When MRA was shortlisted for a valuable contract for the development of a coastal defence

system for another country, it was contingent on the payment of a facilitation fee to an official in the defence ministry. Clearly this was an unusual request but it was also made very clear that MRA would not be awarded the contract, worth $2 billion over 10 years, unless the relatively modest sum of $1 million was paid immediately.

Recently, business activity in the defence sector had been very slow, and MRA was about to announce around 500 staff redundancies. Therefore news that this contract was about to be awarded came as a great relief to the board of MRA, as the jobs would now be secured. However, only the chief executive officer (CEO) and operations director knew about the facilitation fee, so an emergency meeting of the board was convened with only one item on the agenda.

Due to the very sensitive nature of the matter at hand, it was decided not to make a formal record of the discussions at the board meeting. This was more likely to result in a frank exchange of views and encourage all directors to express their opinions openly.

The CEO, Charlie Desborough, explained the dilemma to the board, making it very clear that without this contract there would be no way to protect jobs. The finance director, Jake Neilson, said that he was personally very uncomfortable with the idea of paying a facilitation fee, which was in effect a ‘bribe’. As a professional accountant he was bound by a code of ethics which strictly prohibited making such payments, therefore he could not sanction the payment under any circumstances.

The HR director, Sarah Shue, took a far more pragmatic stance. She acknowledged that any form. of corruption was utterly deplorable; however, it was a fact of life in many countries. She asserted that if the board of MRA decided not to make the payment and forego the contract, then it could be assured that a competitor would not adopt such a high-minded position. The net effect was that by avoiding a relatively small payment, the firm would be doing a disservice to both its employees and its shareholders, who would undoubtedly suffer a reduction in their shareholder value. She maintained that sometimes it is necessary to take difficult decisions in business that are for the greater good, and so suggested that the payment to the official should be made.

Required:

(a) (i) Compare relativism and absolutism and explain the significance of individual or personal differences in guiding ethical behaviour under each approach in a given scenario such as the situation at MRA. (5 marks)

(ii) Explain the ethical theories of deontology and teleology or consequentialism, and analyse which of the approaches have been adopted by Sarah Shue and Jake Neilson. (6 marks)

The involvement of directors in bribery and corruption can seriously undermine the relationships of trust upon which corporate governance is based.

Required:

(b) (i) Assess how bribery and corruption could undermine confidence and trust in MRA, with reference to the principles of corporate governance. (8 marks)

(ii) Describe best practice measures which could be employed by MRA to combat bribery and corruption. (6 marks)