Summary
Chong wants to set up a new store in the up and coming town of Klang. He has an attractive site in his mind which is not zoned for commercial use. The mayor of Klang has offered to expedite the land zoning if Jextra would finance the building of a new primary school in the city, and also contribute towards the construction of a flyover near the proposed site.
Chong understands that the practice of businesses contributing to city projects is pretty common in Malaysia, but wonders whether making such a deal will land him in trouble with Jextra’s code of conduct, especially as he wonders whether the mayor is personally interested. He is also unsure if a refusal to meet the demands would mean a zoning denial altogether.
Arif Alam is Jextra’s top performing and a well-respected Category Manager. His responsibilities include working with suppliers; determining the items (fruits and vegetables) to order for the shelves, negotiating their best prices and buying them. Alam has consistently been negotiating better offers than Jextra’s fifteen other buyers and even competitors. There have been rumors in the office suggesting Alam has been accepting gifts and/or bribes from inferior suppliers in order to procure these contracts.
Chong is in a dilemma wondering whether he should investigate Alam or not? Jextra’s operations have been running smoothly and he wonders if an investigation would put the whole business at risk if it found that all the other buyers are corrupt themselves. Any investigation would need both and money and Chong isn’t sure if it’ll be worthwhile at all.
Jextra Neighbourhood Markets’ possible expansion into Klang
If Tom Chong wants to establish a Jextra Neighborhood Market store in Klang, he will need to carefully navigate his way through his ethical duties to Jextra, the mayor of Klang’s two business proposals related to rezoning for the supermarket, and Jextra’s aggressive five-year investment strategy’s impetus for expanding into Klang.
First, depending upon how it is handled, the mayor of Klang’s implied request for help improving public education in Klang could either be seen as a bribe, or a social responsibility and marketing opportunity for Jextra.
Chong must comply with Hong Kong law (since Jextra is incorporated in Hong Kong), and can ethically comply with the Jextra Business Conduct Code (“JBCC”) so long as any payment is made through the correct channels after an appropriate proposal, and so long as the payment is explicit in its quantity, recipient, and purpose. While Hong Kong law makes it illegal to pay or receive bribes intended to influence conduct or behavior, the JBCC prohibits any activity that creates the appearance of impropriety or harms the corporation’s reputation.
Chong can avoid the appearance of impropriety and any harm to Jextra’s reputation by including the opportunity to contribute to Klang’s educational system in his value proposition to senior management for the Klang Neighbourhood Market site development proposal, recommending that Jextra provide the funds for the budget shortfall as a gesture of goodwill to the community of Klang, and ensuring that the donation be made to the school board’s school development fund for the express purpose of meeting their budget shortfall for the construction of a new primary school.
Further, to avoid impropriety, the planned donation should also be included in the formal proposal to Klang as a gesture of goodwill not tied to rezoning (“Jextra would like to build a Neighborhood Market here. Also, we would like to make a charitable donation through the Jextra Social Fund in support of the Klang community by contributing to the construction of a new primary school”).
Any donation to Klang’s school development fund should be made through the Jextra Social Fund, otherwise it might be illegal in Hong Kong if Jextra circumvented its charitable giving organization. By making the donation through Jextra’s social responsibility charity, Jextra as an organization can formally separate its charitable donation from its rezoning bid (even if the reality is more nuanced).
Furthermore, explicitly providing the donation to the school development fund instead of the Klang school board avoids possible connections to the mayor through his sister, and ensures the funds go to educational development instead of being appropriated for other purposes. Finally, explicitly targeting the donation gives Jextra an option for legal redress if the funds are misappropriated.
Second, Chong need only partially comply with the mayor of Klang’s request that Jextra contribute to infrastructure development in Klang. It is generally reasonable for a company to pay for the infrastructural enhancements required by major development projects, such as required improvements to the power and sewer grids and any required road access routes.
Jextra’s proposed development in Klang has already made provision for surface access to the market through the lot’s western facing, and as a consequence it is not reasonable to expect Jextra to contribute to a highway flyover on the opposite side of the lot which is already under construction and unrelated to Jextra’s proposed supermarket. While the mayor of Klang will probably dislike Chong’s refusal to contribute, Chong would be much less able to legally and ethically justify this payment, and paying for the overpass would have the appearance of a bribe due to its lack of connection to the planned supermarket. For Jextra’s sake, Chong should refuse.
Arif Alam
The next ethical issue facing Tom Chong in his position as country manager in Malaysia is exactly what to do about Arif Alam, the category manager for fruits and vegetables. Chong needs to identify whether or not Alam is accepting bribes, if the relationship with his father-in-law is a conflict of interest, and to what extent any of the behavior is illegal.
Tom Chong needs to collect as much information as possible around this situation. He should figure out how to fund an investigation into Alam’s dealings and also try to estimate how long it might take. He needs to identify which individuals would have the most pertinent information, whether it be Jextra’s suppliers, disgruntled employees who compete with Alam, or any other relevant parties. If Chong finds Arif Alam guilty of any of the suspected behavior, Alam could also be in violation of the company’s code of conduct.
The conflict of interest clause would be violated if Alam had “accept[ed] or receiv[ed] gifts of any value or favours.” The code also explicitly prohibits working with family members in certain contexts: “Employees and immediate family or household members may not serve as a supplier or customer of the Company, or otherwise engage in business dealings with the Company, without the written consent of a member of the Executive Management Team.”
Chong would need to determine if written consent existed for the relationship between Alam and his father-in-law. There are a few different alternatives Tom Chong should evaluate before making his decision. He could undergo a full-fledged investigation into everything around Arif Alam, not worrying about who found out or if relationships with both category managers and suppliers would be strained. He could choose to do nothing at all. Or he could launch something more discreet, looking for individuals who could provide information and corroborate their stories.
We recommend that Chong should decide what to do regarding the new store opening in Klang and how to approach the mayor’s demands before worrying about Alam’s possible unethical behavior. The new store is a more pressing issue at this time, but we would have Chong consider opening a discreet investigation into Alam’s dealings in the near future.
