With slower growth in Western countries, going abroad for new business is essential. Though the opportunities are huge, many companies aren’t prepared for the ethical dilemmas that pop up overseas.Strategy+Business interviewed William J. O’Rourke, the former head of Alcoa in Russia, who ran into some pretty serious issues early on in his tenure in 2005:
“Within his first days on site, O’Rourke began encountering common forms of Russian extortion and corruption. Once he was robbed by local police officers who spotted him walking away from a cash machine. Another time, he received a casual death threat from a government official for refusing a payoff on a bribe. “If this was five years ago,” the official told him, “I would kill you, and I would get away with it.”
According to Rourke, that sort of corruption is not just in business and government, but part of the culture. He said that “…people expect to be extorted to get good medical care, to get their child accepted into a first-class university, or to get any legal document processed quickly.”
The only way to deal with those levels of corruption, which sent Alcoa fleeing from Russia the first time it tried to enter the market, is to take an ethical stand and stick to it no matter what, even when it slows you down. The second you waver, you lose credibility forever. Rourke says:
“…we were preparing to take delivery of a new $25 million aerospace plate furnace in the Belaya Kalitva plant. The local police stopped the transport trucks on the road into the city; we were informed that the trucks would not move until a certain government official got the equivalent of $25,000. We didn’t pay, and we told them, “The furnace can rust there.”
After 72 hours, they finally let the trucks go. The entire first year had incidents like that, which significantly held up investment, leading to complaints from top management. But by holding absolutely firm, O’Rourke and Alcoa ended up creating a safe and very profitable Russian division that didn’t have to deal with constant requests for payment or holdups from suppliers and police.
Giving in to corruption in a new country may be the easiest, fastest way to grow, but taking the completely opposite approach is a much stronger advantage in the long run.
Read the full interview at Strategy+Business
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