Friday, November 6, 2015

Triangle Principle Agent Problem

For this post I will reference one of my earlier experiences I wrote about involving my boss during my internship using bribery as a means to an end. During my internship at a financial firm, my boss who acted as my mentor throughout the three months asked me to accompany him to a business negotiation deal to both experience what it's like to interact with clients and type up meeting minutes for him. The project my boss was in charge with was critical to the future of the company as it constituted a value added proposition to our product that would have made it very attractive to the target consumers. The client was therefore a representative from the firm which we were trying to secure a partnership with and solidify their position as a value added option. The setting was at a coffee shop which made it an informal negotiation in a sense. After the usual meet and greet and chatting about each other's children and lobbing casual questions at each other, my boss and the representative got down to business. After roughly five minutes of proposals from both parties, my boss slides a thin white envelope across the table. It was only when the representative opened it up and the sun caught the envelope that I saw the cash inside. The representative simply slipped the envelope inside his briefcase and the negotiations continued. This event shocked me in two ways. Firstly, both parties involved were Fortune 500 companies which I would expect to adhere to stringent company codes and secondly, the response from the representative seemed almost staged as if he was expecting such a gesture and had experienced bribes before.
As an intern, I had my fair share of menial jobs that I had to perform and one of these was completing my boss' four hour annual company code of conduct module. As ironic as it sounds, this particular company heavily stressed the importance of both non-disclosure agreements and bribery prevention in the module. My position was both my boss' subordinate and a company employee who signed a contract which specified that I would abide by the companies code of conduct (which they force you to actually read). My boss would expect me to stay quiet and be thankful that he gave me such a great opportunity to witness an actual business negotiation. The company on the other hand would urge me to report this incident to human resources to avoid potential lawsuits. I chose to stay quiet and simply take it as an eye opener. Perhaps through popular culture, I've been conditioned to think that these sorts of underhanded practices run rampant in the financial sector and therefore it didn't particularly irk me. Nevertheless, had I faced a moral dilemma, I'd say there would have been no easy way out. Had I reported my boss, I would lose a very important connection and mentor meaning almost two months of wasted time. Staying quiet and keeping it to myself in my mind was definitely the more prudent choice of the two. It'd be very hard to satisfy the interests of all parties involved.

2 comments:

  1. First, let me note that you did face an ethical dilemma. Your decision to stay quiet is understandable, under the circumstances, but that doesn't mean there wasn't an ethical dilemma.

    Next, let's get at the issue of whether everyone cheats, the unwritten rules matter more than those that are formally codified, or if you are inferring too much about that based on rather slim evidence. I don't know the answer to this. But we can think through a hypothetical. What would have happened had you reported on your boss?

    If, in fact, the company stood behind its codified rules, then you would have received support from the company for whistle blowing on your boss. If, however, the codified rules are only a thin veneer and what they company really cares about is the business opportunity this deal represented, then you would have been displeasing not just your boss but the company as well. In this case, they'd probably have let you go and force you not to reveal the bribe to anyone outside the company.

    Every whistle blower and potential whistle blower is in essentially the same position. In that sense blowing the whistle is taking on substantial risk. Keeping quiet seems a safer play, but you do have to live with your conscience.

    I also want to note that ordinary business practice may involve in kind bribes (meals at expensive restaurants, high priced entertainment, or material gifts) rather than cash bribes, where the former don't raise anyone's hackles while the latter does. There are some people who are squeaky clean. Most of us are not. Then this becomes a matter of where to draw the line. It's a tough judgment call.

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  2. I have reason to believe that the company would stand behind its codified rules as code of conduct was heavily stressed during orientation and the human resource department has a separate entity that specifically handles legal/bribery cases. However, as an intern it's a gigantic risk to put everything on the line including long interview process and actual hours of work put in based on a shaky assumption I'm making on a company I've had little experience with. I reckon my boss would have gotten in trouble had I reported him, but the project was crucial to the new product line and therefore it is hard to say how the higher ups would act. I've seen smaller bribes too, I think drawing the line really depends on the personality and morality of the individual in question.

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