Uber’s controversies with Asian Governments (Sept. 20, 2017)

The Case                                                                               Ubers Indonesian' Offices

Offices like these were kept by paying local officials to neglect
the fact that they were not in the correctly zoned area

            Recently Uber has exploded as a company and went from a small startup company in San Francisco to an international company with many different branches. Expanding this rapidly will always come with many obstacles and issues. Asia has been an area of issue for Uber since they started business there. Uber has had incidents and the past and is currently under investigation by the United States government. Uber is cooperating with the investigation therefore showing it did not intend for these incidents to happen. One of these issues was in Jakarta Indonesia, “Police officers said the space was outside city zoning for businesses, so an employee decided to dole out multiple, small payments to police to continue operating there, the people said. The transactions showed up on the employee’s expense reports, described as payments to local authorities” (Newcomer). Uber has fired this employee and has placed Alan Jiang, the person who oversaw the Indonesia branch as well as approving the expense report with these payments in it, on leave of absence.  One of the senior members of Uber chose not to report this to the U.S. officials even though he knew about it last year. They did however release the information when the Justice Department asked them about it, this will allow the justice department to be a little bit more lenient since they voluntarily told the department the information.

            The next incident that occurred was that Uber made a large donation to Malaysian Global Innovations and Creativity Centre. This company is designing the app that Uber will use in Asia. It is also a government backed entrepreneur hub in Malaysia. Within a short time after this, a donation by Kumpulan Wang Persaraan, a Malaysian pension fund, invested 30 million dollars in Uber. Due to the surfacing of the payments in Indonesia and the inquiries about the donation and then investment Uber has hired, “law firm O'Melveny & Myers LLP to review its Asia operations. It previously hired the firm to investigate how it obtained the medical records of an Indian woman who was raped by an Uber driver in 2014, Reuters reported in June” (CNBC). They will be looking to see if Uber broke the Foreign Corrupt Practices act (FGPA). This law makes it illegal for American companies to pay or bribe any foreign government. The probe is investigating this transaction and transactions like this one because, “Less than a year later, the Malaysian government passed national ride-hailing laws that were favorable to Uber and its peers. Lawyers are trying to determine whether there was any form of quid pro quo” (Newcomer). There are many red flags in this entire transaction and it does not help that there has already been bribery in Indonesia by Uber. It is said that two former executives of Uber, Emil Michael, and Eric Alexander, are to have played key roles on negotiating these deals. The Department of Justice, “is looking into potential violations of the Foreign Corrupt Practices Act, which forbids US companies from paying bribes to foreign officials” (Price). Uber is excited to continue and build on their business in Asia. There was a post on their website saying that Uber appreciates, “the government’s support for the innovative business model that Uber represents; as an important driver of economic growth, providing new, cost-effective transportation options and helping address challenges of congestion and pollution” (Khera). Uber is also ready for the many regulations that do come with the passing of ride sharing in Asia. According to their website, their, “focus at this time will also be helping driver-partners efficiently and effectively make plans to transition to this new regulatory environment. (They) look forward to continuing (their) engagement with the Government on this” (Khera). The government although passing laws in favor of Uber has still put many regulations on the ride hailing industry. One of the regulations is from, “the Prime Minister’s Department Datuk Seri Nancy Shukri said e-hailing companies will have to submit drivers’ identification to the Land Public Transport Commission (SPAD) to facilitate criminal checks to be carried out before these drivers are hired” (Jun). This is a reasonable regulation on the industry, it assures customers that the Uber drives will be trustworthy people. The regulations also include, “This bill will make it compulsory for e-hailing companies to have an intermediation business license and comply with conditions set by the Commercial Vehicles Licensing Board” (Jun). Due to this Uber will need to stay a licensed company throughout Asia in order to operate. Some of the regulations do benefit taxi drivers by reducing their checks from every six months to once a year. Another regulation that benefits taxis is that, “e-hailing drivers are only allowed to operate in the country while taxi drivers can take passengers to Singapore and Thailand due to a government-to-government agreement between Malaysia and the two neighboring countries” (Jun). When Malaysian Global Innovations and Creativity Centre was asked about these transactions their response was, “We strongly refute our involvement in any quid-pro-quo arrangements” (Newcomer). Most of these transactions show that there was some bribery occurring and from the outside looking in it seems that they had to pay off the government to be able to operate their business. Many of the government in these developing countries are already corrupt and there are few other ways to get anything passed to benefit a company with out bribing the local government.

