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ACCA Strategic Professional · Advanced Financial Management · Corporate environmental, social, governance (ESG) and ethical issues

Zeta plc's board is considering a project with an NPV of $4.0m before considering a $1.5m payment to a government official, which a local agent says is 'customary' and will secure the licence. Under the ethical approach expected of a senior financial adviser, what is the most appropriate advice?

Advise rejecting the payment and not proceeding on that basis. A payment to an official to secure a licence is bribery, which is illegal and unethical even if the NPV stays positive. Disguising it as a fee or routing it through an agent does not remove liability.

  1. AReject the payment and advise that the project cannot proceed on that basis, since the payment is likely to be bribery, even though NPV of $2.5m remains positiveCorrect
  2. BMake the payment but record it as a consultancy fee because the net NPV is still positive
  3. CMake the payment only if competitors in the country do so as well
  4. DMake the payment through the local agent so Zeta plc has no direct liability

Explanation

A payment to secure a licence from an official is bribery, illegal under laws such as the UK Bribery Act and the US FCPA, and unethical regardless of NPV. Mislabelling it adds false accounting, and using an agent does not remove liability. Positive NPV does not justify illegality.

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