Walmart's Discounted Ethics in Mexico

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Most of the hottest markets--Mexico, China, India and others--score quite badly on TI's overall corruption index. But the nuances of corruption differ. I once interviewed a British businessman who led an international rollout for a major U.K. retailer and asked him which emerging markets had the most corruption. He said, only slightly tongue in cheek, "In China, you might pay 20 on the dollar to get your project done, and it will get done quickly. In India, it's 40, and it will get done in a few years. In Russia, it's 80--and you may get shot before it gets done."

There are no such nuances for American companies subject to the Foreign Corrupt Practices Act (FCPA): regardless of the local practice, bribery is illegal. And as U.S. firms' business in foreign markets has grown, so has the Justice Department's aggressiveness in pursuing FCPA cases, which have been on the rise over the past few years. A number of big retailers have decided that the risk-reward ratio in such markets simply isn't good enough. Ikea, for example, stopped opening stores in Russia because of corruption and delayed its India expansion in part because it didn't believe it could adequately police complex local supply chains there.

It was an unusually proactive move; another lesson from the Walmart case is that it usually takes a crisis to spur real change. Siemens, the German industrial conglomerate, has been rehabilitating itself since a 2006 corruption scandal involving more than $1 billion in bribes across several countries torpedoed its reputation and stock price. After Siemens worked with Justice officials, its codes of conduct became a competitive selling point and were widely copied by other firms. Walmart should take note. As anyone familiar with Watergate knows, the cover-up is usually worse than the crime.

Time.com

Walmart's Discounted Ethics

Its Mexican bribery scandal shows the perils of bowing to local "custom"