Dispensing 'The Less Orthodox Inducements' - BAE Systems and the Global Defense Industry

Q1.  What type of business - Government are alluded in this case? identify the key factors in business - Government relations that make the defence industry particularly vulnerable to ethical misconduct ?

Many business and government relations can be addressed as an un-ethical conduct. In this case if we look at the demand side of the market when dealing with defence industries we will notice that these companies are nearly exclusively selling its product to governments and in most countries the parliament has to agree the level of spending and the type of equipment that should be bought. Also, governments may require these companies to produce some parts of the equipments domestically to secure more jobs and benefit the economy.

On the supply side of the relation and especially in the UK, the government has its special unit for trade and investment to promote its defence companies, and also most deals involve the government approval and guarantee. In this kind of deals, a long term and a strong relationship is required between both parties. As mentioned before we can note that this kind of trade will for sure include many ethical misconduct.

Q2. Identify the main stakeholders in this case and describe the key ethical dilemmas faced by each of the different actors involved ?

The main stakeholders are :

1- Companies operating in the defence industry: when seeking to avoid competition with other companies and gain high revenue BAE rely on different bribery options reaching the targeted market. These kind of companies can be government oriented.

2- Governments : when some people in the government have more power than others they can be used as a key to enter the country especially when there is several competitors and the parliament approval is required.

 Q3. To what extent can BAE be blamed for its part in the alleged bribery, or are the UK and Saudi Government ultimately more responsible for any wrongdoing?

I believe that both sides are involved and responsible. From BAE side seeking high profits and global market expansion in un-ethical approach by avoiding transparent transactions and healthy market competition relying on bribery, secrecy and deals made through a complex web of front companies.

From the government side, The UK government is trying to promote companies like BAE to the parliament and can be considered an unethical conduct. Furthermore, I believe that the UK government had the full deal set with BAE and was in total control and working in the shadow. While from the Saudi government side, I believe that the full power and control the prince had is a total mistake especially in transactions that need many approvals and evaluation before processing, especially when it comes to the national economy and security. Also, both governments have no clear policy in dealing with such situations.

Both Governments in this case are more responsible than BAE because they are the ones responsible for conducting, implementing , and monitoring ethical approaches and preventing the different types of corruption.

Q4. Describe and evaluate the efforts by the BAE and the UK government to address the problem of corruption?

The UK government as others wants to strengthen its anti-corruption efforts by leading an anti-bribery regulation. Particularly in 2006 they gave the issue high attention by setting an anti-corruption squad. Despite all the challenges and efforts the UK government went through when investigating the BAE scandal, and trying to prevent similar actions, and after reaching a sensitive phase in the investigation everything was suddenly reversed and dropped completely on the grounds of national security.

BAE hired the former chief justice Lord Woolf  head a committee to review its ethical conduct. A report then was issued claiming that the company lacks the most important ethical standards and do not pay enough attention to its ethical policies.

One of the main recommendations that Woolf stated is that BAE should address the root of corruption by changing the company business model. This means BAE must cut the middleman approach when dealing with other countries and deal directly with governments.

Finally, i believe that recommendations will never stop BAE or any others from being un-ethical when conducting business with corrupted governments despite cutting the middleman and dealing directly.

Q5. If you were hired by BAE to advise on its ethical challenges, what would your recommendations be?

1   My recommendation will be that :

1.      The Company shall work on ethical standards and adopt openness and transparency. And all its policies and procedures must be publicly available and easily accessible.

2.      To develop a formal process ensuring business decisions have been taken by following a clear consideration of ethical and reputational risks.

3.      Monitor the company expenses especially on gifts and hospitality.