Within Western nations, it is usually considered unethical for corporations to use bribery as a method of getting business. Indeed, it is not uncommon for Western business people to pride themselves on the ethical purity of their own business environment in this respect, whilst reproaching developing nations for their corrupt practices.

It therefore came as a surprise to many when, in 2003, a report appeared in The Guardian newspaper (Leigh and Evans, 2003) alleging that one of Britain’s biggest companies had been involved in bribery on a massive scale. BAE Systems is the UK’s largest manufacturer of weapons, military aircraft and security equipment. According to TheGuardian’s report, the company had paid bribes over many years to officials in Saudi Arabia in order to win contracts worth tens of billions of pounds to supply defence equipment to the Saudi government.

Although subsequent reports by David Leigh and Rob Evans allege a litany of corruption going back to 1970s payments to the Shah of Iran (Leigh and Evans, 2011a), the biggest deal seems to have been BAE’s lucrative al-Yamamah contract, which was agreed in 1985 and which has continued into the 2000s. With regard to this contract, Leigh and Evans allege that

Over the past 20 years, the warplane programme has brought £43bn in revenue for BAE … Police later calculated that more than £6bn may have been distributed in corrupt commissions, via an arSAGE ray of agents and middlemen … A relatively minor, although colourful, aspect of this torrent of cash was a £60 m ‘slush fund’ maintained by BAE to keep Prince Turki bin Nasser sweet on his visits to the west. The arms firm provided him with extravagant holidays, fleets of classic cars, planeloads of shopping and blond girlfriends. (Leigh and Evans, 2011b)

The aspect of this affair that surprised many observers the most, though, was not that corporate executives and unscrupulous autocratic leaders of client nations had colluded in this manner, but that they appear to have done so with the approval and support of the UK government. Attracted by the boost that such deals brought to the UK economy, and by the influence in Middle-East affairs that they enabled, successive British governments seem to have done whatever was needed to facilitate bribery in the arms trade and to subsequently keep it quiet. Indeed, it has even been claimed that British fixers and middlemen, who smoothed the way for the payment of bribes, have been rewarded with knighthoods and other state honours (Leigh and Evans, 2011a).

Leigh and Evans allege that official support for BAE’s corrupt payments continued even after the UK government had signed up to a 1999 international convention agreeing to prevent such practices: ‘Instead of fulfilling their international promises, officials merely tried to put more distance between themselves and the companies doing the bribery’ (Leigh and Evans, 2011c). Moreover, it has been reported that when, under pressure from the media and the British police, the British Serious Fraud Office commenced enquiries into BAE’s affairs in Saudi Arabia, British Prime Minister Tony Blair stepped in to get the investigation halted in the interests of ‘national security’. Leigh and Evans (2011d) suggest that Blair was concerned that ongoing investigations might embarrass the Saudi royal family and stop them sharing security information that would help the UK’s fight against terrorism.

Ethical concerns about this affair relate partly to the perception that bribery and corruption in business dealings is intrinsically unethical. However, concerns also relate to the additional costs that bribes may have entailed for client countries; costs which were ultimately borne by their citizens. In relation to the initial round of payments associated with the al-Yamamah deal, Leigh and Evans suggest that ‘The cash for all these payoffs came, simply enough, from overcharging. Accidentally released UK documents reveal that the basic price of the planes was inflated by 32%, to allow for an initial £600m in commissions’ (2011b). Referring to an earlier deal with Iran, which is alleged to have involved payment of massive bribes to the Shah, Leigh and Evans observe that ‘Such duplicity was a fraud on the Iranian people. They were ultimately the ones who had to pay for the Shah’s thieving’ (2011a).

The main cause for concern about these practices, then, is that a Western company was able to boost its commercial performance by paying well-placed officials in the Middle East enormous sums of money, and that the bill for all this was picked up by ordinary people in Saudi Arabia and Iran who could least afford to pay it.

Nevertheless, a number of British politicians have defended their and their government’s role in the affair. Dennis Healey, a former Labour Defence Secretary, observed that bribery was endemic in the arms trade, implying that corporate executives and government ministers had little choice but to go with the flow: ‘Bribery has always played a role in the sale of weapons … in the Middle East people couldn’t buy weapons unless you bribed them to do so, and that was particularly true in Saudi Arabia’ (cited by Leigh and Evans, 2011e). Ian Gilmour, Secretary for Defence in the Conservative government of 1974, has also expressed this view, pointing out that ‘You either got the business and bribed, or you didn’t bribe and didn’t get the business’ (cited by Leigh and Evans, 2011f). Furthermore, Harold Hubert, a former director of army sales for the UK govern­ment’s Defence and Security Organisation, has suggested that the benefits that accrue from sales of weapons should take precedence over any ethical scruples concerning the way in which those sales are carried out: ‘I am not keen to educate the Persians in virtuous ways. My task is to sell British equipment’ (cited in Leigh and Evans, 2011g).

Some recipients of bribes have also mounted a spirited defence of their part in the affair. For instance, Prince Bandar of Saudi Arabia, who is alleged to have collected more than £100 million a year in bribes on behalf of Saudi officials (Leigh and Evans, 2011d), has suggested that the good things that he and his colleagues have done for their country more than justify the payments they have received as a consequence of defence contracts: ‘If you tell me that building this whole country… out of $400bn, that we misused, or got, $50bn, I’ll tell you, “Yes. So what?”’ (cited in Leigh and Evans, 2011b). And anyway, as Bandar pointed out, he was just doing what anyone in his position would have done: ‘We did not invent corruption … This has happened since Adam and Eve. It’s human nature’ (Leigh and Evans, 2011b).

QUESTIONS:

In a PowerPoint presentation format, answer the following question on a slide by slide bases;

Provide a short paragraph summarizing the case. Be sure to include important information about the organization(s), location(s), stakeholder(s) affected, and a brief description of what happened.

Provide a bit of history of the organization. Include any facts that pertain to the important managerial decisions and ethical analysis you will provide later.

Provide at least FIVE specific stakeholders who were affected by the actions of the organization. For each stakeholder, clearly and thoroughly articulate what the business did to them, when it happened, where it happened, how it affected the stakeholders, and why the stakeholders might be dissatisfied with the business’s action.

THREE precise decisions made by management that contributed to the way stakeholders were negatively affected in this case. If possible, identify the person(s) who made the ultimate decisions. Describe, as best you can, how you believe the person arrived at the decision they made. What impacted the decision? What different considerations likely played a role in making the decision?

Using Virtue Ethics, Give a thorough analysis of the one decision using the moral principle of the chosen ethical theory. Make sure you clearly articulate whether the ethical theory would say the decision was right or wrong and why.

Offer your fellow classmates TWO clear pieces of advice for how to avoid making this particular kind of mistake in their own careers. Be sure to be specific, that is, don’t just say “be ethical” or “don’t hurt people.” Try to really draw two important lessons you learned, and then pass your wisdom along.