tweet #1377: King Kullen

Summary

It’s a relevant and intriguing story of how one employee at Kroger, Michael Kullen, wrote a 6 page letter to a Kroger VP, encouraging them to consider a different business model. He was not taken seriously, resigned from Kroger and opened his own grocery chain called King Kullen. It is considered Americas First Supermarket due to it having separate departments; self-service; discount pricing; chain marketing; and volume dealing. In 2007 King Kullen had revenues of $800 million and operates 32 stores in New York state.

The Odebrecht Group: Ethical Insight

Here is a paper I wrote (with 3 colleagues) on the graft and fraud with The Odebrecht Group.

December 11, 2018

Executive Summary

The Odebrecht Group, established in 1944, was once a flourishing family run business that grew into a $40 billion conglomerate. The company operates within the construction and engineering industry through the development of infrastructure and energy projects. During a money laundering investigation in 2015, The Odebrecht Group was found to be a key company at the center of one of the largest bribery and corruption scandals in the world. The company admitted to using deceitful tactics to gain business around the globe. These tactics proved not only to be contradictory to the company’s guiding principles, but also against the law in many countries. Since this unethical behavior came to light, the company has faced many financial and reputational repercussions. However, The Odebrecht Group is currently making strides to better its compliance programs and leadership. To further these efforts, the company should establish practices to improve the company’s overall ethical culture, enhance ethical leadership commitment and build upon compliance monitoring structures.

Section I

Introduction

Beginning in 2014, Brazilian Federal police began investigating multiple people in connection with Brazilian state-run oil company, Petroleo Brasileiro SA, also known as Petrobras. The initial investigation started when the former head of the Petrobras Refining and Supply Department, Paulo Roberto Costa, received a Range Rover from a previously convicted black-market money changer, Alberto Youself. (Stauffer, 2017). Upon further investigation, a massive money laundering and corruption scandal was uncovered. This greatly affected South American businesses-implicating hundreds of executives and politicians from 12 different countries and at least 11 companies. The scandal was referred to as “Operation Car Wash” and turned out to be the largest corruption scandal in the history of Latin America. Paulo Roberto eventually signed a plea bargain agreeing that he would explain his involvement and additionally name beneficiaries in exchange for a lighter sentence. (Stauffer, 2017). The Odebrecht Group was upon those Roberto named.

The Odebrecht Group, founded in 1944 by Norberto Odebrecht, is a Brazilian conglomerate with strong ties to “Operation Car Wash”. The company has 15 subsidiaries and a presence in 27 countries, exporting their products to more than 100 countries around the world. In 2015, the company had over 180,000 employees, and revenue exceeding $40 billion (Odebrecht, 2018).
The Odebrecht Group is the largest engineering and contracting firm in Latin America and one of Brazil’s largest private sector manufacturing companies. The company’s work includes the construction contracts for the 2016 Rio Olympics and the 2014 FIFA World Cup. (Gillespie & Brocchetto, 2017). Other notable projects in the United States include large projects at the Miami and Orlando International Airports, the Miami Metromover, the I-40 Interchange and the American Airlines Arena in Dallas. (Projects, 2018).

Among the executives, employees, and politicians of “Operation Car Wash”, Marcelo Odebrecht, the former CEO, was indicted and subsequently arrested on June 19th, 2015. He was sentenced on March 7th, 2016 to 19 years and 4 months in jail for paying over $30 million in bribes to executives of Petrobras. These bribes were in exchange for contracts and influence over projects that The Odebrecht Group would later receive. Like Paulo, Marcelo cooperated in a plea deal in return for a lighter sentence. (Stauffer, 2017). In Brazil alone, the scandal led to the impeachment of the former President Dilma Rousseff, and the conviction of former President, Luiz Inácio Lula da Silva, to ten years in prison on charges of illegally receiving $1.1 million from The Odebrecht Group. (Londoño, 2017).

Bribery and Core Ethical Issues

The investigation uncovered that Odebrecht Group had an entire Bribery Department, referred to as the “Division of Structured Operations”. This department was responsible for making illegal payments to politicians and executives to gain business. More specifically, the company would fund political marketing campaigns and subsequently suggest public works projects once the politician was elected. This would benefit the company illegally in what is commonly referred to as “Quid pro quo”. (“Odebrecht Case”, 2017).

