MBA 630 UMUC Leading Ethically and Legally at Home and Abroad Essay

Step 1

turn your attention to the Global Shippers case file. The vice president has appointed you to a board of confidential advisors to discuss whether the Global Shippers CEO’s actions were legal and ethical.

You open the file. Reading over the specifics of this situation, you soon understand that the VP is legitimately concerned about the legal and ethical violations.

In the next step, you will gather the information you need to identify important issues for the VP.

Step 2

While you have some general awareness that there are many ramifications of international transactions from legal and ethical perspectives and many cultural differences among countries, you realize that you need to know a lot more about these subjects before you can attempt to respond to the VP’s questions.

Before you begin your research, listen to this introduction to cross-cultural awareness podcast as it relates to working with people from other cultures. Then review the following topics as you work to meet the VP’s request: international business ethics, laws, and regulations, cross-cultural ethical business decision making (specifically focus on the “Ethical Theory in Global Business” resources), and country cultural differences. (All of these readings are attached)

Step 3

Now that you’ve gathered information and analyzed the legal and ethical consequences of Manning’s actions as outlined in the Global Shippers case file, you’re expected to discuss your conclusions and rationales with the board of confidential advisors convened by Vice President Dodger. Two main requirements will structure this discussion:

First, each board member is to post an initial response fully analyzing the following questions:

Were Manning’s actions legal under the Foreign Corrupt Practices Act, and what are the possible penalties for violating the act?

Were Manning’s actions legal under the UK Bribery Act and what are the possible penalties for violating the act?

Were Manning’s actions ethical, particularly in light of differing cultural norms?

When answering these questions, be sure to apply the following guidelines: Provide a full explanation for why all his actions were or were not legal and ethical in your discussion, including a full rationale for each conclusion. This post can be as long or as short as you need in order to effectively make your points.

