Voles System's Bribery Accusations in China

This case describes the bribery accusations and subsequent investigation of the Chinese subsidiary of a U.S. publicly listed Fortune 500 company, disguised as "Voles System". The primary purpose of the case is to illustrate the internal corporate governance challenges of developed-market multinational corporations (MNCs) operating in emerging markets. This case stands out in the management education field, as it fills a gap where there are very few teaching cases discussing the dark side of international business in emerging markets. After a brief introduction of the company's background, the case describes two anonymous internal "whistleblower" allegations that the Mainland China business unit (BU) had been bribing Chinese officials to win contracts. In response to these reports, the Legal Department conducted two investigations in late 2015 and 2016, respectively, but neither found concrete evidence of bribery, and the allegations could not be substantiated. A third report was subsequently made to the U.S. Department of Justice (DOJ) in April 2017. The DOJ placed Voles under formal investigation. While the investigation found that there was no concrete evidence of bribery of Chinese officials, several managers and staff of Voles's Mainland China BU had established a slush fund and related business entities to entertain senior managers of its key customers in China. The DOJ's investigation came at a great financial cost and hurt the company's reputation in the oil and gas industry. This case ends with multiple questions facing Voles and many MNCs operating in emerging markets: How did Voles fail to prevent such management malfeasance even after implementing industry best practices for corporate governance? What are some short-term measures through which Voles can address the situation in the Mainland China BU as revealed by the DOJ's investigation? What long-term measures should Voles implement to prevent such corporate governance failures from happening again?

• International business
• Corporate governance
• Corporate strategy
• Business and government relations