of doing business must think they work for 1960's GM. No firm accepts this because it is so corrosive to success and you can't afford to carry scum without turning your entire workforce against you. You don't even need to think you're being "moral;" you just have to want to succeed.
    WaltFrench@...
    • naive

      @WaltFrench@... <br>if you want to have any institutional business in eastern europe, africa, or south america you have to bribe the officials. it is as simple as that. and the fact doesn't change no matter how much a company wants it to. if you want to sell to institutions there you have to bribe, otherwise you will never get any business.
      banned from zdnet
  • RE: HP, Dell and Apple keeping schtum amidst fresh ethics crises

    @WaltFrench@... Walt, lets torture the analogy. What should the role of your city be? Should it put up stops signs and red lights at all -- all you have to do is look, right? Most people who get into traffic accidents dont do so because they are bad or stupid --- they took a risk for the reward of extra time saved on the journey or they were focused on another task whilst trying to drive. This is why many jurisdictions ban mobile phone use whilst driving.

    I'm afraid the situations isnt as obvious in all circumstances as you might imagine. In Germany, 15 years ago foreign bribery was a tax deductible expense and today its a criminal offence. US law permits facilitation payments and in other jurisdictions it is not allowed. Some jurisdictions actively prosecute eg. US and others take very few cases to trial despite having tough laws eg. UK.

    I know this is a tough subject to deal with but the facts speak for themselves and need no elaboration.

    Assuming everything is obvious only closes down the conversation and polarizes it around morality. We need a more sophisticated understanding of risk and response strategies.
    jamesfarrar.1@...