One of Colossal Corporation’s import-export companies, Global
Shippers, Inc., a New York–based company with facilities in over 37
countries including the United Kingdom, recently submitted a bid for
an exclusive contract with the government of the small country
Neristan. The contract would provide Global Shippers with the
exclusive right to export goods from Neristan’s government-owned
factories to the United States for distribution and sale. It is projected
that this contract would provide over $20 million in revenue to Global
Shippers per year, increase its stock value, and allow the company to
expand its international operations and employee base.
Shortly after Global Shippers submitted the bid, Neristan’s prime
minister invited the CEO of Global Shippers, Robert Manning, to dine
with him at the most luxurious restaurant in Neristan.
After Roger arrived to the dinner, the prime minister ordered the most
expensive bottle of wine on the menu, and as they drank, he made a
proposal to Manning. The prime minister said, “Here in Neristan we
value relationships above all else, and we have a great opportunity to
help each other.” He went on to say that he was recently tasked with
“selecting the best company for Neristan’s contract,” and he thought
that “Global Shippers has what it takes.”
Manning was excited by the prime minister’s comments. He agreed,
“There is the potential here for a great relationship.” Manning
gratefully accepted the prime minister’s offer of another glass of wine
and listened intently. The prime minister then went on to say, “It is
customary in Neristan for business associates to help each other
prosper, and if you ensure a payment of $100,000 is wired to my
personal account in the next week, I will make sure that Global
Shippers gets the contract.”
Manning, who had dealt with similar requests from other foreign
diplomats in the past, responded, “I’m afraid that such payments are
prohibited in my country, but why don’t I fly you to New York
tomorrow so we can discuss business further?” Manning went on to
say, “The trip will be all expenses paid, and you will stay in the
penthouse at the finest New York hotel. If, after we are done
conducting business, you want to see the sites, I can show you around
the city, and you can stay on us for a while.”
The prime minister gratefully accepted Manning’s offer, and Manning
paid the $3,500 bill for the dinner and wine on his corporate account.
The next day the two flew first-class back to New York. After
conducting business in New York for a day, the prime minister and
Manning traveled around the city, went to the theatre on Broadway,
and dined in the finest restaurants. Everything was paid for by
Manning’s corporate accounts. After several luxurious days in New
York, the two of them then flew first-class to Los Angeles, where, after
several days of “living it up on the town,” they met with Global
Shippers Inc.’s board of directors, and the prime minister announced
that Global Shippers had been awarded the contract. The prime
minister stayed in Los Angeles, all expenses paid, for two weeks after
this meeting, and then flew back to Neristan.
In the meantime, upon the announcement of the contract acquisition,
Global Shippers Inc.’s stock skyrocketed, and the company began
hiring more warehouse employees in Neristan and the United States to
manage its new lucrative contract. Manning received a substantial
bonus from Global Shippers Inc.’s board of directors for his excellent
work related to acquiring the Neristan contract.
Six months later, the first shipment of goods was ready to leave
Neristan and go to the United States, but the customs officials on the
Neristan border refused to allow the goods to leave the dock. The
customs officials stated that they needed time to inspect the goods for
illegal contraband and that it could be weeks before they were cleared
for shipment. Manning, who was visiting the prime minister at the time,
was called to the customs office by his head warehouse employee.
Manning slipped the customs officials $100 each and asked if they
could expedite the shipment. The goods were cleared the next day, and
the first shipment left for the United States.
A few weeks later the prime minister of Neristan was arrested by
Neristan authorities for embezzling government funds. Manning began
to worry that some of his actions may have crossed the lines into illegal
or unethical activity and (given his close relationship with the prime
minister) that he may soon also become the subject of investigation.
He called the vice president at Colossal Corporation, told him the
whole story, and asked him if he could help defend the legality and
ethics of his actions.
Cross-Cultural Ethical Business Decision
Making
Print
Management in the global arena involves addressing unique and difficult issues of culture and
morality. Although general ethical frameworks may help you to assess management decisions in
a cross-cultural context, there are unique questions that arise in global settings. The resources
below provide guidance for situations involving conflicting ethical norms and customs of
different cultures within the business context.
How an organization addresses unique situations involving ethics and customs will impact its
success in the global arena. The first subtopic examines the role of ethical theory in global
business. The second subtopic examines the role of cultural theory in global business.
Global Business Ethics
The field of ethics is a branch of philosophy that seeks to address
questions about morality—that is, about concepts such as good and
bad, right and wrong, justice, and virtue. Ethics impacts many fields—
not just business—including medicine, government, and science. We
must first try to understand the “origins of ethics—whether they come
from religion, philosophy, the laws of nature, scientific study, study of
political theory relating to ethical norms created in society or other
fields of knowledge” (Baker, 2007). The description below on the field
of ethics shows how people think about ethics in stages, from the
origin of ethical principles to the ways people apply them to specific
tasks and issues.
The field of ethics (or moral philosophy) involves systematizing,
defending, and recommending concepts of right and wrong behavior.
Philosophers today usually divide ethical theories into three general
subject areas: metaethics, normative ethics, and applied ethics.
Metaethics investigates where our ethical principles come from, and
what they mean. Are they merely social inventions? Do they involve
more than expressions of our individual emotions? Metaethical answers
to these questions focus on the issues of universal truths, the will of
God, the role of reason in ethical judgments, and the meaning of
ethical terms themselves. Normative ethics takes on a more practical
task, which is to arrive at moral standards that regulate right and wrong
conduct. This may involve articulating the good habits that we should
acquire, the duties that we should follow, or the consequences of our
behavior on others. Finally, applied ethics involves examining specific
controversial issues, such as animal rights, environmental concerns,
capital punishment, and nuclear war (Fieser, 2009).
This approach will be used to help you understand global business
ethics in a modern and current sense.
Where Do Our Values Come From?
Just as people look to history to understand political, technical, and
social changes, so too do they look for changes in thinking and
philosophy. There’s a history to how thinking has evolved over time.
What may or may not have been acceptable just a hundred years ago
may be very different today—how people present themselves, how
they act and interact, and their customs, values, and beliefs.
Ethics can be defined as a system of moral standards or values. A sense
of ethics is determined by a number of social, cultural, and religious
factor, and this sense influences us beginning early in childhood.
People are taught how to behave by their families, exposure to
education, and the society in which they live. Ethical behavior also
refers to behavior that is generally accepted within a specific culture.
Some behaviors are universally accepted—for example, people
shouldn’t physically hurt other people. Other actions are less clear, such
as discrimination based on age, race, gender, or ethnicity.
Culture impacts how local values influence global business ethics. There
are differences in how much importance cultures place on specific
ethical behaviors. For example, bribery remains widespread in many
countries, and while people may not approve of it, they accept it as a
necessity of a business environment. Each professional is influenced by
the values, social programming, and experiences encountered from
childhood on. These collective factors impact how a person perceives
an issue and related behaviors. Even within a specific culture,
individuals have different ideas of what constitutes ethical or unethical
behavior. Judgments may differ greatly depending on an individual’s
social or economic standing, education, and experiences with other
cultures and beliefs. Just as in the example of bribery, it should be
noted that there is a difference between ethical behavior and normal
practice. It may be acceptable to discriminate in certain cultures, even if
the people in that society know that it is not right or fair. In global
business ethics, people try to understand what the ethical action is and
what the normal practice might be. If these are not consistent, the
focus is placed on how to encourage ethical actions.
While it’s clear that ethics is different from religion, values based on
religious teachings have influenced our understanding of ethical
behavior. Given the influence of Western thought and philosophy over
the world in the last few centuries, many would say that global business
has been heavily impacted by the mode of thinking that began with the
Reformation and post-Enlightenment values, which placed a focus on
equality and individual rights. In this mode of thinking, it has become
accepted that all people in any country and of any background are
equal and should have equal opportunity. Companies incorporate this
principle in their employment, management, and operational
guidelines; yet enforcing it in global operations can be tricky and invite
inconsistency.
Impact of Ethics on Global Business
At first, it may seem relatively easy to identify unethical behavior. When
the topic of business ethics is raised, most people immediately focus
on corruption and bribery. However, the concept of business ethics and
global business ethics is much broader. It impacts human resources,
social responsibility, and the environment. The areas of business
impacted by global perceptions of ethical, moral, and socially
responsible behavior include the following:
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•
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ethics and management
ethics and corruption
corporate social responsibility
Ethics and Management Practices
Ethics impacts various aspects of management and operations,
including human resources, marketing, research and development, and
even the corporate mission.
The role of ethics in management practices, particularly those practices
involving human resources and employment, differs from culture to
culture. Local culture impacts the way people view the employeeemployer relationship. In many cultures, there are no clear social rules
preventing discrimination against people based on age, race, gender,
sexual preference, handicap, and so on. Even when there are formal
rules or laws against discrimination, they may not be enforced, as
normal practice may allow people and companies to act in accordance
with local cultural and social practices.
Culture can impact how people see the role of one another in the
