Ralph Lauren: $1.6 Million Bribery Case (2012)

Controversy

Ralph Lauren Company logo

Over the past 45 years Ralph Lauren Corporation has been a leader in design marketing and distribution of premium lifestyle products. This well-known worldwide company has been a part of a major overseas bribery case. From 2005 until 2009 Ralph Lauren’s Argentinean subsidiary had been paying bribes to officials in the Argentinean government. The company discovered misconduct in an internal audit and reported violations of the law, called the Foreign Corrupt Practices Act. Over this four-year period Ralph Lauren Corporation located in Argentina, paid Argentinean customs officials about $593,000 in bribes to import its goods into the country.
All of these illegal payments allowed the company to avoid customs inspections and related paperwork. This was not the only bribe that the company had given. It also gave a number of Argentine government official’s gifts, including the company’s coveted Ricky handbag, which sells for around $22,500. After getting caught by the government, Ralph Lauren has agreed to pay $1.6 million to resolve the charges. The charges that Ralph Lauren had to pay for were the illegal payments and the gifts that were given to the foreign officials. The company agreed to pay penalties of $882,000 to the Justice Department and about $735,000 to the Securities and Exchange Commission (S.E.C.). S.E.C. officials went out of their way to praise Ralph Lauren for its assistance during the investigation. “When you do all the right things in terms of investigating, self-reporting, cooperating and taking appropriate remedial measures, both the S.E.C. and Department of Justice are willing to reward that behavior,” said Thomas A. Hanusik, a lawyer who represented Ralph Lauren. Since being charged, Ralph Lauren has closed all operations in Argentina and does not plan on doing business with them any time in the near future.

Individualism

Ralph Lauren, founder

As shown in Professor Salazar’s PowerPoint titled Does Business Ethics Make Sense she discusses the meaning of individualism. Salazar states, “Everyone has the right to pursue his own interests and should do so, but no one has a right to make other people’s choices about their pursuits for them” (Salazar 11). Milton Friedman’s view on individualism is, “the only goal of business is to profit, so the only obligation that the business person has is to maximize profit for the owner or the stockholders” (Salazar 12). Individualism relates to the Ralph Lauren Corporation overseas bribery case in numerous ways. The Argentinean subsidiary did have the right to pursue their own interests but when it involves a large company and other people’s jobs are on the line it is very unethical. Bribing government officials and customs workers to avoid customs inspections and related paperwork was not the ethical or right thing for Argentina subsidiaries to do. Although they thought that they were doing the right thing at the time they were not because not only did they get involved in illegal terms but they also got Ralph Lauren into a mess that should not have happened. Every businesses goal is to make a profit, but unfortunately the Ralph Lauren Corporation over in Argentina wanted to make profit but in unethical ways breaking the law. Ralph Lauren has always been a well-known, worldwide, high-end company. After this case controversy the Ralph Lauren brand did not lose respect from too many people. The company did not lose respect because they were truthful and once Ralph Lauren himself found out about this issue he took it upon himself to help with the investigation. Even though it cost them $1.6 million in charges, the company did the right ethical thing.

Utilitarianism

The definition of utilitarianism is to maximize happiness in yourself and others. Utilitarianism has a large impact on the modern world and has been particularly significant in shaping politics and economics. It was made clear in the article that the Argentinean subsidiary wanted happiness in itself because by bribing all the people that it did it made the company look better for the time being. During the time when the bribes took place the subsidiary had complete control over what was coming in and out of the country because they avoided the customs inspections and the related paperwork. The Argentineans did not think about what would be best for the company or themselves in the long term. Ralph Lauren went about this whole situation in the right way because he did what would make everything right for himself and the company. Ralph Lauren had nothing to hide and proved that to the government. Ralph Lauren did not have any part in the bribes and he made that clear by making things better and maximizing happiness for himself and the company as a whole.

Kantianism

Polo Ralph Lauren storefront

Kantianism is the philosophy of Immanuel Kant, a German philosopher. The Kantianism theory has four basic principles which are, “to act rationally- don’t act inconsistently in your own actions or consider yourself exempt from rules, allow and help people to make rational decisions, respect people, and their individual needs and differences, and be motivated by Good Will seeking to do what is right because it is right”(Salazar 2). Kantianism theory relates to the Ralph Lauren bribe case in many ways. The Argentinean subsidiary made irrational decisions causing this lawsuit because they thought that they were invincible and exempt from the rules that not only the company had but also the government. After four years of getting away with paying bribes to the government and to the customs workers the subsidiary figured there was no chance at this point of getting caught.
The subsidiary did not intentionally mean to not respect people but by going against the law they disrespected all of the people working for Ralph Lauren. The people taking the bribes did not see any wrong in what they were doing because they were getting something out of it, they were not motivated by goodwill by any means. One of the formulas that Kant describes in the Kantianism theory is the formula of humanity, which is to “Act in such way that you treat humanity, whether in your own person or in the person of another, always at the same time as an end and never simply as a means”(Kant, MM 429). In this quote Kant explains everyone should act how he or she would like to be treated. Kant’s theory runs parallel with this bribery case. When the employees from Argentina realized that they could potentially make more of a profit by giving illegal bribes they did so. By doing these illegal acts the Argentineans got what they deserved in that they no longer had any business with the Ralph Lauren Corporation.

Virtue Theory

As presented in Professor Salazar’s PowerPoint Business Ethics and Virtue the definition of Virtue is “the characteristics that allow things to function properly”(Salazar 4). There are four main virtues in business, which are courage, honesty, temperance, and justice. Courage is the risk-taking and willingness to take a stand for the right ideas and actions. Although the Ralph Lauren Corp. in Argentina did not show courage, Ralph Lauren himself did. Ralph Lauren showed courage by not tolerating with all of the bribes and by completely cutting off all business with Argentina. Honesty is the agreements, hiring and treatment of employees, customers and other companies.
The subsidiary in Argentina was not honest in any way towards the company employees or the customers because they only cared about their position and nobody else’s within the company. Temperance is the reasonable expectations and desires. Ralph Lauren did have temperance in regards to the Argentineans, the expectations he had for them that they would act ethically when conducting business were reasonable. Justice is the hard work, quality of the products, good ideas, and fair practices. While everyone was working hard in the United States for Ralph Lauren, the people working for him inArgentina were not doing the same. The subsidiary in Argentina did not show justice because all of the unethical things they did brought harm to the company. I believe that the company went about this problem in the best way possible. Although they did have to pay $1.6 million Ralph Lauren did not cause any problems during the investigation and actually helped throughout it. Ralph Lauren himself did comply by the four virtues in business unlike the company that he had working for him in Argentina.

References

Gallu, Joshua. "Ralph Lauren Agrees to Pay $1.6 Million in U.S. Bribe Cases." Bloomberg.com. Bloomberg, 22 Apr. 2013. Web. 18 Feb. 2014.

Krupnick, Ellie. "Ralph Lauren Bribery Case Settled For $1.6M." The Huffington Post. TheHuffingtonPost.com, 23 Apr. 2013. Web. 19 Feb. 2014.

Lattman, Peter. "Ralph Lauren Corp. Agrees to Pay Fine in Bribery Case." DealBook Ralph Lauren Corp Agrees to Pay Fine in Bribery Case Comments. N.p., 22 Apr. 2013. Web. 18 Feb. 2014.