Starting-Up Right!" Tips for achieving Business Excellence
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Starting-Up Right!" Tips for achieving Business Excellence
(1) Fund seeking
Kenny, a senior engineer of a telephone company, was approached by his friend Philip, an engineering company's proprietor, for assistance in his business in trading communications equipment.
Since Kenny was responsible for overseeing telecommunication network design and procurement of communications equipment, Philip requested him to make recommendations to the telephone company for purchasing the products of Philip’s newly established company. In return, Philip promised to employ Kenny as a consultant of his company.
Agreeing to the proposal, Kenny then helped in making Philip’s company an authorised vendor of the telephone company and lined up transactions for him.
An outside employment is an advantage under the Prevention of Bribery Ordinance (POBO). If Kenny accepted the consultant post for making Philip’s company an authorised vendor of the telephone company, he might be charged of acceptance of bribe. Philip might also be charged of offering of bribe. Both of them would commit an offence under Section 9 of the POBO.
Besides, there would also be a potential conflict of interest for Kenny to take up the consultant post in Philip’s engineering company even if no bribery was involved. Kenny should declare his interest by informing his employer in writing of this outside employment.
A herbal tea manufacturing company sourced its raw materials from various Mainland suppliers. Mr Fong, a senior merchandiser of the company, was responsible for purchasing herbal materials and inventory control.
Recently, Mr Fong who had experienced financial difficulties was in desperate need of money. He sent several text messages to a Mainland herbal supplier to solicit a loan of RMB60,000. Mr Fong suggested to the supplier that more purchase orders would be placed if the supplier deposited the money into his wife’s bank account in Hong Kong. The supplier made no response to the request. Shortly after, Mr Fong sent another text message to the supplier asking for another loan of RMB30,000 and threatened to cut the purchase orders if it was not granted. The supplier did not agree to his request, as it amounted to solicitation of bribes. The supplier then reported the matter to the management of the herbal tea manufacturer. In view of the severity of the matter and having no tolerance for solicitation of bribes by its staff, the management of the herbal tea manufacturer immediately reported the case to the ICAC.
Soliciting bribes from overseas companies is also subject to prosecution
Though the supplier, from which Mr Fong solicited bribes, was outside Hong Kong, Mr Fong might still commit an offence of soliciting an advantage under Section 9 of the Prevention of Bribery Ordinance (POBO) as he sent text messages requesting for loans to be deposited into his wife’s bank account in Hong Kong in return for placing more orders.
Businesspersons should be aware that the POBO can apply when part of the corrupt act, e.g. promising, agreeing, soliciting or accepting advantages without permission, takes place in Hong Kong.
Accepting bribes, whether directly or indirectly, is against the law
Loan is considered an advantage under the POBO. Accepting bribes regardless of whether the advantage is directly given to the acceptor or indirectly delivered to a third party is still against the law. In the case study, if the Mainland herbal supplier agreed to deposit the loans into Mr Fong’s wife’s bank account in Hong Kong, as long as it was proven that the receiving account was controlled by Mr Fong or that he was the ultimate beneficiary, Mr Fong would be considered as having accepted the advantage.
A plant engineer of a hi-tech electronic product manufacturer was responsible for maintenance of the company's production facilities. The plant engineer came to know a maintenance service supplier who frequently treated him to lavish entertainment at clubs and leading restaurants. Later, the supplier invited the plant engineer to join his company as a partner and promised him a share of the company's annual profits if the plant engineer agreed to award more contracts to him thereafter. Mindful of the supplier's past generosity, the plant engineer felt embarrassed to turn down the supplier's offer.
The plant engineer might contravene the Rules of Conduct of the Hong Kong Institution of Engineers if he concealed his personal interest in the supplier's company and secured business for the supplier who might not be the best capable service provider for his company.
Both the plant engineer and the supplier might violate Section 9 of the Prevention of Bribery Ordinance (POBO) if the partnership, which could be an advantage under the POBO, was offered and accepted without the permission of the electronic product manufacturer.
Although entertainment is common in business practice, the plant engineer should avoid accepting excessive entertainment that may affect his objectivity in discharging duties. He should also check whether his company has any policy on the acceptable level of hospitality offered by contractors/vendors to prevent any conflicts of interest or the potential for such a conflict.
Ivan had been in the toy business for many years. Some years ago he became a shareholder of a Shanghai-Hong Kong joint venture. Because of Ivan's substantial experience in the toy trade, he took charge of the production line, and divided much of his time between Hong Kong and Shanghai.
Ivan often made all the procurement and purchasing decisions, and was often offered with entertainment and gifts by many suppliers. One of these suppliers even went so far to offer Ivan a commission of five per cent of the value of each contract, as a reward for Ivan’s placing orders for industrial chemicals with their company. Ivan had received a total of HK$250,000 illegal rebates or commissions over an eight-month period.
The case was brought to the attention of the ICAC, who found that some of the shareholders were not aware of Ivan's acceptance of advantages from this supplier, and that the company did not have in place a clear policy on this issue. Some shareholders claimed they had given Ivan permission to accept commissions to subsidise his social expenses in Shanghai and Hong Kong, but they were not able to state when the permission was granted, let alone the approved amount or the circumstances under which the acceptance was permitted.