In order to further mask and hide suspicious payments, The Oberbrecht Group bribery team went through the trouble of purchasing a majority stake in a bank in Antigua, Meinl Bank. (Feiser, 2017). This bank was then used to facilitate the illegal transfer of funds to various businesses around the world. (“Odebrecht Plea Agreement”, 2016). Since 2001, Odebrecht Group has won 17 public works projects worth approximately $6 billion in the Dominican Republic alone. Dominican Republic was the second highest country, after Venezuela, to receive the majority of corrupt business. The Odebrecht Group made roughly 100 transfers totaling more than $92 million to various companies between 2001 and 2014. (“Odebrecht Plea Agreement”, 2016)

The principles which Odebrecht Group violated included universally accepted ethical pillars such as honesty, integrity and fairness. The company and its employees were also involved in criminal activities, including, but not limited to corrupt payments, criminal bribery, obstruction of justice, money laundering and conspiracy to bribe foreign officials. These violations affected the company, its employees and the citizens of the countries where the unethical practices were being carried out. Countries including Brazil, Venezuela and Dominican Republic are all well known for their high poverty rates. Citizens of these countries were exploited by The Odebrecht Group as the company won government tenders for public works projects. These were often overpriced, and paid for with taxpayer money. (Lopes & Miroff, 2017).

After the Marcelo Odebrechts arrest and Operation Car Wash investigations The Odebrecht Group’s reputation was diminished which made it difficult for the company to obtain new project contracts both domestically and internationally. (Lopes & Miroff, 2017). Because this ultimately led to decreased revenues, the company laid off a large number of workers and the group went from 180,000 employees to approximately 58,000 at the end of 2017. (Odebrecht, 2018). Additionally, the unethical behavior also negatively affected businesses that were being run ethically. Because The Odebrecht Group was using bribery tactics to win business, ethical companies were losing out on the opportunities and projects which were illegally awarded to Odebrecht Group (Lopes & Miroff, 2017).

Legal Implications

Although The Odebrecht Group is a Brazilian company, it is listed on U.S Stock Exchange and uses U.S. banks. Because of this, the company is subject to U.S anti-bribery laws and the U.S. Department of Justice became involved with the case. (Hersher, 2016). The company pled guilty to a one-count criminal information charge of conspiracy to commit offenses against the United States and violation of the the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). This included bribing officials in twelve countries to the value of around $788 million dollars. (“Odebrecht Plea Agreement”, 2016).

The United States Sentencing Guidelines (U.S.S.G.) were used to determine the applicable fines, which included some reductions for extensive remedial measures. This included terminating 51 employees and disciplining an additional 26. (“Odebrecht Plea Agreement”, 2016). The company created a “Chief Compliance Officer” position reporting to the Audit Committee of the Board of Directors, and adopted heightened controls and anti-corruption protocols for hospitality and gift approval procedures (“Odebrecht Plea Agreement”, 2016).

Financial Implications

The financial implications for Odebrecht Group include the largest ever global foreign bribery resolution. In April 2017, a US court ordered Odebrecht to pay fines of $2.6 billion to authorities in United States, Brazil and Switzerland. (“Odebrecht Plea Agreement”, 2016). Odebrecht’s revenue, and subsequently their earnings before interest, taxes, depreciation and amortization (EBITDA) have followed suit. Revenue has declined by ~62% from $39 Billion in 2015 to $24 Billion in 2017. (Odebrecht, 2018). The reduction in revenue, and the historic fine are the most likely factors to the company laying off over 100,000 employees and the continued reduction in revenue through 2017. On a national level, the economy of Brazil has been going through a recession since 2015 and many attribute this economic collapse to “Operation Car Wash” (Lopes & Miroff, 2017).

Section II

Principles & Values

Before Odebrecht Group was known to for its large bribery scandal, the conglomerate was seen as a pioneer of its field, leading the way for Brazilian firms to participate largely in global business (“Principles & Values”, 2015). The company held firm in its belief that their principles and values were ultimately responsible for the success of the company. In 2014, a year before the scandal was widely publicized, the Chairman, Emilio Odebrecht was interviewed by an American consulting firm in which Odebrecht discussed in detail the principles that guided his family-owned company. Within the interview, he stated that “the organization has eight deeply ingrained core principles, conceived from an explicit culture and forged in practice: trust in people, service spirit, client satisfaction, value creation, decentralization with planned delegation, a partnership mind-set, self-development of people, and reinvestment of returns in the business for continued work opportunities” (Dias, 2014, p. 44).