workplace. For example, gender issues are at times impacted by local
perceptions of women in the workplace. So how do companies handle
local customs and values for the treatment of women in the workplace?
If you’re a senior officer of an American company, do you send a
woman to Saudi Arabia or Afghanistan to negotiate with government
officials or manage the local office? Does it matter what your industry
is or if your firm is the seller or buyer? In theory, most global firms have
clear guidelines articulating antidiscrimination policies. In reality, global
businesses routinely self-censor. Companies often determine whether a
person—based on their gender, ethnicity, or race—can be effective in a
specific culture based on the prevailing values in that culture. The
largest and most respected global companies, typically the Fortune
Global 500, can often make management and employment decisions
regardless of local practices. Most people in each country will want to
deal with these large and well-respected companies. The person
representing the larger company brings the clout of their company to
any business interaction. In contrast, lesser-known, midsize, and smaller
companies may find that who their representative is will be more
important. Often lacking business recognition in the marketplace, these
smaller and midsize companies have to rely on their corporate
representatives to create the professional image and bond with their
in-country counterparts.
Cultural norms may make life difficult for the company as well as the
employee. In some cultures, companies are seen as guardians or
paternal figures. Any efforts to lay off or fire employees may be
perceived as culturally unethical. In Japan, where lifelong loyalty to the
company was expected in return for lifelong employment, the decadelong recession beginning in the 1990s triggered a change in attitude.
Japanese companies finally began to alter this ethical perception and
lay off workers without being perceived as unethical.
Global corporations are increasingly trying to market their products
based not only on the desirability of the goods but also on their social
and environmental merits. Companies whose practices are considered
unethical may find their global performance impacted when people
boycott their products. Most corporations understand this risk.
However, ethical questions have grown increasingly complicated, and
the “correct” or ethical choice has, in some cases, become difficult to
define.
For example, the pharmaceutical industry is involved in a number of
issues that have medical ethicists squirming. First, there’s the well-
publicized issue of cloning. No matter what choice the companies
make about cloning, they are sure to offend a great many consumers.
At the same time, pharmaceutical companies must decide whether to
forfeit profits and give away free drugs or cheaper medicines to
impoverished African nations. Pharmaceutical companies that donate
medicines often promote this practice in their corporate marketing
campaigns in hopes that consumers see the companies in a favorable
light.
Tobacco companies are similarly embroiled in a long-term ethical
debate. Health advocates around the world agree that smoking is bad
for a person’s long-term health. Yet in many countries, smoking is not
only acceptable but can even confer social status. The United States
has banned tobacco companies from adopting marketing practices that
target young consumers by exploiting tobacco’s social cache. However,
many other countries don’t have such regulations. Should tobacco
companies be held responsible for knowingly marketing harmful
products to younger audiences in other countries?
Ethics and Corruption
To begin our discussion of corruption, let’s first define it in a business
context. Corruption is “giving or obtaining advantage through means
which are illegitimate, immoral, and/or inconsistent with one’s duty or
the rights of others. Corruption often results from patronage”
(Corruption, n.d.).
Our modern understanding of business ethics notes that following
culturally accepted norms is not always the ethical choice. What may be
acceptable at certain points in history, such as racism or sexism,
became unacceptable with the further development of society’s mindset. What happens when cultures change but business practices don’t?
Does that behavior become unethical, and is the person engaged in the
behavior unethical? In some cultures, there may be conflicts with global
business practices, such as in the area of gift giving, which has evolved
into bribery—a form of corruption.
Paying bribes is relatively common in many countries, and bribes often
take the form of grease payments, which are small inducements
intended to expedite decisions and transactions. In India and Mexico,
for example, a grease payment may help get your phones installed
faster—at home or at work. Transparency International tracks illicit
behavior, such as bribery and embezzlement, in the public sector in 180
countries by surveying international business executives. It assigns a
Corruption Perceptions Index (CPI) rating to each country. In 2010, New
Zealand, Denmark, Singapore, and Sweden had the lowest levels of
corruption, while the highest levels of corruption were seen in most
African nations, Russia, Myanmar, and Afghanistan (Transparency
International, 2010a).
Even the most respected of global companies has found itself on the
wrong side of the ethics issue and the law. In 2008, after years of
investigation, Siemens agreed to pay more than 1.34 billion euros in
fines to American and European authorities to settle charges that it
routinely used bribes and slush funds to secure huge public-works
contracts around the world. “Officials said that Siemens, beginning in
the mid-1990s, used bribes and kickbacks to foreign officials to secure
government contracts for projects like a national identity card project
in Argentina, mass transit work in Venezuela, a nationwide cell phone
network in Bangladesh and a United Nations oil-for-food program in
Iraq under Saddam Hussein. ‘Their actions were not an anomaly,’ said
Joseph Persichini Jr., the head of the Washington office of the Federal
Bureau of Investigation. ‘They were standard operating procedures for
corporate executives who viewed bribery as a business strategy'”
(Lichtblau & Dougherty, 2008).
Ethics in Action
Each year Transparency International analyzes trends in global
corruption. The following is an excerpt from their 2010 Global
Corruption Barometer report (Transparency International, 2010b).
“Corruption has increased over the last three years, say six out of 10
people around the world. One in four people report paying bribes in
the last year. These are the findings of the 2010 Global Corruption
Barometer.
The 2010 barometer captures the experiences and views of more than
91,500 people in 86 countries and territories, making it the only worldwide public opinion survey on corruption.
Views on corruption were most negative in Western Europe and North
America, where 73 percent and 67 percent of people respectively
thought corruption had increased over the last three years.
“The fall-out of the financial crisis continues to affect people’s opinions
of corruption, particular in North America and Western Europe.
Institutions everywhere must be resolute in their efforts to restore
good governance and trust,” said Huguette Labelle, chair of
Transparency International.
In the past 12 months one in four people reported paying a bribe to
one of nine institutions and services, from health to education to tax
authorities. The police are cited as being the most frequent recipient of
bribes, according to those surveyed. About 30 percent of those who
had contact with the police reported having paid a bribe.
More than 20 countries have reported significant increases in petty
bribery since 2006. The biggest increases were in Chile, Colombia,
Kenya, FYR Macedonia, Nigeria, Poland, Russia, Senegal and Thailand.
More than one in two people in Sub-Saharan Africa reported paying a
bribe—more than anywhere else in the world.
Poorer people are twice as likely to pay bribes for basic services, such
as education, than wealthier people. A third of all people under the age
of 30 reported paying a bribe in the past 12 months, compared to less
than one in five people aged 51 years and over.
Most worrying is the fact that bribes to the police have almost doubled
since 2006, and more people report paying bribes to the judiciary and
for registry and permit services than five years ago.
Sadly, few people trust their governments or politicians. Eight out of 10
say political parties are corrupt or extremely corrupt, while half the
people questioned say their government’s action to stop corruption is
ineffective.
“The message from the 2010 Barometer is that corruption is insidious.
It makes people lose faith. The good news is that people are ready to
act,” said Labelle. “Public engagement in the fight against corruption
will force those in authority to act—and will give people further
courage to speak out and stand up for a cleaner, more transparent
world.”
Gift giving in the global business world is used to establish or pay
respects to a relationship. Bribery, on the other hand, is more
commonly considered the practice in which an individual would benefit
with little or no benefit to the company. It’s usually paid in relation to
winning a business deal, whereas gift giving is more likely to be
ingrained in the culture and not associated with winning a specific
piece of business. Bribery, usually in the form of a cash payment, has
reached such high proportions in some countries that even locals
express disgust with the corruption and its impact on daily life for
businesses and consumers.
The practice of using connections to advance business interests exists
in just about every country in the world. However, the extent and
manner in which it is institutionalized differs from culture to culture.
In Western countries, connections are viewed informally and
sometimes even with a negative connotation. In the United States and
other similar countries, professionals prefer to imply that they have
achieved success on their own merits and without any connections. Gift
giving is not routine in the United States except during the winter
holidays, and even then gift giving involves a modest expression.
Businesses operating in the United States send modest gifts or cards to
their customers to thank them for business loyalty in the previous year.
Certain industries, such as finance, even set clear legal guidelines
restricting the value of gifts, typically a maximum of $100.
In contrast, Asian, Latin American, and Middle Eastern cultures are
quick to value connections and relationships and view them quite
positively. Connections are considered essential for success. In Asia, gift
giving is so ingrained in the culture, particularly in Japan and China,
that it is formalized and structured.
For example, gift giving in Japan was for centuries an established
practice in society and is still taken seriously. There are specific
guidelines for gift giving depending on the identity of the giver or
recipient, the length of the business relationship, and the number of
gifts exchanged. The Japanese may give gifts out of a sense of
obligation and duty as well as to convey feelings such as gratitude and
regret. Therefore, much care is given to the appropriateness of the gift
as well as to its aesthetic beauty. Gift giving has always been
widespread in Japan.
Today there are still business gift-giving occasions in Japan,
specifically oseibo (year’s end) and ochugen (midsummer). These are
must-give occasions for Japanese businesses. Oseibo gifts are
presented in the first half of December as a token of gratitude for
earlier favors and loyalty. This is a good opportunity to thank clients for
their business. Ochugen usually occurs in mid-July in Tokyo and midAugust in some other regions. Originally an occasion to provide
