International Business Module

Introduction

The purpose of this study is to analyze the operations of a multinational firm in a foreign country. The particular areas of interest with regard to this operation of such companies is the ethical aspect of business with relation to international law and the challenges associated with the same. The main reason why firms go international is the prospect of capitalizing on a business opportunity that has availed itself in the target region. Like any other business, operations in a multinational environment carry risks, mostly external to the business. In rare occasions however, the risk posed to business may come from within the organization. Citi bank is one of the most respectable multinational companies in existence. The bank is based in the United States but over time with the increase in globalization, it has spread its operations to other continents. This makes it ideal for analysis through the use of hypothetical situations in the form of a series of ethical dilemmas which shall be would be addressed by its international corporate officer (BUS 401, 2013).

Question 1: What has led to the recent outbreak of scandals in the banking industry?

The recent outbreak of scandals in the banking industry have been caused by several factors first among them being a lack of accountability on the part of those who hold senior positions (Kim et al, 2001). In the case of the executive who was in charge of Citi gold, it would have been prudent of him to know that he is employed in a very sensitive position and this would have been hampered by the presence of his girlfriend who happens to be a former employee. This could have led him to figure out that she was still masquerading as an employee of the bank and swindling clients to the tune of millions of dollars. There was clear conflict of interest in his case since he had to choose between being loyal to her or the company’s regulations (BUS 401, 2013).

Given the fact that ethical communication in the banks follows a top-down channel, unethical behaviors by the staff would similarly follow this channel. Matt for instance needs to oversee the operations of a scandal riddled regional branch of Citi bank. This therefore demands that he leads by example. The communication he receives from his personal attorney coupled by the manner in which he drinking alcohol it is clear that he has a drinking problem that he is trying to cover up. The fact that it is victimless justifies the efforts to cover-up the story. This attitude is likely to be carried into the banking sector where energy is channeled at covering up rather than dealing with problems (BUS 401, 2013).

The banking sector is highly competitive, especially in the wake of an economy that is recovering from a financial crisis. These employees who are stationed in these banks bear the biggest brunt considering they are the ones who are placed under pressure to perform and generate the highest turnover for the bank. As a result they may end up engaging in some dubious dealing as seen in the Barclays scandal in which some of its workers were involved in rate rigging to favor the bank. The intense competition and pressure at times leads the employees to overlook ethical principles that they are bound by while at work(BUS 401, 2013).

Question 2: Are Citibank employees still adhering to Citi’s code of conduct? Matt himself?

Citi bank’s employees are not adhering to the bank’s code of conduct. They try their best to create the impression that they are doing so but in reality they have been contravening these regulations for quite some time. This is evidenced by the three scandals that have created a public relation’s nightmare for the bank. These include the incident in which an executive of Citigold swindled the bank’s customers a total of 50 million dollars. The second incident was when the bank’s employees traded in toxic subprime debt behind the backs of investors. The third instance was the bank’s act of engaging external contractors in the collection of debt. Though not in Indonesia, Matt’s citation for driving under the influence of alcohol is another example as he too is an employee of the bank albeit at the level of management. His trepidation at the thought of this incident reaching his superiors back in the USA as well as the media in Indonesia is enough evidence of his guilt.

Question 3: Is Citi responsible for the actions of outside contractors? What is Citi’s potential liability?

Citi is indeed responsible for the actions of foreign contractors in the event that they are contracted to handle the bank’s customers. This is because in the provision of services to the bank’s market, a duty of care is owed by Citi to its customers regardless of the nature of business. To this end, any damages that result from an error committed by the contractors should be fully compensated by the Bank. This is because the customers of the bank enter into agreements with the bank itself and not the contractors who may be used by the bank. If the ban feels that it needs to seek redress, it can get the same from the contractor but this should in no way affect the manner in which Citi compensates its customers or the next of kin as is in the case when one of its customers lost his life in an altercation with a contractor hired by Citi.

Question 4: What is the appropriate action for Mr. Lelander with regards to these scandals and how can future ethical lapses be avoided?

The first step that needs to be taken with respect to these scandals that the bank has been subjected to is to compensate the parties that have been aggrieved by unethical practices committed by the employees. This will be a great step in the restoration of previously cordial public relations that the bank had with its customers in Indonesia. At the same time, the employees who have been found culpable for the unethical practices need to be suspended and investigated to establish the extent of the rot within the organization. The compensation and the suspension of the workers needs to be done in the public domain and not privately (BUS 401, 2013). Within the bank, it is necessary to deliberately seek out the root cause of the problem. This will establish whether the scandals were isolated incidents or part of a much bigger web of ethical problems that have been in the bank for a long period of time. It is also necessary to apply ethical standards in the same way that they are practiced in the headquarters. This reduces the likelihood of the employees bringing in corrupt practices that are common in the country. Part of the upholding of high ethical standards includes stiff penalties for those who deliberately break the company’s code of ethics. This could also mean him coming clean about the citation he got in Canada (Nelson, 2012).

References

BUS 401Citibank in Indonesia Case Study.

Kim, Yong-Cheol & R. McElreath (2001) “Managing operating exposure: A case study of the automobile industry”,Multinational Business Review. Detroit: Spring 2001. v 9, Iss. 1; pg. 21-27. Book Review (2005) “The gaijin who saved Nissan”, Business Week,1/17/2005, Retrieved from http://www.businessweek.com/magazine/content/05_03/b3916021_mz005.htm on August 23, 2013

Nelson, J. A. (2012). Ethics And Banking: Beyond Compliance. Journal of Business Case Studies (JBCS), 8(4), 393-396.