Multinational's ethical responsibilities

Despite the charges, Sam Walsh, chief executive iron ore of Rio Tinto said the company "continue to believe that our employees have acted properly and ethically in their business dealings in China," according to Rio Tinto's website on August 12.

Walsh said a day earlier that "Rio Tinto is committed to high standards in business integrity and takes its ethical responsibilities very seriously."

On July 17, a week after the four employees were detained, Walsh said the employees "acted at all times with integrity and in accordance with Rio Tinto's strict and publicly stated code of ethical behavior."

However, Australia-based National Business Daily reported on August 8 that a US class action against Rio Tinto seeking damages for human rights abuses stemming from operations at the Panguna copper mine, Bougainville of the Papua New Guinea, had cleared a crucial hurdle -- and could reach trial within two years.

It said a US court had ruled that three of the claims -- for alleged crimes against humanity, war crimes and racial discrimination committed by Rio Tinto in the 1980s and 1990s -- should proceed under an American law that permits foreigners to bring action on major international crimes.

The US court was justified to do that as Rio Tinto was listed on the New York Stock Exchange (NYSE:RTP) as a foreign company.

But a spokesman for Rio Tinto, Tony Shaffer, said, "Rio Tinto completely rejects the allegations of wrongdoing made in the Bougainville complaint and will continue to vigorously defend the matter."

In response to Rio Tinto's bribery case in China, the US Securities and Exchange Commission (SEC) was preparing to probe NYSE-listed Rio Tinto.

The Australian newspaper said on July 24 that the investigation would be based on the Foreign Corrupt Practice Act (FCPA) enacted in 1977.

An earlier FCPA case saw the 162-year-old German conglomerate Siemens, which employs about 475,000 people worldwide, forced to pay US$1.6 billion to settle bribery charges.

The SEC released last year a legal filing on the bribery cases of Siemens, not only in the US, but also in foreign countries including China.

According to the SEC's litigation release, the Munich-headquartered company was involved in bribing government officials worldwide in return for business contracts. It was also accused of paying bribes on its transactions in China of metro trains, signaling devices, high voltage transmission lines, and medical devices.

Label maker Avery Dennison Corp, based in Los Angeles, was the latest foreign company involving in bribery in China. Avery agreed to pay a US$200,000 fine over charges that employees bribed Chinese government officials with kickbacks, sightseeing trips and gifts, the SEC said on its Web site.

The SEC also filed a settled complaint against Lucent Technologies Inc. in a US court in December 2007, alleging violations of the FCPA. Lucent is a wholly-owned subsidiary of Alcatel-Lucent, a French company with business operations in China.

The SEC's complaint alleges that, from at least 2000 to 2003, Lucent spent over US$10 million for about 1,000 Chinese foreign officials, who were employees of Chinese state-owned or state-controlled telecommunication enterprises, to travel to tourist destinations of the US, such as Hawaii, Las Vegas, the Grand Canyon, Niagara Falls, Disney World, Universal Studios and New York City.

But it alleges that the majority of the trips were ostensibly designed to allow the Chinese foreign officials to inspect Lucent factories but officials spent little or no time visiting Lucent facilities.

Professor Shen Kui of the Beijing University Law School attributed bribery by multinationals in China to the incompatible development of business culture though the market economy developed quickly.

Shen said some large companies boasting high levels of ethnic standards would likely choose to downgrade their codes of conduct, following "hidden rules" and involved in commercial bribery in China.

"The cost of breaking law is rather low so that foreign companies prefer taking risks to bribe in order to gain profit," he said, adding law enforcement should be strengthened to curb bribery and maintain a sound market order.

Shen said the law had "no discrimination in treating people" and it was common to see Chinese businessmen being charged with economic crimes.

The latest remarkable case was China's electrical appliance tycoon Huang Guangyu who was detained on November 24 and was investigated by the police, on charges of manipulating trading in shares of two listed companies, Sanlian Commercial Co. and Beijing Centergate Technologies Co..

(Xinhua News Agency August 14, 2009)