consolation to the families of those who had died in the first half of the
year, ochugen falls two weeks before obon, a holiday honoring the
dead.
Businesses operating in Japan at these times routinely exchange oseibo
and ochugen gifts. While a professional is not obligated to participate,
it clearly earns goodwill. At the most senior levels, it is not uncommon
for people to exchange gifts worth $300 or $400. There is an
established price level that one should pay for each corporate level.
Despite these guidelines, gift giving in Japan has occasionally crossed
over into bribery. This level of corruption became more apparent in the
1980s as transparency in global business gained media attention.
Asians tend to take a very different view of accountability than most
Westerners. In the 1980s and 1990s, several Japanese CEOs resigned in
order to apologize and take responsibility for their companies’
practices, even when they did not personally engage in the offending
practices. This has become an accepted managerial practice in an effort
to preserve the honor of the company. While Japanese CEOs may not
step down as quickly as in the past, the notion of honor remains an
important business characteristic.
Long an established form of relationship development in all business
conducted in Asia, the Arab world, and Africa, gift giving was clearly
tipping into outright bribery. In the past two decades, many countries
have placed limits on the types and value of gifts while simultaneously
banning bribery in any form. In the United States, companies must
adhere to the Foreign Corrupt Practices Act (FCPA), a federal law that
specifically bans any form of bribery. Even foreign companies that are
either listed on an American stock exchange or conduct business with
the US government come under the purview of this law.
There are still global firms that engage in questionable business gift
giving; when caught, they face fines and sanctions. But for the most
part, firms continue with business as usual. Changing the cultural
practices of gift giving is an evolving process that will take time,
government attention, and more transparency in the awarding of
global business contracts.
Companies and their employees routinely try to balance ethical
behavior with business interests. While corruption is now widely viewed
as unethical, firms still lose business to companies that may be less
diligent in adhering to this principle. While the media covers stories of
firms that have breached this ethical conduct, the misconduct of many
more companies goes undetected. Businesses, business schools, and
governments are increasingly making efforts to deter firms and
professionals from making and taking bribes. There are still countless
less visible gestures that some would argue are also unethical. For
example, imagine that an employee works at a firm that wants to land a
contract in China. A key government official in China finds out that you
went to the business school that his daughter really wants to attend.
He asks you to help her in the admission process. Do you? Should you?
Is this just a nice thing to do, or is it a potential conflict of interest if
you think the official will view your company more favorably? This is a
gray area of global business ethics. Interestingly, a professional’s
answer to this situation may depend on his or her culture. Cultures that
have clear guidelines for right and wrong behavior may see this
situation differently than a culture in which doing favors is part of the
normal practice. A company may declare this inappropriate behavior,
but employees may still do what they think is best for their jobs.
Cultures that have a higher tolerance for ambiguity, as this chapter
discusses, may find it easier to navigate the gray areas of ethics—when
it is not so clear.
Most people agree that bribery in any form only increases the cost of
doing business—a cost that is either absorbed by the company or
eventually passed on to the buyer or consumer in some form. While
businesses agree that corruption is costly and undesirable, losing
profitable business opportunities to firms that are less ethically
motivated can be just as devastating to the bottom line. Until
governments in every country consistently monitor and enforce
anticorruption laws, bribery will remain a real and very challenging
issue for global businesses.
Corporate Social Responsibility
Corporate social responsibility (CSR) is the corporate conscience,
citizenship, social performance, or sustainable responsible business,
and is a form of corporate self-regulation integrated into a business
model. CSR policy functions as a built-in, self-regulating mechanism
whereby business monitors and ensures its active compliance with the
spirit of the law, ethical standards, and international norms.
CSR emerged more than three decades ago and has gained increasing
strength over time as companies seek to generate goodwill with their
employees, customers, and stakeholders. “Corporate social
responsibility encompasses not only what companies do with their
profits, but also how they make them. It goes beyond philanthropy and
compliance and addresses how companies manage their economic,
social, and environmental impacts, as well as their relationships in all
key spheres of influence: the workplace, the marketplace, the supply
chain, the community, and the public policy realm” (Defining Corporate
Social Responsibility, 2008). Companies may support nonprofit causes
and organizations, global initiatives, and prevailing themes. Promoting
environmentally friendly and green initiatives is an example of a current
prevailing theme.
Coca-Cola is an example of global corporation with a long-term
commitment to CSR. In many developing countries, Coca-Cola
promotes local economic development through a combination of
philanthropy and social and economic development. Whether by using
environmentally friendly containers or supporting local education
initiatives through its foundation, Coca-Cola is only one of many global
companies that seek to increase their commitment to local markets
while enhancing their brand, corporate image, and reputation by
engaging in socially responsible business practices (“Sustainability,”
n.d.).
Companies use a wide range of strategies to communicate their
socially responsible strategies and programs. Under the auspices of the
United Nations, the Global Compact (n.d.) “is a strategic policy initiative
for businesses that are committed to aligning their operations and
strategies with ten universally accepted principles in the areas of
human rights, labour, environment and anti-corruption.”
Enforcement of Ethical Guidelines and Standards
The concept of culture impacting the perception of ethics is one that
many businesspeople debate. While culture does impact business
ethics, international companies operate in multiple countries and need
a standard set of global operating guidelines. Professionals engage in
unethical behavior primarily as a result of their own personal ethical
values, the corporate culture within a company, or from unrealistic
performance expectations
In the interest of expediency, many governments—the US government
included—may not strictly enforce the rules governing corporate
ethics. The practice of gift giving is one aspect of business that many
governments don’t examine too closely. Many companies have
routinely used gifts to win favor from their customers, without
engaging in direct bribery. American companies frequently invite
prospective buyers to visit their US facilities or attend company
conferences in exotic locales with all expenses paid. These trips often
have perks included. Should such spending be considered sales and
marketing expenses, as they are often booked, or are these companies
engaging in questionable behavior? It’s much harder to answer this
question when you consider that most of the company’s global
competitors are likely to engage in similarly aggressive marketing and
sales behavior.
Governments often do not enforce laws until it’s politically expedient to
do so. Take child labor, for example. Technically, companies operating
in India or Pakistan are not permitted to use child labor in factories,
mines, and other areas of hazardous employment. However, child labor
is widespread in these countries due to deep-rooted social and
economic challenges. Local governments are often unable and
unwilling to enforce national rules and regulations. Companies and
consumers who purchase goods made by children are often unaware
that these practices remain unchecked.
The Evolution of Ethics
Ethics evolves over time. It is difficult for both companies and
professionals to operate within one set of accepted standards or
guidelines only to see them gradually evolve or change. For example,
bribery has been an accepted business practice for centuries in Japan
and Korea. When these nations adjusted their practices in order to
enter the global system, the questionable practices became illegal.
Hence a Korean businessman who engaged in bribery ten or twenty
years ago may not do so today without finding himself on the other
side of the law. Even in the United States, discrimination and businessregulation laws have changed tremendously over the last several
decades. And who can know what the future holds? Some of the
business practices that are commonly accepted today may be frowned
on tomorrow.
It’s clear that changing values, as influenced by global media, and
changing perceptions and cultures will impact global ethics. The most
challenging aspect is that global business does not have a single
definition of fair or ethical. While culture influences the definitions of
those ideas, many companies are forced to navigate this sensitive area
very carefully, as it impacts both their bottom line and their
reputations.
References
Baker, W. R. (2007, April). A reflection on business ethics: Implications
for the United Nations Global Compact and social engagement and for
academic research. UNESCO. Retrieved from
http://portal.unesco.org/education/en/files/53748/11840802765Baker.p
df/Baker.pdf
Corruption. (n.d.). BusinessDictionary.com. Retrieved from
http://www.businessdictionary.com/definition/corruption.html
Defining corporate social responsibility. (2008). Corporate social
responsibility initiative. Harvard Kennedy School. Retrieved from
http://www.hks.harvard.edu/m-rcbg/CSRI/init_define.html
Fieser, J. (2009, May 10). Ethics. Internet Encyclopedia of Philosophy.
Retrieved from http://www.iep.utm.edu/ethics
Lichtblau, E., & Dougherty, C. (2008, December 15). Siemens to pay
$1.34 billion in fines. New York Times. Retrieved from
http://www.nytimes.com/2008/12/16/business/worldbusiness/16sieme
ns.html
Sustainability. (n.d.). The Coca-Cola Company. Retrieved from
http://www.thecoca-colacompany.com/citizenship/index.html
Transparency International. (2010a). Corruption perceptions index 2010.
Retrieved from
http://www.transparency.org/policy_research/surveys_indices/cpi/2010/
results
Transparency International. (2010b). Global corruption barometer 2010.
Retrieved from
http://www.transparency.org/policy_research/surveys_indices/gcb/2010
United Nations Global Compact. (n.d.). Who we are. Retrieved from
http://www.unglobalcompact.org
Licenses and Attributions
3.4 Global Business Ethics from Challenges and Opportunities in
International Business is available under a Creative Commons
Attribution-NonCommercial-ShareAlike 3.0 Unported license without
attribution as requested by the site’s original creator or licensee. UMGC
has modified this work and it is available under the original license.
Corruption in International Business
The Problem of Corruption
When a large corporation decides to enter a foreign market, it must
usually secure a number of licenses, permits, registrations, or other
government approvals. Certain types of business may be even be illegal
