Without explicit consequences for bad actions, there is no positive learning in the organization

Gary Nagle, CEO of Glencore since 2021

Alejandro Fontana, PhD

There are three ways to generate value in an organization. The first is the example that leaders of the organization must set. The example of leaders is a necessary condition for the development of values. The second way is to not hinder initiatives that collaborators may have. Rather, initiatives that comply with values, such as volunteering, changing attitudes toward customer interests, and rigorous compliance with quality control should be promoted. The third way is to show stakeholders and the entire organization the consequences of certain actions. For example, it would not be appropriate for an organization to give a management position to a decision-maker who, due to incompetence, had caused great harm to the company, such as nearly leading it to bankruptcy. If such a situation or something similar were to occur, neither the stakeholder nor any of the collaborators would become aware of what it means to incompetently fulfill a management position.

On Tuesday, February 28, 2023, the newspaper Gestión published shocking news. The Swiss commodities and mining giant, Glencore, was fined $700 million by a US court for maintaining a bribery scheme with officials from several countries over more than a decade. According to Reuters, prosecutors have stated that Glencore paid over $100 million in bribes to officials from seven South American and African countries, including Nigeria, Brazil, Venezuela, and the Democratic Republic of Congo, in order to secure business or avoid audits. A Forbes communication from May 2022 also reports that the company had acknowledged that «a US subsidiary had orchestrated a scheme to manipulate the references used to establish the price of oil at two of the country’s major ports.»

Glencore has also been ordered to pay £281 million by a UK court after being found guilty of paying $28 million in bribes in Cameroon, Ivory Coast, Equatorial Guinea, Nigeria, and Sudan between 2011 and 2016. These bribes sought to gain preferential access to the oil of those countries. Finally, the company also faces a lawsuit in Brazil, related to the Lava Jato case.

The fine in the USA was 15% lower than what the country’s judicial guidelines would dictate. This is because the company had previously admitted guilt, cooperated by providing documents abroad USA, and has begun implementing new measures to improve ethics and compliance. However, the company is estimated to have to pay more than $1.5 billion in reparations for the three mentioned cases.

Glencore owns 33.75% of Antamina in Peru, has operations in Volcan and Antapaccay, and owns 99.99% of Perubar, the logistics operator. Additionally, it was the former owner of Las Bambas copper mine, which it sold to MMG for $7 billion, in 2014. According to a Forbes report from May 2022, Kenneth Polite, Deputy Attorney General of the Criminal Division of the US Department of Justice, commented at a press conference that «corporate greed had motivated this widespread misconduct.» He added, «Glencore committed these crimes to make hundreds of billions of dollars.»

On his part, Gary Nagle, CEO of the company, told Reuters that he recognized the misconduct identified in these investigations and that the company had cooperated with the authorities. At the same time, he emphasized that this type of behavior no longer had a place in Glencore. He added that the company had taken measures in response to these crimes, including the dismissal of the employees involved, so that «today it is no longer the company it was when these unacceptable practices occurred.»

Gary Nagle has been with the company for more than 22 years, having held positions at the Baar headquarters until 2007, and then in Colombia and Australia. However, although in the US judicial process, the company admitted the presence of individuals responsible for paying bribes («cash desks») at Glencore’s headquarters in Baar, Nagle denied knowing about the existence of these «cash desks», in an interview with Businessweek, in August 2022. In addition, in that interview, he refused to say whether Glencore would take legal action against former executives and employees involved in acts of corruption.

On the other hand, Ivan Glasenberg, CEO of Glencore from 2002 to 2021, is now the largest individual stake in Glencore. The market value of his fortune, as of March 5, 2023, amounts to $8.3 billion, according to Forbes.

From an ethical perspective, generating values in an organization demands the example of its leaders and their commitment not to obstruct the ethical attempts of employees. But if the consequences of bad actions are not shown, it is difficult for the authors of those actions and the rest of the organization to have a positive learning experience from that wrongdoing. They will conclude that if they misbehave, the key to success is to do so without anyone noticing.

Publicado por Alejandro Fontana

Profesor universitario, PhD en Planificación y Desarrollo,

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