Eberhard Faber Inc.’s Ethical Crossroads: Bribery and Acquisition
Ethical Issues in the Acquisition
The decision to acquire equity in the foreign company involves significant ethical issues. The fact that the company in question bribes government officials in its country to conduct business presents a major ethical problem. Eberhard Faber Inc. itself would not be breaking US law by making this deal, but the target company is breaking the law in its own country through bribery. This creates an ethical dilemma where the board of directors must decide whether to proceed with the deal, knowing the target company disregards the laws of its operating country. The decision involves not just legal compliance but also the board’s perception of the morally right course of action.
Mr. Faber’s Justification and Moral Consistency
Mr. Faber justifies the potential acquisition, arguing that owning stock in an unethical company does not automatically make Eberhard Faber Inc. unethical. He bases this on the premise that bribery, while illegal, is a common and accepted practice in the target company’s country. Therefore, his moral standard suggests it is permissible under these specific circumstances to engage with a company known for bribery.
This standard potentially fails the consistency requirement, which demands applying the same moral rules to all relevantly similar situations. Defining ‘similar situations’ is key. Consider these scenarios:
- Scenario 1: Domestic Bribery. If the US government started demanding bribes for companies to operate, Mr. Faber, to be consistent, would theoretically have to accept paying bribes to his own government, just as he accepts it in the foreign country. However, the text implies Mr. Faber differentiates based on location, deeming bribery acceptable where it is common practice but not in his home country. This contradicts the consistency requirement.
- Scenario 2: Other Illegal Practices. If Eberhard Faber Inc. dealt with a company breaking a different law (e.g., environmental regulations like dumping toxic waste) that was also common practice in its country, consistency would require Mr. Faber to accept this practice as well. The text does not explicitly state their stance, but it is plausible the board and Mr. Faber might find accepting such environmental damage problematic, further highlighting the potential inconsistency in his moral standard.
Board Member Moral Responsibility
The board members arguably bear moral responsibility for the decision. They were fully informed about the bribery; ignorance cannot be claimed as an excuse. They possessed the freedom to choose not to proceed with the acquisition, meaning no apparent excusing conditions (like lack of freedom or knowledge) absolve them.
However, potential mitigating factors might exist, such as:
- Pressure to achieve higher earnings.
- Influence or pressure from senior leadership.
- Uncertainty about the full negative consequences of bribery (e.g., undermining public trust in government, hindering national development), although this is less likely to fully excuse the decision given the available information.
Crucially, acquiring a 30% stake implies significant influence over the target company. This level of influence strengthens the argument for the board’s moral responsibility regarding the company’s actions post-acquisition.