unless the corporation is first able to obtain a change or adjustment to
the nation’s laws or regulations. Since the power to authorize the
foreign corporation’s activities is vested in the hands of local politicians
and officials, and since corporations have access to large financial
resources, it should not be surprising that some corporate executives
resort to financial incentives to influence foreign officials. While certain
financial incentives, such as promises to invest in local infrastructure,
may be legitimate, any form of direct payment to the foreign official
that is intended to influence that official’s public decisions will cross the
line into illegal subornation, also commonly referred to as bribery.
Bribery is one of the archetypal examples of a corporation engaged in
unethical behavior. A number of problems can be attributed to
business bribery. First, it is obviously illegal—all countries have laws
that prohibit the bribery of government officials—so the foreign
company engaging in bribery exposes its directors, executives, and
employees to grave legal risks. Second, the rules and regulations that
are circumvented by bribery often have a legitimate public purpose, so
the corporation may be subverting local social interests or harming
local competitors. Third, the giving of bribes may foment a culture of
corruption in the foreign country, which can prove difficult to eradicate.
Fourth, in light of laws such as the US Foreign Corrupt Practices Act
(FCPA) and the Organization of Economic Cooperation and
Development (OECD) Convention on Anti-Bribery (discussed in greater
detail below), bribery is illegal not only in the target country, but also in
the corporation’s home country. Fifth, a corporation that is formally
accused or convicted of illicit behavior may suffer a serious public
relations backlash.
Despite these considerable disincentives, experts report that worldwide
business corruption shows little signs of abating. Transparency
International (TI), a leading anticorruption organization based in Berlin,
estimates that one in four people worldwide paid a bribe in 2009. It
appears that the total number of bribes continues to increase annually.
The World Economic Forum calculated the cost of corruption in 2011 at
more than five percent of global GDP (US$ 2.6 trillion) with over $1
trillion paid in bribes each year (ICC, 2011).
Governments and intergovernmental organizations have redoubled
their efforts to combat the perceived increase in international business
corruption. Globalization, which accelerated in the final decades of the
twentieth century, is often cited by specialists as contributing to the
spread of corruption. Corporations and businesses in every nation have
become increasingly dependent on global networks of suppliers,
partners, customers, and governments. The increased interaction
between parties in different countries has multiplied the opportunities
for parties to seek advantage from illicit incentives and payoffs.
Although outright bribery is clearly unethical and illegal, there is great
deal of behavior that falls into a gray zone that can be difficult to
analyze according to a single global standard. When does a business
gift become a bribe? What level of business entertainment is right or
wrong? Over the past two decades, governments and regulators have
sought to clearly define the types of behavior that are considered
unethical and illegal.
Another factor that has heightened the sense of urgency among
regulators is the magnitude of recent cases of corruption (several of
which are described in greater detail below). The cost to shareholders
as well as stakeholders and society has proven enormous. Governments
and international organizations have ramped up their enforcement of
anticorruption laws and sought increasingly severe penalties,
sometimes imposing fines amounting to hundreds of millions of
dollars. Largely as a result of these efforts, most multinational
corporations have developed internal policies to ensure compliance
with anticorruption legislation. However, as we will see in the case
study featured in this chapter, such compliance also raises complex
ethical dilemmas for corporations. It remains difficult to regulate ethical
behavior when social and cultural norms vary significantly from country
to country. Acts that are considered unethical in one country may
represent a traditional way of doing business in another. One legal
scholar explains the difference as follows: “A common misconception,
held in both Western and developing countries, and even among many
researchers on corruption, is to confuse what is corrupt with what is
legal. Laws are defined by values, as are ethical norms, but the two are
not equivalent” (Eiher, 2009).
This resource will explore the impact, reasonableness, and the
effectiveness of anticorruption laws and corporate compliance rules.
Finally, we will discuss a case in which the line between corruption and
traditional business practices remains difficult to ascertain.
The Scope of the Problem
Recent cases of corruption in international business have attracted
considerable media attention. Paying a traffic officer to ignore a minor
traffic violation is unremarkable; paying a senior government official a
secret bribe of millions of dollars to get a large contract signed is a
different matter.
While virtually all multinational companies have adopted anticorruption
policies, it is not clear how often these policies are fully implemented
and internalized as part of the corporate culture. The emphasis on
anticorruption policies is relatively recent and, even in the most
responsible organizations, such policies are still works in progress.
However, there is some evidence that the implementation is not always
as effective as might be hoped.
For example, a study by Control Risks (2013) and
the Economist magazine’s Intelligence Unit showed that while most
companies acknowledge the need to combat bribery and corruption,
many are complacent and unprepared to deal with scandals inside their
own organizations. The review of global attitudes on corruption
surveyed more than 300 senior lawyers and compliance heads in April
2013. It painted a disturbing picture. The authors concluded that “too
many companies still fall short of best practices in their anticorruption
compliance programs.” Despite ranking anticorruption high on most
corporate agendas, the report noted a “danger of complacency” among
companies, and as a result, “the risk of a company finding itself in the
middle of a corruption-based investigation remains real” (Tedesco,
2013).
Transparency International’s Corruption Perceptions Index (CPI) ranks
countries and territories according to their perceived levels of public
sector corruption. It is an aggregate indicator that combines different
sources of information about corruption, making it possible to
compare countries. Perceptions are used because corruption is
generally a hidden activity that is difficult to measure. The CPI confirms
that corruption remains a problem worldwide and takes place even in
the wealthiest countries (Transparency International, 2013). Research in
2012 by the Austrian economist Friedrich Schneider placed the annual
loss to the German economy alone at €250 billion (“Corruption Will
Cost Germany,” 2012).
The Dow Jones State of Anti-Corruption Survey in 2011, which surveyed
more than 300 companies worldwide, found that more than 55 percent
of companies have found cause to reconsider working with certain
global business partners due to concerns about possible violation of
anticorruption regulations. Additionally, the biannual survey indicated
than more than 40 percent of companies believe they have lost
business to competitors who won contracts unethically, an increase
from only 10 percent in the 2009 study. “Strict liability provisions in
legislation like the UK Bribery Act make businesses responsible for the
activities of their agents and partners overseas, and this is having a
direct impact on the occurrence of new business partnerships between
firms,” said Rupert de Ruig, managing director of Risk and Compliance,
Dow Jones (Dow Jones Risk and Compliance, 2011).
Global social costs from corruption include the reluctance of investors
to commit to projects in developing economies, inhibited growth of
businesses due to syphoning off of revenues for bribes, and diversion
of funds from food, medical, and educational aid programs. In addition,
it seems likely that corruption hampers the development of executive
talent in developing nations, given that frustrated local executives may
seek to emigrate to countries where corruption is less prevalent.
Consider for example, the long term impact of the necessity of paying a
bribe to get running water in a household in rural India (Campion,
2011). This type of corruption can effectively exclude the poor from
access to vital public services. Economist Daniel Kaufmann (1997) of the
Harvard Institute of International Development cites public sector
corruption as the most severe obstacle to development in developing
and post-communist countries.
Notable Examples of Corruption
The number and magnitude of recent corruption cases prosecuted by
government authorities is disconcerting. Moreover, these widelypublicized cases may represent only the tip of the iceberg: regulatory
bodies focus principally on the bribery of public officials so that other
forms of business corruption are under-reported. As of 2013, the ten
largest cases successfully tried pursuant to the FCPA are listed below
(in order of magnitude of fines) (Cassin, 2013):
1. Siemens (Germany)—$800 million in 2008
2. KBR/Halliburton (USA)—$579 million in 2009
3. BAE (UK)—$400 million in 2010
4. Total SA (France)—$398 million in 2013
5. Snamprogetti Netherlands BV/ENI SpA (Holland/Italy)—$365
million in 2010
6. Technip SA (France)—$338 million in 2010
7. JGC Corporation (Japan)—$218.8 million in 2011
8. Daimler AG (Germany)—$185 million in 2010
9. Alcatel-Lucent (France)—$137 million in 2010
10.
Magyar Telekom/Deutsche Telekom
(Hungary/Germany)—$95 million in 2011
There are other recent examples of large-scale corruption in
international business, described in greater depth in the sections
below.
Walmart in Mexico
According to a report issued by the Mexican Employers Association in
2011, companies operating in Mexico spend more than 10 percent of
their revenue on corrupt acts. One of the most well-known cases was
the Walmart scandal that was brought to light in September 2005 and
resulted in the company’s stock value dropping by as much as $4.5
billion. Evidence unearthed by internal and external investigations
revealed a widespread use of bribes, alleged to total over $24 million.
The bribes were paid to facilitate the construction of Walmart stores
throughout Mexico. The country is a huge market for Walmart—one in
every five Walmart stores is in Mexico. As of October 2014, the
investigation continued, having implicated Walmart management at
the most senior levels of complicity or awareness.
GlaxoSmithKline in China
In September 2013, China’s Xinhua news agency reported that a police
investigation into bribes paid by drug manufacturer GlaxoSmithKline
(GSK) indicated that the bribes were organized and paid by GSK China
and not by individuals operating on their own prerogative as had been
reported by the company initially. Police also alleged that the
corporate parent merely went through the motions of an internal audit
process, indicating a knowledge and acceptance of the bribery. This
very recent case suggests that the Chinese government’s widely
publicized arrests and convictions for bribery have not yet served as a
sufficient deterrent to corrupt practices by foreign corporations.
Alcatel in Costa Rica
In January 2010 Alcatel agreed to pay Costa Rica US $10 million in
reparations for social damage caused by Alcatel’s payment of US$2.5
million in bribes to get a contract to provide mobile phone services in
