Ethics, Sustainability, and Social Responsibility
UBS, a venerable Swiss banking institution with global business activities, experienced the significant implications that political factors can have on the bottom line. The U.S. government alleged that by advertising its "tax savings" advantages to U.S. clients, UBS aided wealthyAmericans in siphoning off billions of dollars to a safe haven that the IRS cannot touch. The government requested from UBS the names of 52,000 U.S. citizens who it suspected were tax evaders. Initially, UBS declined to release names, citing Swiss banking laws and regulations thatguarantee the privacy of customers. However, UBS was in a lose-lose situation: If it resisted the IRS, it risked losing its U.S. banking license. If it disclosed names of its customers, it would break the traditional Swiss banking secrecy and potentially violate Swiss law, which makes it a felony to improperly disclose client information. In 2009, after multiple rounds of intense negotiations, UBS finally relented to significant pressure by the U.S. government and released the names of 4,450 U.S. citizens who are suspected to have evaded taxes. The U.S. government's case against UBS was helped immensely by a former employee at UBS who cooperated with prosecutors on details of how such transactions occur. The "whistle- blower," a U.S. citizen, has been lauded for his help in the investigation. Yet, in January 2010 he also began serving a 40-month prison sentence for his own guilty plea for helping his clients at UBS evade taxes.46 Some in the industry believe such a surprisingly long prison term, despite his cooperation with investigators, will dramatically reduce motivation for other potential whistle- blowers to come forward.
a. What is the proper role for a multinational firm in cases where government regulations across countries are in conflict? For example, UBS executives claimed that releasing any names of U.S. customers would violate Swiss banking laws. A compromise was laterreached that only the names of customers suspected of illegal activity were released.
b. What is the responsibility of individual employees to their employers and to their governments when there seems to be a conflict?