By Kia Allen amp Marie Claire Llareus Ethical Issue Bribery Bribery the offering or taking of something of value to influence persons or gain an unfair advantage Bribery raises moral and political concerns undermines good governance and economic development and distorts international compe ID: 178315
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Avon Products Bribery Scandal in China
By Kia Allen & Marie Claire LlareusSlide2
Ethical Issue: Bribery
Bribery: the offering or taking of something of value to influence persons or gain an unfair advantage
Bribery raises moral and political concerns, undermines good governance and economic development, and distorts international competitive conditions.
In other countries, bribery is a culturally expected part of doing business and business relationship building. In China, a relationship-based business is highly valued.Slide3
Case Study
Avon Products Inc. vs. U.S. Securities & Exchange Commission
In June 2008, there were bribery allegations in Avon’s China division. An Avon employer paid thousands of dollars to Chinese government officials and third-party consultant agencies in order to obtain governmental permission to conduct door-to-door sales in China.
The allegations later extended to Avon’s Brazil, Mexico, Argentina, India, and Japan division.
Federal prosecutors found questionable payments dating back to a September 2005 draft internal report.Slide4
Timeline
2007
2008
2009
2010
2011
2012
U.S. sales hit $2.62 billion,
only to start shrinking
in
the following years.
OCT- AVON launched an internal
investigation into possible
f
oreign Corrupt Practices Act (FCPA)
violations in China (appeared to
be linked to the payment of
i
mproper promotional expense).
JUNE- An investigation
began regarding
allegations of
bribery in
the China division
which extended to
other countries (an allegation of improper expenses for items like travel and entertainment on behalf of a Chinese government official.
4
th
quarter sales of AVON’s China business posted an 8 percent drop in revenue andan operating loss of $3 million.
AVON spent
$122.5 million on legal fees and costs related to theinvestigationsince 2009.
At least 4 AVONexecutives weresuspended (inboth Asia and U.S.)
AVON reports the number of North
American “reps” fell 8 percent in2011 and says it is planning job cuts.
MAY 5- AVON announcedfiring 4 executives.
DEC 13- AVON announced
it initiated a search for anew chief executive. CEOAndrea Jung announced stepping down and staying onas executive chairman.
FEB 24- AVON filed a report with
The Securities and Exchange
Commission (SEC) highlighting the
event as a corporate risk factorthat could cause investor loss.
AVON won adirect selling license and wasapproved to returnto China.
2006Slide5
Organizational Chart
Avon Products Inc.Slide6
Organizational Chart (cont.)Slide7
Proposal