that country. This case is notable for its application of the concept of
social damage and the resulting order of compensation to the citizens
of Costa Rica.
Anticorruption Laws and Regulations
The first major international anticorruption law was the United States’
Foreign Corrupt Practices Act , adopted in 1977 (DOJ, 2015). The FCPA
criminalized bribery of foreign public officials by American business
enterprises. Initially, the FCPA was not well received. Few other
countries followed suit, and US companies complained that the FCPA
shut them out of the competition for billions of dollars’ worth of
overseas business contracts. Slowly, however, the push for concerted
anticorruption measures gathered momentum, and intergovernmental
institutions such as the OECD, the African Union, and the United
Nations eventually adopted anticorruption conventions. Further
support for a global anticorruption agenda was provided by the
lending institutions such as the World Bank, by NGOs such as
Transparency International, and by the rapidly evolving CSR movement.
Notable among these efforts was the Communist Party of China’s
promulgation of a code of ethics to fight the widespread corruption
within the Communist Party of China (Sommerville, 2010).
The FCPA applies only to bribes paid (or offered) to foreign
government officials to obtain or retain business or to develop an
unfair competitive advantage. The concepts of bribe and foreign
government official can be interpreted broadly. While companies and
executives charged with FCPA violations have often sought to
characterize their payments as business “gifts,” this has not shielded
them from liability when there was evidence that the payments were
intended as a means of obtaining illicit objectives. However, where
payments have been characterized as “facilitation” or “lubrication”
payments, meaning that they merely created an incentive for an official
to promptly execute legal actions, such as mandatory customs
inspections, the payments have been allowed. In numerous countries,
the state owns all or part of commercial enterprises so that a great
number of business executives could be classified as foreign
government officials.
In 1997, the OECD established legally binding standards for defining
bribery in international business transactions. Similar to the FCPA, the
OECD Anti-Bribery Convention focuses on the bribery of public
officials. Like the FCPA, the OECD also potentially creates the
opportunity for companies to circumvent the regulations by hiring
consultants or agents. Notably excluded from the scope of the OECD
Convention is a prohibition against bribing private parties. Despite such
loopholes, the OECD Convention was an important step in the right
direction. By 2012, forty-three countries had ratified the agreement and
begun its implementation.
Corruption and Culture
Prior to the expansion of international trade in the nineteenth and
twentieth centuries, most commerce was local and followed traditional
norms and ethical standards. With the expansion of international trade,
however, businesses began to operate across cultural and linguistic
boundaries. Misunderstandings and transgressions, both intended and
unintended, became commonplace. To some extent, perceptions of
corruption may derive from cultural differences, because behavior that
is considered corrupt in one society may represent a normal business
practice in another.
One example can be found in the Chinese concept of guanxi, which
refers to the reciprocal obligations and benefits expected from a
network of personal connections. A person with a powerful level of
guanxi is considered a preferred business partner because such a
person can utilize connections to obtain business or government
approvals. Guanxi can derive from extended family, school friends and
alumni, work colleagues, members of common clubs or organizations,
and business associates. Chinese businesspeople seek to cultivate an
intricate and extensive web of lifelong guanxi relationships. The key
expectation in guanxi networks is reciprocity in the granting of favors;
the failure to reciprocate is considered a breach of trust. The greater
the favor asked or granted, the greater the favor owed. Guanxi thus
generates a cycle of favors over time. Among the questionable
practices facilitated by guanxi are certain types of corrupt favoritism—
such as nepotism (favoring family members) and cronyism (favoring
friends). In fact, relatively high levels of nepotism or cronyism are
accepted and tolerated in many non-Western cultures, not only in
China. As applied to business transactions, guanxi opens doors and
creates opportunities for business relationships and dealings. In itself,
guanxi is not corrupt. However, strong guanxi connections and
obligations can serve as an incentive to corruption.
Many traditional business practices around the world are rooted in
concepts analogous to guanxi, as in the practice of using business gifts
or personal connections to speed up transactions both large and small.
Russians use the term blat to refer to the ability to get things done
through personal networks or contacts with people of influence. The
Japanese have adapted the English word connections to coin a term of
their own, konne. In Pakistan, the use of
personal sifarish (“recommendation”) refers to the ability to make
contact with the right official on the most favorable terms. The French
expression for bribe is pot de vin (“jug of wine”), which implies friendly
relations. In Urdu and Hindi, petty bribes are known as chai pani (“tea
water”). In West Africa the term is dash. The English colloquial
term grease and the German schmiergeld (“grease money”) imply a
lubrication or easing of resistance to the transaction. In Mozambique,
one term for corruption is cabritismo or “goatism,” which is derived
from the saying “a goat eats where it is tethered.”
The universality of such terms suggests that various forms of business
bribery and graft are prevalent worldwide. However, specific business
activities that are considered acceptable in some societies may be
considered taboo in others. Thus, the American practice of lobbying
legislators and governmental agencies would be considered an illegal
form of buying influence in many other countries. In some societies,
gift giving to chiefs, elders, or religious leaders is considered not only
acceptable and appropriate, but even a mandatory traditional
expression of respect and obligation.
A survey conducted by KPMG in the United Kingdom found that while
80 percent of respondents agreed that the UK Anti-Corruption Act was
an admirable attempt to address the problem of corruption, 58 percent
believed that the act was impractical and ignored the reality that
bribery is an accepted way of doing business in many countries. Other
similar studies have revealed widespread international criticism of US
anticorruption law as hypocritical in light of the American business
practice of offering gifts to potential customers or clients (e.g., trips to
conferences, golf outings, tickets to entertainment and sporting events,
use of luxury facilities such as spas, condos, and country clubs, etc.).
References
Campion, M. J. (2011, June 11). Bribery in India: a website for
whistleblowers. BBC News. Retrieved from
http://www.bbc.co.uk/news/world-south-asia-13616123
Cassin, R. (2013, May 29). France’s total SA cracks our top 10 list. FCPA
Blog. Retrieved from
http://www.fcpablog.com/blog/2013/5/29/frances-total-sa-cracks-ourtop-10-list.html#
Control Risks. (2013). International Business Attitudes to Corruption:
Survey 2013. Retrieved from
http://www.controlrisks.com/en/services/integrity-risk/internationalbusiness-attitudes-to-coruption.
Corruption ‘will cost Germany €250 billion. (2012, March 16). The Local.
Retrieved from http://www.thelocal.de/20120316/41373
DOJ (US Department of Justice). 2015. A Resource Guide to the U.S.
Foreign Corrupt Practices Act. Retrieved from
http://www.justice.gov/criminal/fraud/fcpa/guide.pdf
Dow Jones Risk and Compliance. (2011, March 31). Dow Jones State of
Anti-Corruption Compliance Survey. Retrieved from
http://www.dowjones.com/pressroom/SMPRs/DJACCSurvey2011.html
Eiher, S. (2009). Corruption in international business: The challenge of
cultural and legal diversity. Abingdon, UK: Routledge.
ICC (International Chamber of Commerce). (2011). Clean business is
good business. Paris: ICC, Transparency International, the United
Nations Global Compact, and the World Economic Forum Partnering
Against Corruption Initiative (PACI).
Kaufmann, D. (1997). Corruption: the facts. Foreign Policy, 114–131.
Retrieved from
http://info.worldbank.org/etools/docs/library/18143/fp_summer97.pdf.
Sommerville, Q. (2010, February 24). China communists get new anticorruption ethics code. BBC News. Retrieved from
http://news.bbc.co.uk/2/hi/asia-pacific/8533410.stm.
Tedesco, T. (2013, July 15). Anti-corruption high on corporate agenda,
low in practise: UK study. Financial Post. Retrieved from
http://business.financialpost.com/2013/07/15/anti-corruption-high-oncorporate-agenda-low-in-practise-u-k-study/.
Transparency International. (2013). Corruption Perceptions Index 2013.
Retrieved from http://www.transparency.org/cpi2013/results.
Licenses and Attributions
Chapter 10: Corruption in International Business from Good
Corporation, Bad Corporation: Corporate Social Responsibility in the
Global Economy by Guillermo C. Jimenez and Elizabeth Pulos is
available under a Creative Commons Attribution-NonCommercialShareAlike 4.0 International license. UMGC has modified this work and
it is available under the original license.
Photo by Stockmonkeys.com is licensed under CC-BY 2.0.
Major Ethical Perspectives
There are several well-respected ways of looking at ethical issues. Some
of them have been around for centuries. It is important to know that
many who think a lot about business and ethics have deeply held
beliefs about which perspective is best. Others would recommend
considering ethical problems from a variety of different perspectives,
including utilitarianism, deontology, social justice and social contract
theory, virtue theory, general theories of justice and rights, and feminist
thought about ethics and patriarchy. We will examine several of these
perspectives below.
Utilitarianism
Utilitarianism is a prominent perspective on ethics, one that is well
aligned with economics and the free-market outlook that has come to
dominate much current thinking about business, management, and
economics. Jeremy Bentham is often considered the founder of
utilitarianism, though John Stuart Mill (who wrote On
Liberty and Utilitarianism) and others promoted it. Utilitarianism
emphasizes not rules but results. An action (or set of actions) is
generally deemed good or right if it maximizes happiness or pleasure
throughout society. Originally intended as a guide for legislators
charged with seeking the greatest good for society, the utilitarian
outlook may also be practiced individually and by corporations.
Bentham believed that the most promising way to obtain agreement
on the best policies for a society would be to look at the various
policies a legislature could pass and compare the good and bad
consequences of each. The right course of action from an ethical point
of view would be to choose the policy that would produce the greatest
amount of utility, or usefulness.
In brief, the utilitarian principle holds that an action is right if and only
if the sum of utilities produced by that action is greater than the sum of
utilities from any other possible act. This statement describes act
utilitarianism—which action among various options will deliver the
greatest good to society? Rule utilitarianism is a slightly different
version; it asks, what rule or principle, if followed regularly, will create
the greatest good?
Notice that the emphasis is on finding the best possible results and