            This case has a lot of depth and the surface has only been scratched since it is so recent there is an ongoing investigation that will hopefully uncover more evidence that can provide a clear concise end to this case. Only time will tell if there was bribery involved between Uber and the Malaysian government.

Stakeholders                                                                              The CEO of Uber

Uber's current CEO Dara Khosrowshahi

There are many key stakeholders in this case since it involves both a private company and different governments. Each individual government is a stake holder since they have each either taken or given money to the company. This shows that there is a section of the government that is corrupt. The users of Uber are at stake but in a much smaller way since these issues do not directly affect them, but they would still be paying into a corrupt company which no one really would like to do. The CEO of Uber is also a large stake holder since all these decisions reflect on him. In total there is a case of bribing the police, faulting obtaining of medical records, getting fraudulent money invested in the company, and having laws made to favor the company based on the money they paid to the government.

Individualism

The individualist theory is that a business must operate in the best interest of its stakeholders and turn the most profit possible while staying within the law. Milton Friedman’s view of individualism is just that a business must operate to maximize profits and stay within the law. Any other action that would not result in profits would be deemed unethical since it would be stealing from the owners and stakeholders in the company. Tibor Machan argued that this idea can hold a business back since sometimes there are decisions a company makes that in the short-term stumps profits, however eventually will yield much greater profits. Machan did agree with Friedman on the fact that the company still needed to stay within the law (Salazar 17-28). In this case it seems that Uber did not stay within the law and therefore based on the individualist theory this was an unethical choice. Uber in the first case of the office space in Indonesia clearly paid the local officials to allow them to use an incorrectly zoned area as an office space. In doing so Uber broke bribery laws which violates the idea that individualism is based on. The second case has a less evidence currently since the public does not know if the donation made by Uber and the investment made by Kumpulan Wang Persaraan had anything to do with bribing the government. If that is the case, even though the decision to donate money was in the best interest of the company and its stake holders since it then allowed Uber to operate, it is still unethical base on individualism since it still violates the law. Uber as a company has violated the individualistic theory on the sole premise that their bribes even though they were in the best interest of the company were illegal.

Utilitarianism

Utilitarianism is the promotion of happiness throughout the entire community. Every person needs to benefit from the company’s decision not just the company. Utilitarianism base for ethical rule is that the, “Business actions should aim to maximize the happiness in the long run for all conscious beings that are affected by the business action” (Salazar 19). In this case the company’s decision to invest in the Asian government created happiness for some since it made business easier. However, it did not create happiness for competing companies, such as taxis. This is because the law changes that occurred only benefited Uber and no one else. The first case caused a space that could have been being used correctly, but instead it was taken up by Uber. This could have made many people in the city of Jakarta unhappy. People would be unhappy with this if they were looking to use the space for its proper zoned usage, but instead they would find a company operating a business there. This inconveniences others and violates the idea behind Utilitarianism.

The second issue Uber is investigating is the donation and then investment of Kumpulan Wang Persaraan in Uber. Although it may not have been bribery since it is not proven to have been yet, it still violates Utilitarianism. The reason being that Uber needed to be able to operate in Malaysia but could not wait for the laws to be approved at the normal rate, thus they had to donate money to the government in order to speed up the process. This does not promote happiness, Uber paying the already corrupt government and feeding into the system only strengthens the corruption. When companies should be fighting the corruption and making every move possible to try to eliminate it. This is a tough decision companies need to make since the two sides of the decision have drastically different results. On one hand the company could pay the bribe and continue to operate, risking being caught. Or they could make the ethically right choice and fight the corruption, while not being able to operate. A corrupt government will always lead to its citizens being unhappy therefore both of the incidents are unethical according to utilitarianism.

