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Jens 'n' Frens
Idle thoughts of a relatively libertarian Republican in Cambridge, MA, and whomever he invites. Mostly political.
"A strong conviction that something must be done is the parent of many bad measures."
-- Daniel Webster
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Wednesday, March 02, 2016 :::
SEC: Qualcomm Hired Relatives of Chinese Officials to Obtain Business
The Securities and Exchange Commission today announced that Qualcomm Incorporated has agreed to pay $7.5 million to settle charges that it violated the Foreign Corrupt Practices Act (FCPA) by hiring relatives of Chinese government officials deciding whether to select the company’s mobile technology products amid increasing competition in the international telecommunications market.
This is obviously a post about affirmative action.
Given two aspiring police officers, one white and one black, with approximately equal metrics (test scores, credentials, etc.), which do you hire? There's a strong fairness appeal to disallowing my "approximately" to weasel out of an obvious decision, and let's go ahead and suppose that the white is slightly more qualified, and that this is a city in which the police force has more whites and fewer blacks than anything you might want to compare it to: the city population, the population of victims, the population of perpetrators, or some population average weighted by neighborhoods in which crime takes place. It seems likely to me in that case that the black police officer will do better in terms of actually preventing crime than the white police officer, simply because of the reaction of people to the color of his skin.[1] Supposing all of this is true, I would hire the black police officer — and maybe this doesn't actually count as "affirmative action" at all. After all, I'm hiring him because I expect that he would do the best job.
When Henry Ford hires Edsel and Henry II to run the family business, this looks like nepotism,[2] and likely contains an element of that, but in each case the person being hired (1) had grown up around the firm, and had a lot of firm-specific knowledge, and (2) was well-known to Henry I, who might otherwise have expended more energy than it was worth vetting other candidates well enough to be nearly as confident in them. When a new President brings along long-time associates into positions of power, there is likely to be an element of cronyism and patronage, but, given information constraints, it may well also be the most reasonable way for the President to fill those roles with people who are suspected to be competent and to administer his program.
The Qualcomm case still feels a bit different from these situations, not least because the employees in question didn't work on this deal (I think); if they had, I can draw up a similar story in which Qualcomm is hiring an agent who is trusted by the Chinese partner and has detailed knowledge and is uniquely situated to solve an information problem through no particular merit. While this actual case seems to me to fall clearly on the untoward side of the line, the line isn't especially distinct. Quoting again from the press release,
“I know this is a pain, but I think we’re operating under a different paradigm here than a normal ‘hire’/‘no hire’ decision tree. We’re telling this kid … we don’t want to waste time or extend any extra effort in this favor [the telecom company] has asked of Qualcomm, and then turn around and ask the same person we just rejected to do us a special favor.”
The term "bribery" is sometimes used loosely and colloquially, but in its true sense it seems to me that a characterizing element of it is the subornation of the violation of a fiduciary duty, and it seems pretty clear here that this is a favor being done for the Chinese individual and not for the Chinese telecom company itself, it which case it would strike me as simply part of the consideration one side of the contract was providing the other party. This is the concern with cronyism and nepotism[3], and my arguments above amount to "here are reasons why it might not be violating a fiduciary duty to the owners of the company or the citizens of the country". In any case, though, hiring an individual who would in fact be less effective at the job but seems more "qualified" is a sign that the job is being treated as a plum to be awarded and not as a real job — if people start steering the conversation away from effectiveness toward some other conception of "merit", that's a decent sign that fiduciary duties may be being violated.[4]
[1]And of course this "isn't fair" to the white police officer, and I just profoundly don't care; jobs with the police department among those I'm least inclined to make into prizes to be awarded to the most "deserving", and most strongly prefer to award to the most effective.
[2]It was a private company at the time, but I can still imagine this might have rankled someone.
[3]Again, the complaint loses its strength when the owner of a privately held company is making the hiring decision.
[4]Note, though, the "tournament" models of executive compensation, in which a potential chance at the CEO's job is intended as part of the compensation of lower-level employees.
::: posted by dWj at 11:40 AM
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