that the assumption is that we can measure the utilities involved. (This
turns out to be more difficult that you might think.) Notice also that
“the sum total of utilities” clearly implies that in doing utilitarian
analysis, we cannot be satisfied if an act or set of acts provides the
greatest utility to us as individuals or to a particular corporation; the
test is, instead, whether it provides the greatest utility to society as a
whole. Notice that the theory does not tell us what kinds of utilities
may be better than others or how much better a good today is
compared with a good a year from today.
Whatever its difficulties, utilitarian thinking is alive and well in US law
and business. It is found in such diverse places as cost-benefit analysis
in administrative and regulatory rules and calculations, environmental
impact studies, the majority vote, product comparisons for consumer
information, marketing studies, tax laws, and strategic planning. In
management, people will often employ a form of utility reasoning by
projecting costs and benefits for Plan X versus Plan Y. But the issue in
most of these cost-benefit analyses is usually (1) put exclusively in
terms of money and (2) directed to the benefit of the person or
organization doing the analysis and not to the benefit of society as a
whole.
An individual or a company that consistently uses the test question,
“What’s the greatest good for me or the company?” is not following
the utilitarian test of the greatest good overall. Another common
failing is to see only one or two options that seem reasonable. The
following are some frequent mistakes that people make in applying
what they think are utilitarian principles in justifying their chosen
course of action:
1. Failing to come up with lots of options that seem reasonable and
then choosing the one that has the greatest benefit for the
greatest number. Often, a decision maker seizes on one or two
alternatives without thinking carefully about other courses of
action. If the alternative does more good than harm, the decision
maker assumes it’s ethically okay.
2. Assuming that the greatest good for you or your company is in
fact the greatest good for all—that is, looking at situations
subjectively or with your own interests primarily in mind.
3. Underestimating the costs of a certain decision to you or your
company. The now-classic Ford Pinto case demonstrates how
Ford Motor Company executives drastically underestimated the
legal costs of not correcting a feature on their Pinto models that
they knew could cause death or injury. General Motors was often
taken to task by juries that came to understand that the company
would not recall or repair known and dangerous defects because
it seemed more profitable not to. In 2010, Toyota learned the
same lesson.
4. Underestimating the cost or harm of a certain decision to
someone else or some other group of people.
5. Favoring short-term benefits, even though the long-term costs
are greater.
6. Assuming that all values can be reduced to money. In comparing
the risks to human health or safety against, say, the risks of job or
profit losses, cost-benefit analyses will often try to compare
apples to oranges and put arbitrary numerical values on human
health and safety.
Rules and Duty: Deontology
In contrast to the utilitarian perspective, the deontological view
presented in the writings of Immanuel Kant purports that having a
moral intent and following the right rules is a better path to ethical
conduct than achieving the right results. A deontologist like Kant is
likely to believe that ethical action arises from doing one’s duty and
that duties are defined by rational thought. Duties, according to Kant,
are not specific to particular kinds of human beings but are owed
universally to all human beings. Kant therefore uses “universalizing” as
a form of rational thought that assumes the inherent equality of all
human beings. It considers all humans as equal, not in the physical,
social, or economic sense, but equal before God, whether they are
male, female, Pygmy, Eskimoan, Islamic, Christian, gay, straight, healthy,
sick, young, or old.
For Kantian thinkers, this basic principle of equality means that we
should be able to universalize any particular law or action to determine
whether it is ethical. For example, if you were to consider
misrepresenting yourself on a resume for a particular job you really
wanted and you were convinced that doing so would get you that job,
you might be very tempted to do so. (What harm would it be? you
might ask yourself. When I have the job, I can prove that I was perfect
for it, and no one is hurt, while both the employer and I are clearly
better off as a result!) Kantian ethicists would answer that your chosen
course of action should be a universal one—a course of action that
would be good for all persons at all times. There are two requirements
for a rule of action to be universal: consistency and reversibility.
Consider reversibility: if you make a decision as though you didn’t
know what role or position you would have after the decision, you
would more likely make an impartial one—you would more likely
choose a course of action that would be most fair to all concerned, not
just you. Again, deontology requires that we put duty first, act
rationally, and give moral weight to the inherent equality of all human
beings.
In considering whether to lie on your resume, reversibility requires you
to actively imagine both that you were the employer in this situation
and that you were another well-qualified applicant who lost the job
because someone else padded his resume with false accomplishments.
If the consequences of such an exercise of the imagination are not
appealing to you, your action is probably not ethical.
The second requirement for an action to be universal is the search for
consistency. This is more abstract. A deontologist would say that since
you know you are telling a lie, you must be willing to say that lying, as
a general, universal phenomenon, is acceptable. But if everyone lied,
then there would be no point to lying, since no one would believe
anyone. It is only because honesty works well for society as a whole
and is generally practiced that lying even becomes possible! That is,
lying cannot be universalized, for it depends on the pre-existence of
honesty.
Similar demonstrations can be made for actions such as polluting,
breaking promises, and committing most crimes, including rape,
murder, and theft. But these are the easy cases for Kantian thinkers. In
the gray areas of life as it is lived, the consistency test is often difficult
to apply. If breaking a promise would save a life, then Kantian thought
becomes difficult to apply. If some amount of pollution can allow
employment and the harm is minimal or distant, Kantian thinking is not
all that helpful. Finally, we should note that the well-known golden rule,
“Do unto others as you would have them do unto you,” emphasizes the
easier of the two universalizing requirements: practicing reversibility
(“How would I like it if someone did this to me?”).
Licenses and Attributions
Reading: Major Ethical Perspectives from Business Law by Lumen
Learning is available under a Creative Commons AttributionNonCommercial-ShareAlike 4.0 International license. UMGC has
modified this work and it is available under the original license.
Introduction to Culture and Business
This chapter will take a closer look at how two key factors, culture and
ethics, impact global business. Most people hear about culture and
business and immediately think about protocol—a list of dos and
don’ts by country. For example, don’t show the sole of your foot in
Saudi Arabia; learn the nuances of bowing in Japan. While these
practices are certainly useful to know, they are just the tip of the
iceberg. We often underestimate how critical local culture, values, and
customs can be in the business environment. We assume, usually
incorrectly, that business is the same everywhere. Culture certainly
matters, and more and more people are realizing its impact on their
business interactions.
In the broadest sense, culture refers to how and why we think and
function. It encompasses all sorts of things—how we eat, play, dress,
work, think, interact, and communicate. Everything we do, in essence,
has been shaped by the cultures in which we are raised. Similarly, a
person in another country is also shaped by his or her cultural
influences. These cultural influences impact how we think and
communicate.
Making Local Global
Food is a key part of many cultures. It is part of our early bonds as
children and our warm memories of comfort food and dishes that
continue to whet our appetites.
Two of the most visible American exports are the twin brands, Dunkin’
Donuts and Baskin-Robbins. Owned today by a consortium of private
equity firms known as the Dunkin’ Brands, Dunkin’ Donuts and BaskinRobbins have been sold globally for more than thirty-five years. Today,
the firm has more than 14,800 points of distribution in forty-four
countries with $6.9 billion in global sales.
After an eleven-year hiatus, Dunkin’ Donuts returned to Russia in 2010
with the opening of twenty new stores, under a new partnership.
Dunkin’ Donuts previously pulled out of Russia “following three years
of losses exacerbated by a rogue franchisee who sold liquor and meat
pies alongside coffee and crullers” (Helliker, 2010). Each culture has
different ingrained habits, particularly in their choice of food and
mealtime customs. The more globally aware businesses are mindful of
these issues and monitor their overseas operations and partners. One
of the key challenges for many companies operating globally with
different resellers, franchisees, and wholly owned subsidiaries is the
ability to control local operations.
This wasn’t the first time that Dunkin’ had encountered an overzealous
local partner who tried to customize operations to meet local
preferences and demands. In Indonesia in the 1990s, the company was
surprised to find that local operators were sprinkling a mild, white
cheese on a custard-filled donut. The company eventually approved
the local customization since it was a huge success (D. Jenkins,
personal communication, 2010).
Dunkin’ Donuts and Baskin-Robbins have not always been owned by
the same firm. They eventually came under one entity in the late
1980s—an entity that sought to leverage the two brands. One of the
overall strategies was to have the morning market covered by Dunkin’
Donuts and the afternoon snack market covered by Baskin-Robbins. It
is a strategy that worked well in the United States and the company
continued its use as it expanded to different countries. The company
was initially unprepared for the wide range of local cultural preferences
and habits that would impact its business. In Russia, Japan, China, and
most of Asia, donuts, if they were known at all, were regarded more as
a sweet type of bakery treat, like an éclair or cream puff. Locals
primarily purchased and consumed them at shopping malls as an
impulse purchase or afternoon-snack item, not as a breakfast food.
In fact, there was no equivalent word for donut in Mandarin, and
European-style baked pastries were not common outside the Shanghai
and Hong Kong markets in China. To further complicate Dunkin’
Donuts’ entry into China, which took place initially in Beijing, the
company name could not even be phonetically spelled in Chinese
characters that made any sense, as Baskin-Robbins had been able to do
in Taiwan. After extensive discussion and research, company executives
decided that the best name and translation for Dunkin’ Donuts in China
would read Sweet Sweet Ring in Chinese characters.
Local cultures also impacted flavors and preferences. For BaskinRobbins, the flavor library is controlled in the United States, but local
operators in each country have been the source of new flavor
suggestions. In many cases, flavors that were customized for local