Under Section 9 of the Prevention of Bribery Ordinance (POBO), the principal's permission (in this case, the toy company) has to be given before an agent (Ivan) solicits or accepts an advantage; otherwise the agent has to apply for permission as soon as reasonably possible after the acceptance. In addition, for such permission to be lawful, the principal needs to carefully consider the details of the application before granting permission.
Ivan's company had not stated clearly in advance whether or not its staff members could accept advantages in relation to their official duties. In other words, Ivan did not have the company's permission when he accepted the commission. Furthermore, since he had not applied for retrospective permission from his company afterwards, and his acceptance of the commission was not known to and approved by all shareholders, such acceptance was considered without the principal’s permission.
Some of the company shareholders recklessly claimed that they had given permission for Ivan to accept commission. However, they had not specified the details and scope of acceptance, and there was no record of the accepted rebates. They also did not take into account the fact that such a policy would affect fairness of competition among their suppliers. This was against both the spirit and requirements of Section 9 of the POBO, so the defence of "permission of the principal" was not substantiated.
As such, companies should proactively formulate rules and regulations to govern the acceptance of advantages by staff at all levels. They should also state clearly in writing the company policy on the nature and maximum amount of advantages staff are permitted to accept, conditions of such acceptance, declaration procedures and enquiry channels, etc. for staff compliance.
An assistant service manager of a company accepted several pieces of computer equipment from a sales manager of a computer hardware supplier, including a scanner, a printer, a projector and a CD writer valued a total of HK$110,000, as a reward for placing purchase orders with the supplier. The company did have procurement guidelines that stipulated the minimum number of quotations required for every purchase. However, the assistant service manager colluded with the supplier to produce false quotations to deceive his employer. The assistant service manager also falsified some documents to get his employer to pay for a hard disk, a monitor and a central processing unit, all of which he took home for his own personal use.
Both the sales manager who offered advantages to secure business and the greedy assistant service manager had committed a bribery offence under the Prevention of Bribery Ordinance.
The procurement field has always been vulnerable to the risk of corruption, especially on high value goods and services such as information system and IT equipment that require frequent updating. When a chain of purchases of IT equipment is initiatedor consulting services are outsourced, the situation is rife with opportunities for illicit deals if the procurement process is not properly administered. Furthermore, the fact that the assistant service manager was able to take home some IT equipment revealed that the company’s asset control was a complete failure.
Management usually rely on the expertise in their workforce to perform procurement duties. But that must not excuse, deter or prevent them from instigating the necessary checks and balances to minimise the danger of corruption and malpractice. For examples, managers should lay down procedures and safeguards to prevent tampering or leakage of quotations or tenders during the procurement process. Tender evaluation panel involving professionals can be formed to evaluate the bids of high value or special purchases and make recommendations for senior management to consider. Proper records of quotations/tenders as well as products/services delivered should be kept for checking and future audits. Separating procurement duties from storekeeping duties and conducting inventory check are also helpful to minimize risks of company’s assets being misappropriated.
An international company intended to set up its South East Asian headquarters in Hong Kong. A committee was appointed, chaired by the company's vice president, Susanna, to select the supplier of IT equipment and computer software for the new office.
One of Susanna's old school friends, who worked for a computer supplier, learnt of the possible contract and approached Susanna. In an attempt to influence Susanna's decision over the contract for the IT equipment and software, he gave her an expensive watch as a gift. Though fully aware of her classmate's intention and clearly knowing that she did not have the power to affect the decision of the committee, Susanna still succumbed to the temptation and accepted the gift. In a further attempt to influence her decision, her school friend paid Susanna a visit at home and deliberately left behind a new notebook computer, saying it was for her trial use during overseas business trips.
After prudent consideration, the committee finally decided to award the equipment and software contract to another company. Susanna's old school friend was upset at the outcome but could do nothing about it. Later, some of Susanna's colleagues learnt of the watch and notebook computer, which gave rise to much gossip in her company. The incident eventually drew the attention of senior management and was reported to the ICAC for investigation.
Susanna's old school friend clearly tried to sweeten her with gifts. He was the offeror and Susanna was the recipient. Even though Susanna subsequently did not place orders with his company, both of them already breached the Prevention of Bribery Ordinance (POBO).
Under Section 11 of the POBO, if it is proved that the offeror believes that the advantage given is an inducement or a reward of favours , the recipient of the bribe cannot use the defence that: (a) "he did not actually have the power to do so", (b) "he accepted the advantage without intending to do so" or (c) "he did not in fact do so". It is important to note that accepting any gift or sweetener is an offence under law, even if the final outcome or intent of the gift is not achieved.
Jonathan was a very task-oriented young computer programmer employed by the Galaxy Electronics Ltd for two years.
One day, his supervisor asked him to design a programme for a digital answering machine. Jonathan turned it down and explained that he was extremely busy at that time. The job was then contracted out to an outside software house named Leo Systems Company.