Kantianism

Kantianism is the theory that a business must make rational decision and not treat the consumers as an ends but instead as a means. Kantianism is the ideolog that a business must, “Always act in ways that respect and honor individuals and their choices. Don’t lie, cheat, manipulate or harm others to get your way. Rather, use informed and rational consent from all parties” (Salazar 20). In this case the business was making rational decisions for themselves and for their stakeholders since they were trying to increase profits. But they were not making rational decisions for the consumer or anyone else. This case violates Kantianism since Ubers investment was only to gain for themselves rather than making their company a more holistic company. One of the main ideas behind Kantianism, as previously mentioned, is that a company must not manipulate anyone to get their way. Both incidents this case is investigating either have clear evidence supporting that Uber manipulated others to get their way or has suspicion of manipulation. The first case where an Uber employee payed local officials to ignore the fact that they were operating in an incorrectly zoned area is a clear case of manipulation. On the employee’s expense report the payments were even described as “payments to local officials”. There is no hiding the fact that this was bribery and manipulation. The second incident that is being investigated does not have a set decision based on Kantianism since it has not been proven that Uber’s donation and the investment mad by Kumpulan Wang Persaraan had anything to do with the laws that were passed. If they do find that these transactions did lead to the laws being passed, then it does violate Kantianism. Like wise if they find that the transactions had nothing to do with the passing of the law Uber did not violate the ideology behind Kantianism.

Virtue Theory                                                                                         Uber's Future

Uber will face many obstacles going forward with
business

In this theory a company must act based on the four different characteristics defined as justice temperance honesty and courage. The virtue theory focuses on the individual as a whole rather than basing it off of a certain ideology. It considers if the decision made the person or company’s character better. If the decision benefits the company’s character, then it is ethical for the company to do. These actions made by Uber do not reflect those characteristics, nor to they add to the character of the company. These actions make Uber look like a company that pays the government to get an edge on the competition. They sow that Uber is a company that is feeding into the corruption in Asia rather than fighting. The decisions that Uber has made as well as its employees reflect poorly on their character which is the main focus of the virtue theory. Thus, the decisions are unethical pertaining to the virtue theory.

References

“Finding the Way.” The Uber Story | Uber, www.uber.com/our-story/.

Ingram, David. “What Is at Stake for Uber in U.S. Bribery Probe?” Reuters, Thomson Reuters, 21 Sept. 2017, www.reuters.com/article/us-uber-corruption/what-is-at-stake-for-uber-in-u-s-bribery-probe-idUSKCN1BW0HH.

Jun, Soo Wern. “Grab, Uber Now Regulated after Public Transport Bills Passed in Dewan Negara.” NST Online, 15 Aug. 2017, www.nst.com.my/news/government-public-policy/2017/08/268231/grab-uber-now-regulated-after-public-transport-bills.

Khera, Ashvin. “Malaysia Ridesharing Regulations Passed In Parliament.” Uber Blog, 28 July 2017, www.uber.com/en-MY/blog/malaysia-ridesharing-regulations-passed-in-parliament/.

McAlone, Avery Hartmans and Nathan. “The Story of How Travis Kalanick Built Uber into the Most Feared and Valuable Startup in the World.” Business Insider, Business Insider, 1 Aug. 2016, www.businessinsider.com/ubers-history.

Newcomer, Eric. “Uber Faces Widespread Asia Bribery Allegations Amid U.S. Criminal Probe.” Bloomberg.com, Bloomberg, 20 Sept. 2017, www.bloomberg.com/news/articles/2017-09-20/uber-is-said-to-review-asia-dealings-amid-u-s-criminal-probe.

Price, Rob. “Uber Is Cooperating with DOJ Investigation of Alleged Bribes Paid in Several Asian Countries.” Business Insider, Business Insider, 20 Sept. 2017, www.businessinsider.com/uber-asia-doj-bribery-investigation-2017-9.

“Uber Is Reportedly Reviewing Its Asia Business amid US Bribery Probe.” CNBC, CNBC, 20 Sept. 2017, www.cnbc.com/2017/09/20/uber-reviews-asia-business-amid-us-bribery-probe-source.html.