The eight principles are a part of what the company calls, Odebrecht Entrepreneurial Technology (TEO), a philosophy that provided the moral and ethical foundation for the business (Dias, 2014). Under this philosophy each of the eight principles were expanded upon. Trust in people signifies a shared desire to evolve, service spirit relates to the passion needed to provide innovative solutions, and client satisfaction emphasizes providing service with community and environmental awareness (Dias, 2014). Value creation places emphasis on adding value to shareholders assets and decentralization with planned delegation promotes leaders to perform and make decisions with autonomy (Dias, 2014). Furthermore, a partnership mindset emphasizes teamwork, and self development of people through education is used to foster the company’s development (Dias, 2014). Lastly, reinvestment of returns focuses on creating new business opportunities and ensuring sustainability (Dias, 2014).

According to Emilio Odebrecht, staying grounded in the Odebrecht Entrepreneurial Technology philosophy stimulated employees “willingness to serve, the desire and ability to evolve, and the aspiration to overcome challenges to achieve results” (Dias, 2014, p.45). He also stated that the philosophy is meant to foster “trust and partnership between leaders and mentees” (Dias, 2014, p. 45). Although these principles were meant to elicit moral behaviors within the organization, the magnitude of the bribery scandal suggests that members did not always abide by the TEO philosophy- thus creating an imbalance in the company’s ethical culture.

Odebrecht’s cultural imbalance is best described through Trevino and Nelson’s explanation of formal and informal systems found in their book, Managing Business Ethics. The authors state that “ethical culture is created and maintained through a complex interplay of formal and informal organizational systems” (Trevino & Nelson, 2017, p.161). Formal systems establish the standards for the organization through ethical policies, principles, and training. On the other side, informal systems include company daily norms, language and role models (Trevino & Nelson, 2017).These informal aspects either work in tandem with the formal system or display opposing characteristics from the formal system. The Odebrecht Group is a prime example of an organization whose informal system is not aligned with its formal system. This is most evident when comparing the actions taken in the bribery scandal to the guiding principles found in TEO. Specifically, the company did not act in accordance with its desires to add value to shareholders, ensure sustainability and act with community awareness. In the short run, taking part in bribery deals added value to shareholders and seemingly sustained the business. However, with the company being fined $2.6 billion and the negative reputation it earned, shareholder value inevitably dropped. In terms of acting with the community in mind, it is clear that bribery practices put in place by the company negates this principle. As previously mentioned, countries in which The Odebrecht Group operated in such as Brazil, Venezuela and the Dominican Republic face high poverty rates. Even with this knowledge, the company put into place bribery transactions that ultimately rewarded them with many expensive public infrastructure projects funded, in part, by community taxpayer dollars. By ignoring the increased financial stress placed on these countries, The Odebrecht Group failed to conduct business with its community in mind.

Since the actions taken by the company seemed to oppose Odebrecht’s core values, it is clear that leaders were not bound to the TEO philosophy. Moreover, the TEO philosophy referred to in the 2014 interview contained a key statement that qualified the eight guiding principles. This statement could have provided the framework to allow for such deviations from the principles to occur. TEO stated “these cultural and ethical principles should never become a straitjacket that hinders the initiatives, creativity, and style of those who put them into practice. On the contrary, their aim is to boost individual capacity and allow everyone to make a personal mark on the facts and acts of the entrepreneurial life” (Dias, 2014, p.44). It could be argued that this statement encouraged employees to only hold onto these principles loosely. When confronted with a profitable opportunity that negates the principles, the statement arguably suggested that leaders should not let the philosophy hold them back from the opportunity. The revised TEO philosophy created in the aftermath of the scandal no longer contains this statement.

Ethics Theory Analysis

The unethical behavior displayed within the company could also be assessed through a more philosophical lense in which theories related to ethical decision making could be applied to the actions of Odebrecht. For instance, utilitarianism is a consequentialist theory that directs attention to the consequences or results of a particular decision or action (Trevino & Nelson, 2017, p. 40). Under this principle, the action or decision should “maximize benefits to society and minimize harms” (Trevino & Nelson, 2017, p.40). In other words, the best decision is the one in which the benefits to society overall outweighs the harms. In a business setting, this theory would assess the benefits and harms a decision has for its stakeholders, those impacted by the decision.

