This story came out over the summer break but worth flagging for others who missed it. Carrefour, the French retailer whose China strategy is widely admired, is now mired in a corruption scandal and has been forced to call in the police to investigate.
In August, eight purchasing managers were formally detained by local police on bribery allegations following an internal investigation by the company. A total of 22 people including eight suppliers were questioned.
According to Chinese media reports, the Carrefour staff were held on suspicion of taking bribes in exchange for winning contracts to supply fresh foods to the retailer. The arrests followed Carrefour's own internal investigation.
One of the keys to the success of Carrefour 's China business is often held to be its decentralised procurement.Unlike western rivals such as Wal-Mart, which try to replicated the centralised buying practices used in the west, Carrefour gives its stores much greater autonomy.
Decentralised buying ensures that Carrefour 's China stores are full of local produce and speciality foods — which consumers like –and Carrefour's buyers are free to strike there own deals with local suppliers. Clearly, the temptation to abuse that power has proved too great for some Carrefour buyers.
The crackdown by Carrefour come at a time of growing suspicion that western companies in China in their zeal to accommodate local culture and customs, may opt to turn a blind eye to corrupt practices of their local managers.
In an era in which the message of corporate social responsibility is prominent displayed in annual reports and websites, the onus is on multinationals to put in place the procedures and checks to ensure that they practice what they preach — even in China.
Carrefour has been in China since 1995 and now has 101 hypermarkets as well as the Dia chain of hard discount stores. It employs 35,400 people.
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