The Practitioner Scholar

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Nnaoke Ufere: “Alcohol Made Me Do It”: Rationalizations and CEO Corrupt Behavior

May 1, 2012 · 2 Comments

Albert "Jack" Stanley, the 65-year-old chairman and CEO of KKR, a senior executive at Halliburton, was legendary for winning billion-dollar contracts in emerging countries; he seemed to possess a magic wand for dealing with government officials and winning their trust in countries like Egypt, Malaysia, Nigeria and Yemen. Those who know Stanley well describe him as a smart and fearsome competitor, intent on winning big deals and getting rewarded for his contributions. His dedication to Halliburton was unquestionable and he was considered a global rainmaker. He had it all. But all that changed on one private trip to Abuja, Nigeria.

When Stanley boarded the flight to Abuja, Nigeria, little did he know that the fateful trip would not only end his winning ways and prestigious career, but also would send him to prison for 30 months, plus $10.8 million in restitution payment. Mr. Stanley, according to federal prosecutors, made the clandestine trip to meet with senior Nigerian officials to figure out who to bribe and how much to pay. The agreed $182 million bribery greased the palms of Nigeria procurement officials who reciprocated by awarding a lucrative contract worth more than $6 billion to Halliburton. Nigeria officials rewarded Stanley with “kickback” in the amount of $10.8 million. But Stanley violated the Foreign Corrupt Practices Act of 1977, which forbid US-based companies from paying bribes to government officials abroad. The case went to trial and Stanley was convicted of bribery.

On the sentencing day on February 23, 2012, according to the Wall Street Journal, Mr. Stanley told Judge Keith Ellison that his decision to bribe Nigerian officials was fueled by "ambition, ego and alcohol". His rationalizations notwithstanding, the judge sentenced him to 30 months in prison and ordered him to refund the $10.8 million he received from the deal. Halliburton also settled with the US government and paid $579 million in penalties.

Mr. Stanley’s bribery behavior is not an isolated case nor is his use of “alcohol-made-me-do-it” rationalization strategy to justify criminal act atypical. According to case files on the Department of Justice and SEC websites, several multinational corporations (MNCs) have pleaded guilty to similar crimes – Johnson & Johnson, IBM, Shell, Baker Hughes, ABB, Siemens, Tyson Foods, Vetco, Wal-Mart (case pending), etc.

Finding from our research on supply-side corruption (those who pay bribes purposively for self-interested benefits) directly implicates CEOs as active perpetrators of corrupt practices. Our finding shows that a CEO’s corrupt behavior is shaped by four important factors. First, the host country’s institutional environment which creates opportunities for corrupt behavior by providing incentives and a moral free zone where CEOs rationalize and justify corrupt behavior as normative - the way business is done in the host country. Second, CEO’s motivational desires to achieve company and/or personal goals when the benefits of doing so exceed the costs. Third, the private payoff that accrues to the CEO. Fourth, a board of directors that explicitly or implicitly support and reward behaviors that promote corrupt practices or fail to take action when corrupt practices come to light.

When we examine Stanley’s case from the lens of self-interest used in our studies, we find a rational actor whose corrupt practices were guided in part by his motivational desires to achieve both organizational goals (lucrative $6 billion contract award) and personal reward ($10.8 million in kickback). One of the most intriguing findings from our research is that corrupt CEOs tend not to view themselves as corrupt. They tend to acknowledge their corrupt behaviors but at the same time rationalize it in ways that make them appear to be normal and acceptable business practice in their host countries.

Nnaoke Ufere is the Chief Executive Officer for iServiceX, Inc. in Atlanta, Georgia. He is also in the Ph.D. in Management: Designing Sustainable Systems program at the Weatherhead School of Management at Case Western Reserve University and can be reached at nufere@iservicex.com. His research examines the nexus of entrepreneurial illegality and venture performance to offer an initial exploration of the illegal behaviors enacted by entrepreneurs in pursuit of venture success.

Tags: DM Reflections

2 responses so far ↓

  • 1 Ufere Ebere C // Dec 4, 2012 at 11:20 AM

    Hello brother, i wish to state that you have done well by your research which focus more on the issues affecting our country dear country Nigeria and other african country. I pray God grant u d grace to finish well in all your endeavours. Remain bless. From Ufere Ebere C
  • 2 INQUIRY FROM CH ex Gemini // May 17, 2014 at 5:23 AM

    It is presumable, this is why so many companies have holding companies offshore with financial privacy jurisdictions... so they can still bribe.

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