Earlier this week, Taiwanese prosecutors indicted five former employees of Foxconn Technology Group for allegedly taking kickbacks from suppliers.
The Taipei District Prosecutors Office said in a press release that the five people, all of whom were involved in procurement, had received more than 160 million new Taiwan dollars ($5 million) in bribes from 10 suppliers over two years, starting in July 2009, an article in the Nikkei Asian Review reports.
Foxconn, also known as Hon Hai in Taiwan, is the world’s largest maker of computer components and employs approximately one million workers at its factories across China. Those workers assemble products for top international brands such as Apple, HP, Sony and Nokia.
Prosecutors said the kickbacks came in the form of “entertainment fees or service fees,” according to Nikkei Asian Review. “In exchange for the illicit payments, the suppliers were promised better deals. They could be selected as the group’s official vendors, quoted a higher price, get increased volume, and receive payment faster,” the prosecutor’s office said.
An article running on The China Post adds more detail, explaining that Liao Wan-cheng and Teng Chih-hsien, who were senior managers at a Foxconn procurement unit, were charged with breach of trust for accepting kickbacks from 10 suppliers in exchange for clearing quality checks and buying their equipment, prosecutors said. A middleman was also charged, that article reports.
The allegations surfaced after Taiwanese media reported last year that Teng had been detained by police in the southern Chinese city of Shenzhen for allegedly taking bribes from suppliers.
Foxconn said at that time, it was reviewing its acquisition procedures and the integrity of managers, and that its operations in China had not been affected. The company has since said that the alleged violations were limited to the procurement of consumables and accessory equipment.
The investigations—and now indictments—have me thinking about corruption, and specifically, bribery in the supply chain, as well as how it can be prevented. For example, companies can improve expense management and documentation. By requiring documentation for every expense and transaction, it’s possible to close some of the loopholes that allow bribery. Some companies also have internal hotlines or tiplines employees can use to report suspected corruption.
More importantly, companies can work to create teams and ensure the entire team meets with suppliers. That’s an essential process for companies working to establish a presence in new markets. That’s because it’s more difficult for anyone—or even a couple people—to receive bribes when the whole team deals with suppliers.
Nonetheless, that doesn’t mean there aren’t ways around such steps and processes. It also doesn’t mean some employees won’t be tempted to ask for kickbacks, and it certainly doesn’t mean some suppliers won’t offer expensive gifts in hope they gain more favored status or larger orders.
What are your thoughts, either about Foxconn or the potential for bribes in the supply chain? Does your company have steps to prevent such activity? Finally, have you ever been offered a bribe?