Week 5 Discussion
pPart 1: Post a Response
Many business leaders believe that engaging in global business provides opportunities to expand and stay competitive. Go to “SEC Enforcement Actions: FCPA Cases” found at http://www.sec.gov/spotlight/fcpa/fcpa-cases.shtml and read either the “SEC Charges Stryker A Second Time for FCPA Violations” or “Legg Mason Charged With Violating the FCPA” press release. Once you have chosen your case, provide a brief description of the case. Next, discuss two (2) strategies the company could have used to avoid the situation.
I choose the Stryker Corp case, because, I couldn’t really find one that stuck out to me as interesting. This one I choose because it involved a company from Michigan, which is where I was born so it got my interest. This was an international medical device company that was found twice to be in violation of insufficient internal accounting controls and inaccurate books and records. You would think after having to deal with heavy penalties and restrictions once, the company would implement rigid guidelines that would ensure that all aspects of the company’s finances were being handled properly at every level. The fines for the second offense were totaled at $7.8 million dollars, also they were to have an independent compliance consultant to evaluate, review its internal accounting procedures and its record-keeping, anti-corruption relating to its use of all parties that sold on behalf of Stryker.
The article does not really get to in-depth about the relationships of those individuals that sold on behalf of Stryker which makes it sort of difficult to decide what exactly needs to be implemented in order to avoid such violations from happening. I assume, of course, that is has to be legitimate in order for the FCPA to issue a violation and for the company to agree to settle to the terms and comply with an independent compliance consultant. The options I will recommend will have to be based on the general knowledge given. It appears that the company might have a culture or upper management structure that is focused on gaining the profit and not focusing so much on the detailed standards of some of their departments. I think one of the major things that could be done to prevent this would be to completely over haul the company culture, focusing on ethical qualities and preservation above profit and growth. This at first seems like it is counterproductive allowing sales to fall in priority, but I am not sure that it could be worse than a $7.8 million dollar fine and inconvenience for the company. They are losing more than complying by not complying which doesn’t make much sense. And that is just the second violation, not even mentioning the first violation. Along with a drastic change in the company culture, I think that if they took their time properly researching some of the third-party sellers or had dedicated project managers that could check procedures in the accounting area before they got published, they may have caught some of the deficiencies prior to accumulating all these violations. Seems like it would have been an obvious fix after the first violation.