CASE
What company wouldn’t want a “leg up” in obtaining contracts for lucrative new business?
• Case: It’s All in the Family
This case highlights how some companies are hiring the sons and daughters of influential foreign officials and businesspersons in China to enhance the likelihood that they will get business.
What company wouldn’t want a “leg up” in obtaining contracts for lucrative new business? Seeking to gain an advantage in the competitive world of investment banking led J.P. Morgan Chase & Company officials to seek out and hire the children of prominent Chinese officials. The individuals hired may have had the knowledge or skills needed to fulfill the jobs for which they were hired. But their most valuable qualification was something in their genes—being related to an influential member of the political or business elite in China. Having a connection to someone with decision-making authority to grant business opportunities to J.P. Morgan might have been the distinct factor that resulted in them getting the job.
The purposeful targeting of well-connected sons and daughters with the express purpose of driving business contracts might be considered bribery under federal law. The U.S. Justice Department has launched an investigation to determine if these hiring decisions violate the Foreign Corrupt Practices Act. In fact, the chief executive of J.P. Morgan’s China operations voluntarily resigned. J.P. Morgan isn’t alone in using such a practice. Citigroup, Goldman Sachs, Morgan Stanley, UBS, and others are also said to have done so.
Company executives at J.P. Morgan were aware of the program as well as broad anticorruption measures several years before the Securities and Exchange Commission began its investigation. Claiming that this preferential hiring is “the norm of business” in China, J.P. Morgan’s top leaders believe they acted according to accepted standards. J.P. Morgan’s business acquisition in China did indeed improve after it launched the selective hiring program.
The bank developed a spreadsheet detailing potential recruits along with their “valued” connections or business-enhancing prospects. They also created a special internship to accommodate some applicants who were screened less stringently than other job applicants. So, the candidates were given particular attention and a smooth path to employment. Government officials aren’t stating that the employees are not qualified. They are more interested in the reason each was selected from the applicant pool. A finding that any of the banks involved intentionally hired the sons and daughters to win business might result in bribery charges.
The banks are scrutinizing their hiring practices as they respond to the government investigators’ inquiries. This practice highlights differences in cultures, norms, and laws among nations. What might be considered an expected and completely acceptable practice in China might be deemed illegal—or at the very least, unethical—in the United States.
- Explain why it is or is not a good practice to consider the connections a job applicant might have that could enhance an employer’s business portfolio.
- Discuss whether targeting the children of well-connected political or business leaders is ethical.
- Imagine that you are the Chief HR Officer for a company considering doing business in China. You have been informed that many of your competitors have implemented programs to hire the sons and daughters of influential Chinese leaders. What advice do you give to your executive leadership team? Whose interests would be most important in your policy decision?
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• Prompt: Complete the case at the end of Chapter 7, “It’s All in the Family” by answering the questions at the end of the case. This case is located in the supplemental cases at cengage.com/login. You will have to follow the directions to set up a user account to access this case (if you have not already done so). Additionally, elaborate on how you would handle doing background checks and hiring.
• Requirements: 500 words minimum – Include in your response how Philippians 4:8-9 guides us in decision-making. You may use this scripture or another passage that is appropriate.
Answer preview what company wouldn’t want a “leg up” in obtaining contracts for lucrative new business?
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