If Odebrecht used the consequentialist theory in assessing whether or not to participate in bribing politicians, the company would first identify its stakeholders as the Odebrecht family, company shareholders, the politicians, and the community in which they are providing products and services. The company could believe that participating in the bribery transactions benefits the politician. Providing a politician with a significant amount of funds for their campaign or current administration could ultimately lead to political success. Furthermore, being awarded more projects increases value for shareholders. The harms of bribery transactions include the possibility of a tarnished reputation if the transactions were made public, legal repercussions, monetary fines, the creation of an unfair competitive environment and negative impacts on the economic stability of the community in which the company operates. If the company did not participate in the bribe, that would lead to the loss of projects for the company and lower added value to shareholders. It could also harm the politicians campaign by having less funding. By looking at this through the lense of a consequentialist, The Odebrecht Group could see that everything the company and the politicians could gain from participating in a bribery agreement does not outweigh the larger negative effects that illegal bribery transactions could bring to both the company and the community. Therefore, to minimize harms, The Odebrecht Group would decide to refrain from corrupt bribery practices.

Because the consequentialist mindset leaves room for subjectivity, we believe that Odebrecht should have acted in accordance with the deontological approach, a theory that focuses less on perceived consequences and more on ethical duty. In practicing this approach, one would base his or her decisions on “broad, universal ethical principles or values such as honesty, promise keeping, fairness, loyalty, rights, responsibility, compassion and respect for human beings…” (Trevino & Nelson, 2017, p.43). If the Odebrecht leaders were making decisions based on this theory, they would note that participating in a bribe obstructs the fairness of the competitive market, compromises their duty to follow the law, and shows little compassion for its competitors or the community. Even though bribery tactics lead to positive outcomes for the company and the politicians, a deontologist would think that the action would still be considered wrong since it goes against binding, universal moral principles (Trevino & Nelson, 2017 p. 43). As stated earlier, the bribery practices also goes against The Odebrecht Group’s own principles of community awareness, value creating and ensuring sustainability. With this in mind, the company would reason that infusing bribery into the business would not be an ethical decision.

Section III

What Led to Odebrecht’s Bribery

Odebrecht did not become the center of one of the largest and most complex bribery cases in history overnight. Nor was this a case of a rogue individual that acted on their own. Instead, it happened over many years and with increasing complexity, and although the Odebrecht case came to light in 2015, it most likely began thirty or more years earlier given the company is over 100 years old (Fieser, 2017). What contributed to Odebrecht’s situation was a combination of unethical leadership, an unethical culture, and disregard for ethics and compliance.

Leadership

From a leadership perspective, it is clear that top executives, particularly the Odebrecht family, were directly involved and created the bribery scheme. By keeping the Structured Operations Division small and in close proximity to executive leadership, it reduced their risk of exposure. Emilio Odebrecht, who took over as CEO in 1991 and whose father founded the company, stated in a Brazilian court that “Giving a little ‘help’ to the politicians was what you had to do to get contracts. And if you wanted the best projects you had to secretly bankroll their political campaigns”. He went on to state “All this that was happening was normal, institutionalized” (Fieser, 2017). It is evident that top leadership fundamentally believed that bribery was a necessity for them to do business and points to their environment as being the cause. This echoes Trevino & Nelson’s (2017) discussion of social learning theory and following group norms by using “everyone’s doing it” as justification for unethical behavior (p. 272). This was also true of other senior leaders at the company who were found guilty and testified in court. These leaders were following suit with their CEO and founders.

Culture and Environment

The Odebrecht Group’s actions would have undoubtedly been influenced by both its own internal corporate culture, as well as Brazil’s business culture. The company’s corporate culture was said to have come “from an obsession with hard work, expertise, and customer service” and top executives were said to follow Norberto Odebrecht’s multi volume guide of best practices (Fieser, 2017). Within this subset of the company, there was likely a “powerful norm against reporting on peers or superiors”, as described by Trevino & Nelson (2017) when discussing structures for unethical conduct reporting (p.185).

On the other hand, it is important to understand that the unethical behavior in relation to bribery was concentrated among top leadership and the Structured Operations Division. With approximately 180,000 employees, the unethical culture was not likely present or as strong at lower levels of the company. Additionally, the unethical behavior was not in all aspects of their business. As an engineering firm, they did not have bridges and buildings failing due to cutting corners.

