Former President Suharto of Indonesian once famously dismissed the concern over his country’s corruption by saying: Well you come out here from Washington with these high ideas to tell us….
What steps could he have taken to avoid missing the ownership and bribery requirements prior to initiating the negotiation?
Michael Woodson, the CEO of a major college publishing company headquartered in the United States with three offices in major U.S. cities as well as a recent expansion in the United Kingdom, had been considering expanding his company’s operations to India. According to his research, with one of the highest literacy rates in the world, a highly educated and moderately priced workforce, and burgeoning distribution channels for noncollege publications, India was the ideal location for the newest office. Following multiple conversations with Ranjit Singh, handpicked to be the operations manager of the proposed New Delhi office, Michael and his wife Anita (Vice President of Human Resources) made the twenty-one-hour trip to New Delhi. At the start of their meeting, Ranjit corroborated Michael’s research, and demonstrated a real eagerness to head operations in New Delhi. The three of them discussed the market, the labor needs, and even various real estate options. All the boxes—so to speak—were seemingly checked . . . except two. First, as Ranjit informed the Woodsons, it would not be possible for the Woodsons to own more than 49% of the New Delhi Office. By Indian law, no foreign national could own a majority stake in a local business. That, thought Michael, was an issue, but not an insurmountable one. However, the next “box” presented a real problem. As Ranjit described it, in order to get the process started and secure governmental approval, a handful of local, regional, and governmental officials would have to be paid off. These “payments,” as described by Ranjit, were nonnegotiable. “This is how one does business in India.” Shocked and appalled, Anita and Michael couldn’t believe what they were hearing. “You mean we have to bribe officials in order to bring new jobs, taxes, and revenue to your country? Surely, there must be another way. That’s not how our company does business! Besides, once bribes are requested and received, when would it ever stop?” Ranjit matter-of-factly explained the Indian ways of doing business, and even shared a few stories that demonstrated how failing to do so resulted in a failed (or stopped before it started) enterprise. The Woodsons excused themselves from the meeting. “What are we going to do?” they asked each other.
1. Michael Woodson did his research before entering the negotiation; however, he missed a key issue. What steps could he have taken to avoid missing the ownership and bribery requirements prior to initiating the negotiation? 2. What choices do the Woodsons have at this point? 3. If they ended the negotiation at this point, what will likely happen? Why? 4. If you were Michael or Anita and chose to continue the negotiation, what would you say or do at this point? Why? 5. When ethical norms differ among the countries represented in a negotiation, which country’s norms prevail? Explain.