Small and medium enterprises (SMEs) play a fundamental role in the economic development of a country. They have assisted in rapid economic industrial development of Asian countries especially the Asian Tigers. Nonetheless, they have faced major challenges in the competitive global environment that have led to their engagement in unethical practices that negatively affect their reputation. The problem with SMEs begins at the infancy stage; most of the SMEs are small-sized that are started by the owner based on experience gained in a particular industry. For instance, Chan Dong-hwa founded Kitchen Best based on experience acquired after working for numerous years in various electronics factories. Due to their plainness, running SMEs is often easy requiring simple structures to operate effectively. Chan was in charge of every operation in Kitchen Best (from production to marketing) while his wife acted as his personal assistant.
SMEs strive to expand and grow their market share with little emphasis on creating an elaborate management system. Managers at SMEs do not possess sufficient training in management and exhibit deficiency in business management skills. This creates complications as the managers are unable to interpret correctly the cultural, ethical and legal system in which they operate. They cannot neither identify nor differentiate between ethical and unethical practices. Consequently, whenever the businesses are faced by problems, they fail to take the right action that may compromise their integrity. SMEs operate in an environment characterized by fierce competition thus they are forced to alter their management and business strategies to suit the needs of the market they operate in. In the process, unethical tactics are likely to prevail. This issue is complicated by the absence of efficient internal check and balances to ensure that the management and business practices are within the legal and ethical framework. As a result, unscrupulous employees are likely to take advantage of the lax internal control environment for personal gains. The issues of bribes and kickbacks will definitely arise.
All over the world, businesses have a tendency to offer modest entertainment to their clients in a bid to solidify business relationships. Nonetheless, overindulgence in entertainment and kickbacks leads to incurrence of needless costs and divert the strategies of the company from growing into a competitive organization. This is due to the fact that the company will be left in the mercy of the corrupt giver and beneficiary e.g. the case of Ma and Lau in Kitchen Best. With operations in China, Hong Kong and Macao, Kitchen Best had to meticulous in its cross-border operations given the varying strict anti-corruption legislation in the three regions. Contravention of these laws would have serious implications on the company’s business.
The law of Hong Kong Cap 201 is on the prevention of bribery ordinance. Section 9 (1) states that it is criminal...