Before examining specific countries’ cultures, it is important not to stereotype cultures as being more or less ethical, since not only can ethical cultures “exist in the midst of corrupt surroundings”, but Trevino & Nelson (2017) “think it’s important to distinguish between common practices and values” of a country (p.414). Meaning, although it may be common practice to bribe a government official, individuals still understand that this is unethical behavior and their laws reflect this. Cultural norms must also be kept separate from unethical behavior. In Odebrecht’s home country of Brazil, “Brazilians generally expect deception among negotiators who are not well acquainted, so they may be more likely to use deception during early stages than are Americans” (Trevino & Nelson, 2017, p. 406). However, deception as a negotiation tactic does not mean that unethical behavior is occurring or laws being broken.

Although one might expect The Odebrecht Group to deflect blame using their environment as justification for unethical behavior, the cultural and political environment in Brazil and other countries where Odebrecht successfully bribed officials may have incentivised this practice. Given the nature of Odebrecht’s business in engineering and infrastructure, decision makers and influencers were government officials in the countries where each project was being built. Therefore, significant culpability also lies with the government officials in each of these countries and could easily be the topic of another research paper. To no surprise, the majority of the 12 countries which have settled with The Odebrecht Group are found in the lower tiers of Transparency International’s Corruption Perception Index, with several other cases still unresolved.

Ethics and Compliance

In addition to culture and environment, it is important to look at how the failure of the organization’s ethics and compliance programs allowed for bribery to occur. Due to the widespread international nature of Odebrecht’s operations, there are many countries and international laws involved. However, for simplicity the focus will be on anti-corruption laws of the United States and Brazil, both which successfully convicted The Odebrecht Group.

Historically, the “bribing of foreign officials with huge payoffs was found to be rampant” even among U.S. corporations (Trevino & Nelson, 2017, p.407). It wasn’t until 1977 when the FCPA was passed that the U.S. government began cracking down on this behavior. Although Brazil has strengthened its anti-corruption legislation since the 1990s, it was not until 2014 when Brazil passed its own robust Clean Company Act in which it held corporations liable. While this is no excuse, large companies do take time to adapt their practices and may be even slower to act with a long history of profitable operations.

The 1991 revision of the U.S. Sentencing Guidelines are summarized into “Seven Requirements for Due Diligence and an Effective Compliance Program” by Trevino & Nelson (2017, p. 220). Of the seven requirements, three seem particularly relevant for Odebrecht – Assigning high-level individuals to oversee compliance standards (requirement 2), exercising care to ensure authority is not delegated to those with a propensity to act illegally (requirement 3), and putting in place monitoring, auditing, and other systems to detect criminal conduct (requirement 5). The unethical behavior fundamentally occurred because there was a lack of oversight of the executives and a lack of audits of their practices. Similar to requirement 2, and in-line with the U.S. Sentencing Commission’s 2004 revision, the company did not have independent oversight of ethics and compliance with direct reporting to the executive board. Additionally, top executives and the Odebrecht family clearly did not meet the criteria of requirement 3. Finally, no regular audits or detection systems were in place and for obvious reason given the resources that The Odebrecht Group dedicated to keeping the operation secretive (requirement 5). Other factors such as the misaligned culture and actions not being in-line with their TEO simply led to a more severe punishment in accordance with this same 2004 revision.

Recommendations

Culture Recommendation

Although, the bribery tactics used by The Odebrecht Group were concentrated within the hands of higher level executives, an ethical culture needs to be established within all employment levels in order for The Odebrecht Group to be truly aligned with its TEO principles. To do so, regular ethics training for all employees could be put into action. More specifically, these programs could focus largely on ethical leadership as a way to groom future leaders within the company. As referred to in the company’s guiding principles, The Odebrecht Group already places value on the development and education of its employees. Because of this, incorporating ethical development would align well with the company’s principles and help establish an ongoing culture of ethical thinking. The ethics training should persist continuously throughout ones employment with the company and regular online assessments could be used to assess employees understanding of their ethical duties.

In addition to ethical leadership training, it is important to consider how norms within Brazil influenced the behaviors of The Odebrecht Group. Although against the law in many countries, bribery is seen as a normal way of doing business in many regions. With this in mind, it is important that The Odebrecht Group combat the “everyone’s doing it” group norm in order to create an ethical culture. According to Trevino & Nelson (2017), “changes in the reward system can lead to changes in group norms”. This occurs because norms are often established in order to “support behaviors that are implicitly rewarded” (p.274). If The Odebrecht Group began recognizing and rewarding those individuals who make strong efforts to develop themselves as an ethical leader, the “everyone’s doing it” group norm would take on a different, more positive meaning.