It so happened that Leo, the proprietor of Leo Systems, was an old friend of Jonathan. He rang Jonathan and told him of the job offer. Actually, Leo and his staff had their hands full at that time but would not like to turn down Galaxy when they made the offer. What Leo wanted was to maintain a good relationship with Galaxy all through so that in future when their jobs again had to be contracted out, they would come to Leo Systems again.
Leo asked if Jonathan would consider lending a hand in designing the programme in his own spare time. The contract money could be split, with Jonathan taking a share for the part that he did and Leo taking the share his men worked on.
Jonathan thought hard. He could certainly sacrifice a few nights' sleep to get a part of the programme written up. He knew what the requirements were.
Should he say ‘yes’ to Leo? He would be earning extra money at the expenses of his boss. Would this weigh heavily on his conscience? Or was it a stone that could be lifted easily?
Jonathan was facing a situation of conflict of interest as well as an ethical dilemma that might put his personal values such as loyalty and honesty to challenge. On one hand, his assistance to Leo could help Leo’s company maintain a good business relationship with Galaxy; on the other hand, his taking up of the moonlighting job from Leo at the expense of his boss might create a conflict of interest. In handling the situation, Jonathan should identify the relevant facts and take stock of all stakeholders concerned. The following factors should be taken into consideration when identifying viable alternatives and choosing the best course of action for himself:
The ETHICS PLUS ethical decision making model might be helpful for him in solving the dilemma.
Man, an IT manager, was responsible for sourcing a LAN system to be set up in his large engineering company. He started to contact various contractors and one of them was a medium sized computer firm called ABC whose technical sales manager Gordon was a personable young man.
Gordon tried to persuade Man to use his suggested LAN system by quoting a price at $500,000 and claiming it the best bargain in the market. Indeed, Gordon had his eyes set on the cost of after-sales service and maintenance which was actually quite profitable. Man hesitated and said that he needed to seek his supervisor’s approval first as well as to seek a few more other quotations for comparison. In order to secure the deal, Gordon made a suggestion that he would offer Man a set of free computer equipment of the latest model for his personal use if Man assisted Gordon in getting the contract.
What should Man do? Should Man accept Gordon’s attractive offer? Would he commit any offence by doing so?
Under Section 9(1) of the Prevention of Bribery Ordinance (POBO), it would be an offence if Man (an employee), without the approval of his employer, accepted advantage from Gordon for assisting him in getting the business contract.
According to Section 2 of the POBO, advantage means any gift, loan, fee, reward or commission, employment, contract, service, favour, payment, release or discharge of loan or liability, etc. The set of free computer equipment offered by Gordon to Man can be regarded as advantage.
Gordon might also violate Section 9(2) of the POBO for offering bribes to Man for the same purpose.
Tom and Jerry were mechanical engineers of the Clark Gable Company Ltd (CG Co). The two were the same batch and had been with the company for only a short time. Recently, due to the re-organisation of the firm, some people would be laid off. Mechanical engineering work would then be vested with a larger company, the Rock Hudson Ltd. The first ones to go would be those who came last and thus Tom and Jerry's jobs would be in jeopardy.
Tom tried to find a way out for the two of them. They persuaded two friends, Sam and Tim who had similar training and background, to set up an engineering company called the Catch All Engineering Ltd (CAE). This would serve as a fallback in case they were really sacked.
Shortly after CAE was set up, the bad news released. Tom and Jerry were given notice to leave CG Co but, to their great surprise, Rock Hudson Ltd., which had taken over CG Co, offered to employ them to undertake their old duties.
Both of them were overjoyed. But then they had another problem. The two would have no more time to take care of matters related to CAE.
So one evening Tom and Jerry treated Sam and Tim to a sumptuous meal and told them that they could no longer share the business with them. Sam and Tim were outraged. They reprimanded Tom and Jerry for making use of them in the first place and then leaving them in the lurch. Trying to find a way out, Tim then made a proposal to Tom and Jerry.
Rock Hudson, as a major company, could provide many work opportunities. The only thing that had to be done was to get CAE on their approved list of contractors. Tom and Jerry could try to arrange that in whatever way possible. After all, CAE provided quality service and it had to survive.
Tom and Jerry were in a quandary. They counted themselves most fortunate to be still in employment and with an even larger company. And they wished they could help their friends out. Should they agree to add CAE to the approved list no matter what and no matter how? It would do Rock Hudson no harm anyway.
What would happen if they refused? Would they be indebted to Sam and Tim for the rest of their lives? How should they handle that?
Tom and Jerry were facing an ethical dilemma that might put their personal values such as fairness and honesty to challenge. On one hand, they felt obliged to help Sam and Tim out as they were lured into setting up a company upon invitation; on the other hand, it might jeopardise their career if Tom and Jerry tried to put the company on the approved list of contractors without going through proper procedures. In handling the situation, they should identify the relevant facts and take stock of all stakeholders concerned. The following factors should be taken into consideration when identifying viable alternatives and choosing the best course of action for themselves:
The ETHICS PLUS ethical decision making model might be helpful for them in solving the dilemma.
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