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Business Ethics in the News
JPMORGAN: Doing Business With China's Elite
Monday, Nov. 18, 2013
JPMorgan Chase is under the gun again, as investigators are looking into the bank’s dealings in China. Between 2006 and 2008, JPMorgan partnered with Fullmark Consultants, an obscure consulting firm in Hong Kong, “to promote activities and standing” of the bank’s operations in China. The problem? Fullmark’s executive, operating under the alias, Lily Chang, is actually Wen Ruchun; the only daughter of Wen Jiabao, who at the time was China’s prime minister in charge of overseeing its economy and financial institutions. Throughout the partnership, JPMorgan secured a contract as an underwriter for China Railway Group’s public offering, a company overseen by Ms. Wen’s father, as well as held a stake in the private equity firm, New Horizon Capital, which was founded by Ms. Wen’s brother. While JPMorgan has not been accused of any wrongdoing, the bank has a history of pushing the boundaries of the Foreign Corrupt Policies Act, which prevents companies from offering anything of value to foreign officials to gain an improper advantage in retaining business. Is hiring well-connected people in China just another “cost of doing business” overseas, or is this an ethical failing on the part of JPMorgan’s top brass?
Patrick: Maybe it’s just me, but the line between bribery and strategic partnerships seems to have all but disappeared. Did JPMorgan enter into a contract with Ms. Wen to utilize her familial connections? It sure seems that way, but isn't that what we all do? If you've recently undertaken a job hunt, you know full well the premium that LinkedIn puts on “connections,” and who wouldn’t ask their well-connected relative for an introduction? Nepotism is a real danger here, but we must also acknowledge that if business is about building relationships, we have to expect firms to act accordingly.
Kirk: It’s no surprise multinational firms are hiring the sons and daughters of influential officials, not just in China, but in any area of operation for the company. Particularly in China, business is largely predicated on the development of relationships, often involving the mutual giving of favors. As in this case, the danger is when firms take shortcuts in developing these relationships. The cultivation of authentic relationships is the solution here. It’s not easy, and it certainly takes time, but it’s the line that firms must walk when conducting business overseas.
A Framework for Thinking Ethically (Markkula Center for Applied Ethics)