ACCTING2501 Financial Accounting

A BHP Billiton mining deal being investigated for alleged corruption was personally overseen by Cambodian strong man Hun Sen, diplomatic cables reveal. The mining giant’s aborted attempt to establish a bauxite mine in Cambodia and its hospitality program for Chinese officials at the 2008 Beijing Olympics are at the centre of a foreign bribery probe involving the Australian Federal Police and the US Justice Department.

Diplomatic cables, several marked ‘sensitive’ and ‘protected’, show for the first time Cambodian Prime Minister Hun Sen’s close involvement in 2006 negotiations with BHP executives. The cables show Hun Sen told a private audience in Cambodia that he would give ‘BHP 1 million hectares of land’ weeks before the 2006 agreement was signed. He also promised the company ‘a possible tax holiday’ and chaired a committee examining legal issues associated with the BHP proposal.

The cables reveal how BHP decided to stop all mineral exploration in Cambodia in 2009 just months after a British-based non-government organisation exposed its ‘tea money’ payments of US$3.5 million to Cambodian government departments and raised concerns some of the money had gone missing. There is no evidence suggesting any of the money went to Hun Sen, who has dismissed reports suggesting BHP was involved in bribery in Cambodia.

The cables, released under FOI by the Department of Foreign Affairs and Trade, show BHP in 2006 took what Australian officials regarded as an unusual step of asking them to directly approach Hun Sen for a meeting to ‘go to the next level and close the deal’. Although Australian officials rejected the request to approach the Cambodian leader on BHP’s behalf in order to ‘preserve our political capital’, embassy staff in Phnom Penh contacted Hun Sen’s office to get a contact name and number to pass to BHP.

In September 2006, Hun Sen and BHP executives signed an agreement granting the firm and joint venture partner Mitsubishi rights to explore a huge area of land for bauxite deposits. The deal was ratified by Hun Sen and then prime minister John Howard weeks later.

The cables make clear that although BHP’s exploration process was progressing slowly during 2007 and 2008, the company’s Cambodia-based executives were optimistic about the project’s success. However, the diplomatic cables show a change in BHP’s stance on Cambodia shortly after the February 2009 release of the Global Witness report.

In April 2009, Australian diplomats sent a ‘confidential’ cable to Canberra raising doubts about BHP’s long-term commitment to Cambodia, blaming the global financial crisis and the country’s ‘own poor financial management’. The cable stated that any withdrawal by BHP would ‘not only breach BHPB’s MOU with the Cambodian government (signed in the presence of prime ministers Hun Sen and Howard in Canberra in 2006)’, but would also ‘diminish Australia’s influence in this major sector’.

Australian diplomats in Phnom Penh also sent a cable to Canberra in response to the claims by Global Witness stating that ‘the specific references [to] Australian companies are very concerning’. However, they remained confident BHP had done nothing wrong.

BHP told the Australian government in June 2009 that it would pull out of Cambodia because the bauxite deposit was not worth mining due to global financial conditions.

Required

A. Provide an overview of ethical decision-making model

B. Provide an overview of ethical principles

C. Identify the stakeholders in this situation.

D. Determine the ethical issues (if any) involved.

E. Comment on the ethics of bribing officials in a country where you are conducting business given that such actions are part of the country’s normal business practice, but they are unacceptable in your own country.

Assignment Answer:

The ethical principle is those that help in the smooth functioning of the company by laying a strong foundation and ensuring the actions are well directed. It provides a framework that is generalised and the manner in which the ethical dilemma must be widespread. Such principles provide guidance in solving the issues that occur due to ethics. The laws of ethics lead to a proper course of action and hence, following the same provides a robust framework.The ethical principles that are followed by the organisation are:

The principle of respect for autonomy

Autonomy can be defined as self-rule and contains an obligation to respect the independence of others. This means that the rights and the actions of the others are duly honoured. Other people have their decision making process and have their statement. It is therefore imperative that the company needs to respect their lives and decisions. This is even termed the principle of human dignity (Edwards, 2015).Such a policy provides a negative duty not to interfere with the process of decision making of other that is, it is an affirmative duty not to interfere in the others decision making process. It is, therefore, necessary that the company should be honest in the dealings and ensure the smooth functioning in a just and fair manner. Any violations will lead to the bad reputation of the company.

Secondly, an organisation needs to follow the principle of beneficence that indicates an organisation should bring good in all the actions. Hence, it is required from the organisation that positive steps should be undertaken to prevent any harm. It is imperative for the organisation to ensure that the organisation ensure steps that are directed towards the well being of the others (Albuquerque, Dumey & Koskinen, 2013).

Thirdly, the principle of nonmaleficence comes to the forefront where it is indicated that the company should not intend to do any harm. It is important for the company to ensure that there should be no harm or were any contingency is involved there should be a method to minimise the damage (Albuquerque, Dumey & Koskinen, 2013).It is well understood that cost cannot be avoided and hence there must be a well-directed principle to reduce the harm. Further, any wrong policy can lead to wastage of resources and will fall flat. When beneficence and nonmaleficence are added, it leads to action that produces the more positive result as compared to the harm.

Lastly, the principle of justice states that there is an obligation to provide others whatever they owe or deserve. Hence, it is upon the functioning of the business to give the people the benefits they deserve. Accordingly, the organisation should not act in a manner that will lead to the unfair burden. Imposing undue burden will lead to negative publicity for the company and in turn will destroy the goodwill (Edwards, 2015). Hence, the company should follow the principle that is best directed at bringing the good and passing the benefits.

References

Albuquerque, R,Durnev, A,Koskinen, Y. (2013) Corporate social responsibility and firm risk: theory and empirical evidence.Boston University.

Edwards, M. (2015) Why it’s time to say goodbye to ‘doing good and doing well. Available from: https://www.opendemocracy.net/transformation/michael-edwards/why-it-s-time-to-say-goodbye-to-doing-good-and-doing-well [Accessed 17 September 2018]