Since the bribery scandal, The Odebrecht Group has taken certain measures to correct its unethical culture. One of these efforts include an ethics line. This line is a confidential channel used to anonymously report misconduct. The company website states that the information is received by an independent firm which “assures whistleblowers absolute secrecy and no reprisals” (“Ethics Line, 2018). While this ethics line is a positive addition to the company, a strong ethical culture has to be established for employees to be compelled to use the ethics line. This requires the need for Odebrecht employees to understand their ethical responsibilities. For this reason, it is also recommended that The Odebrecht Group create a formalized ethical responsibility description as a part of role responsibilities. Research has shown that if an employees role requires them to report wrongdoings, then they are more likely to do so (Trevino and Nelson, 2017, p.278). By this logic, if Odebrecht employees are explicitly told and consistently reminded that ethical behaviors are a job requirement, ethics becomes intertwined within the company’s culture.

Additionally, since ethical responsibility would be established in role descriptors, the company could also report on ethical behavior within employee performance reviews. The company would measure how much each employee has exemplified Odebrecht’s core ethical values and principles in order to meet business goals. Trevino and Nelson (2017) believe that “when such a process is in place, high fliers who exceed all their numbers can be held accountable for how they met those numbers because this is built right into their performance expectations and rewards process” (p.180). Essentially, if Odebrecht employees who act in accordance with the company’s ethical values are the ones being promoted, while those not in accordance with the company are being disciplined, this performance review process helps establish an ethical culture (Trevino & Nelson, 2017, p.180).

Leadership Recommendation

Currently, The Odebrecht Group has taken a series of steps to improve leadership systems in an effort to put ethics and compliance at the forefront of the business. The company has set up a new Board of Directors and has made it a rule that members of the Odebrecht family will no longer be eligible for chairperson (Russo, 2018). While these initiatives are put in place to address ethics at a higher level, we also recommend actions other leaders within the company can do to improve ethical leadership. These actions include increasing the communication of ethical commitment.

The importance of adhering to the law and behaving in accordance to The Odebrecht Group’s ethical values needs to be reiterated by leaders so that an ethical mindsets trickle down to all employees. According to Peters and Waterman within their book, In Search of Excellence, “the value shaping leader is concerned, on the one hand, with soaring lofty visions that will generate excitement and enthusiasm… on the other hand, it seems the only way to instill enthusiasm is through scores of daily events” (Trevino & Nelson, 2017, p.240). With this in mind, we recommend that Odebrecht leaders establish a platform to consistently discuss and express company values and applicable ethical concerns. This platform could be in the form of regular “Lunch and Learn” gatherings in which leaders deliver talks centered on values and running an ethical business. These events will be focused on inspiring employees to act ethically. Coupled with these forums, leaders will then need to make a strong effort to connect day to day with a variety of different employees (Trevino & Nelson, 2017, p. 241). This will help to establish trust amongst employees as well as provide leaders the opportunity to understand how ethical practices are used on a day to day basis.

Compliance Recommendation

In the aftermath of The Odebrecht Group’s bribery scandal, the company has been a part of an anti-corruption monitoring program, an agreement with the US Department of Justice and Brazilian Federal Prosecutors Office (Russo, 2018). In this agreement, The Odebrecht Group was put under observation by the US Department of Justice and by Otavio Yazbek, former director of Brazil’s Securities and Exchange Commission (Russo, 2018). The Odebrecht Group has also enlisted a new chief compliance officer, Olga Pontes. Ever since her appointment in 2016, Pontes has worked to place ethics and compliance at the center of business. New compliance efforts include the creation of a global advisory council that meets twice a year to help the board of directors in fostering anti-corruption and sustainability ideas (Russo, 2018). The company has also established standards for board member candidates in which all new members go through integrity checks to avoid conflicts of interest.

In conjunction with what The Odebrecht Group has already put into place, we recommend additional measures focused on evaluating the effectiveness of compliance efforts and creating guidelines for global business practices. First, the company could incorporate outside audits of its compliance department and programs. This adds an additional checks and balances layer used to foster accountability. Furthermore, regular audits of the compliance program itself can give insight into its effectiveness. With these insights, The Odebrecht Group can consistently improve compliance efforts while cementing ethics and compliance as a stop priority.

