Lockheed Corporation-Overseas Bribery Gone Rampant
In 1975, news was released that the Lockheed corporation had made more than #$200 million in secret payments to foreign agents and government officials in the Netherlands, Italy, Japan, Turkey, and other countries. Primarily, this involved using bribery and gifts to curry favor in gaining contracts to provide military aircraft.
These payments were made through a variety of mechanisms. Sometimes, they were paid directly to the recipient; other times, they went through subsidiary companies or other intermediaries to disguise the source of the funds.
Because the company was a defense contractor and depended heavily on government contracts, this behavior damaged its business relations with it's major customer, and called the morality of the entire defense industry into question. It also found foreign governments, an important market given that the US defense budget was shirking, reluctant to do business with them at all.
Ultimately, the company suffered only minor penalties for its actions, for peripheral actions such as providing misinformation or making misleading statements, because there were no laws in place at the time to prohibit these actions - but it's worth nothing that the Foreign Corrupt Practices Act of 1977 was quickly passed in order to provide more stern remedies should the company continue to do business in this manner.
Lockheed suffered mounting losses for several years, but managed to stay afloat until the defense budget increased under the Reagan administration, by which time the company had managed to improve public relations and keep its nose clean.
Analysis
Some question whether Lockheed's actions were unethical at all - in many foreign nations, payoffs and kickbacks to politicians are a normal and accepted part of doing business in those nations, and while there were stiff penalties for bribery of U.S. officials, there were no laws in place to address the same practice overseas. If U.S. firms failed to do this, they may lose business to suppliers from other countries who would engage in such practices.
However, it raises the question of what activities a business may engage in overseas - if extortion or threat is a common and accepted business practice, should U.S. corporations engage in that sort of behavior in overseas markets, and should the U.S. government refuse to hold them responsible?
The Foreign Corrupt Practices Act now provides clear guidelines as to what practices are permissible for American firms that do business overseas, though it has become standard practice for U.S. firms to do business through foreign intermediaries - so frame a legal standpoint, the firm can pay a sales agent that in turn bribes a foreign official and escape culpability. So the dilemma largely remains.
Also, payments to expedite normal business transactions ("greasing" to remove impediments) in foreign countries are not illegal. This typically includes small amounts paid to low-level officials in exchange for doing something they would normally have done (paying off a customs official to processes paperwork quickly)
Lessons Learned
There is some question as to whether a firm can "stoop" to certain conduct simply because it is common practice - it is suggest that by doing so, the firm legitimizes and helps to perpetuate such practices, and a better course of action is to refrain, and instead seek to gain an advantage by doing business completely above-boards and offering a superior product, a better price, or another objective and acceptable means of gaining preference.
One thing that is noted is that Lockheed (ostensibly) desisted from offering payoffs and kickbacks to foreign officials, but continued to grow its business overseas, which would seem to suggest that the payments had not been entirely necessary, or all that effective.