Case study of Japanese bribe

The case basically talks about the “bribe” in Japan by the Lockheed Aircraft Company. Mr. A Carl Kotchian is the president of the company. In 1970 they were saved from bankruptcy emergency government loan of $250 million. In order to save from financial disaster Lockheed is desperately looking to sell it air craft in major Japan airline. Eventually Kodama succeed in entering in to contract sell Lockheed aircraft in Japan with $9 million bribe to the Prime Minister Kukeo Tanaka and other government official, they knew that by paying the bribe they were sure that they will get the contract to sell their plane in All-Nippon Airline.

Officials from private trading company advised about the bribe, but Mr. A Carl Kotchian says that it was the “Japanese Business Practice” in which local consultant is in more supportive to keep in with local “business practice”

US investigate and found $22 million as bribe or secret payment but they mention it as “marketing cost in their books of account. Internal Revenue Codes states it as bribe which is directly paid to the officials and employees. But however it was not considered as bribe during that time for no us enact rules by US government. But due to guilt of bribe Mr. Kochian was resign with the pressure from board of directors and Kodama was arrested.

Mainly there are three main stake holders;

1. Mr. A Carl Kotchian who was the president of Lockheed Air Craft Company who bribe different Japanese parties to sell his product in Japan

2. japanese parties which includes Prime Minister Kukeo Tanaka and his officials enter in to the contract to buy air craft from Lockhood Company

3. Yoshio Kodama the consultant of Lockheed Company to engineering the contract of Lockheed Company with Japanese parties.

Highlights of the case

Mr. A Carl Kotchian wants to sell his plane to any major air line in the japan, but in japan McDonnell Doulas was the main supplier of aircraft. If Mr. A Carl Kotchian fails to sell his aircraft in Japan then there is great chance that of bankruptcy of the company since they have got no customer and thousands of employees will lose their jobs and remain jobless

Japanese parties can buy the product of Lockheed Company provided, if they pay $9 million to the government of Japan as donation which much of money went to the Prime Minister and other government’s officials who actually were interested with All-Nippon Air lines.

The internal auditors and consultant of Lockheed Company were left with no options to incure or audit about the payment of bribe to the Japanese government because they will be jobless since the only source of income will be from Japan.

US police investigate the case i.e. payment of $22 which is secret, but Mr. A Carl Kotchian justified it as “Japanese business practice” and he also told they have paid in order to enter a contract which would provide Lockheed worker with job and thus redound the benefit of their dependent, communities and the stake holder of the corporation.

Now Lockheed was pleaded guilty of payment of huge amount of bribe to the Japanese government they have concealed the amount as “Marketing cost” of course it is not in accordance with Internal Revenue Code. But however US law forbids it as not bribe.

At the end of the case board of directors are left with no option of false statements of bribe as “marketing cost” to the government. Mr. A Carl Kotchain was force to resign under pressure.

To identify what went right in the case and what went wrong

In this case we have to look from different direction, Mr. A Carl Kotchain have bribed Japanese parties because in order to provide Lockheed workers with job and to the benefit of their dependence, their community and stake holder of the corporation. But however Mr. A Carl kochain contract was not ethically signed to have the business. They have sign the contract bribing the Japanese government by huge amount of around $9 million which in my opinion would have used for marketing strategies such as advertisement, research and development, campaign etc rather than bribing.

Japanese government accepting the bribe to sign the contract of Lockheed is very unethical. Here in Japan corporate government control fails to control and it is terrible in which bribe is the “business practice” of Japan. But however the Japanese people have done good job by making Kukoe Tanaka to resign from the post of prime minister and ousted Tanaka as successor.

Mr. A Carl Kochian resign was also good job because he considers bribe is market strategy to promote the sale which there is a chance that he will make it as culture of the organization. Instead he might have used a good market strategy which is ethical.

Mr. Kodama was arrested and he deserves because he is the main person to negotiate the unethical contract between Japan government and Lockheed Company.

• Corporate government has failed to appoint the independent auditors to professionally judge the case of bribery. So that they can prevent the unethical business strategy adopted by Lockheed Company. • It would be better if they have appointed independent auditors to audit Lockheed Company. • The corporate governance control have failed to learn the Japanese business culture of bribery as their local business practice • Such a culture of bribery business practice should not allow to Japanese government. Corporate governance should pass a rule and regulation to erase such practice.