In terms of managing compliance on a global level, The Odebrecht Group must find a way to operate in countries of varying ethical standards. This is most important for the company as the bribery tactics used were a product of cultural norms. Trevino and Nelson make the distinction between ethical relativism and ethical imperialism. Ethical relativism is most similar to the common phrase, “when in rome, do as the Romans do” and is tied to the belief that we should not impose our own ethical standards on others (Trevino & Nelson, 2017, p.414). On the other hand, ethical imperialism “assumes absolute truths that would require exactly the same standards and behavior in every culture” (Trevino & Nelson, 2017, p. 414). It is believed that both relativism and imperialism can lead to negative outcomes and that there should be a balance between the two (Trevino & Nelson, 2017, p. 415). Because of this, we recommend that the Odebrecht Group establish “ethical thresholds” for doing business abroad based on the company’s ethical values. For instance, suppliers, contractors and executives within other companies working with The Odebrecht Group must meet a minimum standard of compliance in order to do business with the company. As a part of Odebrecht’s compliance commitment, the company has already established 10 principles used to fight corruption. One of these principles include “adopt principles firmly grounded on ethics, integrity and transparency..” (“Compliance”, 2017). The ethical thresholds that the company sets should be one that measures if global partners meet Odebrecht’s ethics, integrity and transparency principles. Additionally, the implementation of thresholds would help the company hold true to another one of its commitments stating that The Odebrecht Group should “Never rely on cultural or customary market conditions as a justification for illicit actions” (“Compliance”, 2017).

Lastly, the country of Brazil is involved in organizations aimed at regulating and monitoring corrupt business practices. Most notably is the Organization for Economic Cooperation and Development (OECD). The OECD Anti-Bribery Convention required participating countries to make bribing foreign public officials a crime (Nelson & Trevino, 2017, p. 428). Based on the OECD website, the organization hosts Global Anti-Corruption and Integrity forums in which government leaders, business leaders, civil society organizations and academia come together to present and discuss new approaches and initiatives related to foreign bribery, trade and competition (“Global Anti-Corruption”, 2018). Since businesses and organizations are given the chance to become partners with the Global Anti-Corruption and Integrity forums, a company such as Odebrecht Group would benefit greatly from involvement. Not only could the company use this platform to learn more about anti-corruption best practices, it could also provide the company an opportunity to showcase its improvements.

Conclusion

The Odebrecht Group has suffered greatly for its unethical behavior relating to bribery and corrupt business practices. However, the company’s current commitment to compliance and ethical standards are steps in the right direction. The Odebrecht Group will undoubtedly face more challenges as participating in the global playing field creates blurred ethical lines. For this reason, it is important for the company to hold firm core values, compliance guidelines and support system for ethical behavior when doing business abroad (Trevino & Nelson, 2017, p. 431). Overall, for an effective ethical culture, The Odebrecht group must instill both a values based and a compliance based approach. Trevino and Nelson (2017) believe that “the best programs aim to focus on aspiring to a set of values first and foremost, supported by just and fair enforcement of the rules” (p. 250).

References

Compliance. (2017, November 16). Retrieved November 26, 2018, from https://www.odebrecht.com/en/governance/compliance

Ethics Line. (2018, August 03). Retrieved November 26, 2018, from https://www.odebrecht.com/en/ethics-line

Fieser, E. (2017, June 12). A Graft Machine’s Collapse Sows Chaos in the Caribbean. Retrieved November 26, 2018, from
https://www.bloomberg.com/news/features/2017-06-12/odebrecht-corruption-machine-s-collapse-sows-chaos-in-the-dominican-republic

Gillespie, P., & Brocchetto, M. (2017, April 5). Odebrecht: The company that created the world’s biggest bribery ring. Retrieved November 26, 2018, from https://money.cnn.com/2017/04/05/news/economy/odebrecht-latin-america-corruption/index.html

Global Anti-Corruption and Integrity Forum – Global Anti-Corruption and Integrity Forum. (2018). Retrieved from http://www.oecd.org/corruption/integrity-forum/

Hersher, R. (2016, December 21). Justice Department Announces Largest Corporate Bribery Penalty Ever. Retrieved November 26, 2018, from https://www.npr.org/sections/thetwo-way/2016/12/21/506297795/justice-department-announces-largest-corporate-bribery-penalty-ever

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