cultures were added a decade later to the main menus in major
markets, including the United States. Mango and green tea were early
custom ice cream flavors produced for the Asian market in the 1990s.
In Latin America, dulce de leche became a favorite flavor. Today, these
flavors are staples of the North American flavor menu.
One flavor suggestion from Southeast Asia never quite made it onto
the menu. The durian fruit is a favorite in parts of Southeast Asia, but it
has a strong, pungent odor. Baskin-Robbins management was
concerned that the strong odor would overwhelm factory operations.
(The odor of the durian fruit is so strong that the fruit is often banned
in upscale hotels in several Asian countries.) While the durian never
became a flavor, the company did concede to making ice cream
flavored after the ube, a sweetened purple yam, for the Philippine
market. It was already offered in Japan, and the company extended it
to the Philippines. In Japan, sweet corn and red bean ice cream were
approved for local sale and became hot sellers, but the two flavors
never made it outside the country.
When reviewing local suggestions, management conducts a market
analysis to determine if the global market for the flavor is large enough
to justify the investment in research and development and eventual
production. In addition to the market analysis, the company always has
to make sure they have access to sourcing quality flavors and fruit.
Mango proved to be a challenge, as finding the correct fruit puree
differed by country or culture. Samples from India, Hawaii, Pakistan,
Mexico, the Philippines, and Puerto Rico were taste-tested in the
mainland United States. It seems that the mango is culturally regarded
as a national treasure in every country where it is grown, and every
country thinks its mango is the best. Eventually the company settled on
one particular flavor of mango.
A challenging balance for Dunkin’ Brands is to enable local operators
to customize flavors and food product offerings without diminishing
the overall brand of the companies. Russians, for example, are largely
unfamiliar with donuts, so Dunkin’ created several items that
specifically appeal to Russian flavor preferences for scalded cream and
raspberry jam (Helliker, 2010).
In some markets, one of the company’s brands may establish a market
presence first. In Russia, the “Dunkin’ brand already ranks as a dessert
purveyor. Its Baskin-Robbins ice-cream chain boasts 143 shops there,
making it the number two Western restaurant brand by number of
stores behind the hamburger chain McDonald’s Corp” (Helliker, 2010).
The strength of the company’s ice cream brand is now enabling
Dunkin’ Brands to promote the donut chain as well.
References
Helliker, K. (2010, April 27). Dunkin’ Donuts heads back to Russia. Wall
Street Journal. Retrieved from
http://online.wsj.com/article/SB10001424052748704464704575208320
044839374.htm
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What Is Culture? Values, Customs, and
Language
Local preferences, habits, values, and culture impact all aspects of
doing business in a country. But what exactly do we mean by culture?
Culture is different from personality. For our purposes here, let’s
define personality as a person’s identity and unique physical, mental,
emotional, and social characteristics. No doubt one of the highest
hurdles to cross-cultural understanding and effective relationships is
our frequent inability to decipher the influence of culture from that of
personality. Once we become culturally literate, we can more easily
read individual personalities and their effect on our relationships.
So, What Is Culture, Anyway?
Culture in today’s context is different from the traditional, more
singular definition, used particularly in Western languages, where the
word often implies refinement. Culture is the beliefs, values, mind-sets,
and practices of a group of people. It includes the behavior pattern and
norms of that group—the rules, the assumptions, the perceptions, and
the logic and reasoning that are specific to a group. In essence, each of
us is raised in a belief system that influences our individual
perspectives to such a large degree that we can’t always account for, or
even comprehend, its influence. We’re like other members of our
culture—we’ve come to share a common idea of what’s appropriate
and inappropriate.
Culture is really the collective programming of our minds from birth.
It’s this collective programming that distinguishes one group of people
from another. Much of the problem in any cross-cultural interaction
stems from our expectations. The challenge is that whenever we deal
with people from another culture—whether in our own country or
globally—we expect people to behave as we do and for the same
reasons. Culture awareness most commonly refers to having an
understanding of another culture’s values and perspective. This does
not mean automatic acceptance; it simply means understanding
another culture’s mind-set and how its history, economy, and society
have impacted what people think. Understanding so you can properly
interpret someone’s words and actions means you can effectively
interact with them.
When talking about culture, it’s important to understand that there
really are no rights or wrongs. People’s value systems and reasoning
are based on the teachings and experiences of their culture. Rights and
wrongs then really become perceptions. Cross-cultural
understanding requires that we reorient our mind-set and, most
importantly, our expectations, in order to interpret the gestures,
attitudes, and statements of the people we encounter. We reorient our
mind-set, but we don’t necessarily change it.
There are a number of factors that constitute a culture—manners,
mind-set, rituals, laws, ideas, and language, to name a few. To truly
understand culture, you need to go beyond the lists of dos and don’ts
and understand what makes people tick and how, as a group, they
have been influenced over time by historical, political, and social issues.
When trying to understand how cultures evolve, we look at the factors
that help determine cultures and their values. In general, a value is
defined as something that we prefer over something else—whether it’s
a behavior or a tangible item. Values are usually acquired early in life
and are often nonrational—although we may believe that ours are
actually quite rational. Our values are the key building blocks of our
cultural orientation.
Odds are that each of us has been raised with a considerably different
set of values from those of our colleagues and counterparts around the
world. Exposure to a new culture may take all you’ve ever learned
about what’s good and bad, just and unjust, and beautiful and ugly and
stand it on its head.
Human nature is such that we see the world through our own cultural
lenses. Tucked in between the lines of our cultural laws is an
unconscious bias that inhibits us from viewing other cultures
objectively. Our judgments of people from other cultures will always be
colored by the frame of reference we’ve been taught. As we look at our
own habits and perceptions, we need to think about the experiences
that have blended together to impact our cultural frame of reference.
In coming to terms with cultural differences, we tend to employ
generalizations. This isn’t necessarily bad. Generalizations can save us
from sinking into what may be abstruse, esoteric aspects of a culture.
However, recognize that cultures and values are not static entities.
They’re constantly evolving—merging, interacting, drawing apart, and
reforming. Around the world, values and cultures are evolving from
generation to generation as people are influenced by things outside
their culture. In modern times, media and technology have probably
single-handedly impacted cultures the most in the shortest time
period—giving people around the world instant glimpses into other
cultures. Recognizing this fluidity will help you avoid getting caught in
outdated generalizations. It will also enable you to interpret local cues
and customs and to better understand local cultures.
Understanding what we mean by culture and what the components of
culture are will help you better interpret the impact on business at both
the macro and micro levels. Confucius had this to say about cultural
crossings: “Human beings draw close to one another by their common
nature, but habits and customs keep them apart.”
What Kinds of Culture Are There?
Political, economic, and social philosophies all impact the way people’s
values are shaped. Our cultural base of reference—formed by our
education, religion, or social structure—also impacts business
interactions in critical ways. As we study cultures, it is very important to
remember that all cultures are constantly evolving. When we say
“cultural,” we don’t always just mean people from different countries.
Every group of people has its own unique culture—that is, its own way
of thinking, values, beliefs, and mind-sets. For our purposes, we’ll focus
on national and ethnic cultures, although there are many subcultures
within a country or ethnic group.
Precisely where a culture begins and ends can be murky. Some cultures
fall within geographic boundaries; others overlap. Cultures within one
border can turn up within other geographic boundaries looking
dramatically different or pretty much the same. For example, Indians in
India or Americans in the United States may communicate and interact
differently from their countrymen who have been living outside their
respective home countries for a few years.
The countries of the Indian subcontinent, for example, have close
similarities. And cultures within one political border can turn up within
other political boundaries looking pretty much the same, such as the
Chinese culture in China and the overseas Chinese culture in countries
around the world. We often think that cultures are defined by the
country or nation, but that can be misleading because cultural groups
can include nationalities; subcultures (gender, ethnicities, religions,
generations, and even socioeconomic class); and organizations,
including the workplace.
Nationalities
A national culture is—as it sounds—defined by its geographic and
political boundaries and includes regional cultures within a nation as
well as among several neighboring countries. A country’s history,
including changes to its name and boundaries substantially impacts its
culture.
In the past century alone, we have seen many changes as new nations
emerged from the gradual dismantling of the British and Dutch
empires at the turn of the 1900s. For example, today the physical
territories that constitute the countries of India and Indonesia are far
different than they were a hundred years ago. While it’s easy to forget
that the British colonized India for two hundred years and that the
Dutch colonized Indonesia for more than one hundred and fifty years,
what is clearer is the impact of the British and the Dutch on the
respective bureaucracies and business environments. The British and
the Dutch were well known for establishing large government
bureaucracies in the countries they controlled. Unlike the British
colonial rulers in India, the Dutch did little to develop Indonesia’s
infrastructure, civil service, or educational system. The British, on the
other hand, tended to hire locals for administrative positions, thereby
establishing a strong and well-educated Indian bureaucracy. Even
though many businesspeople today complain that this Indian
bureaucracy is too slow and focused on rules and regulations, the
government infrastructure and English-language education system laid
out by the British helped position India for its emergence as a strong
high-tech economy.
Even within a national culture, there are often distinct regional cultures;
the United States is a great example of diverse and distinct cultures all
living within the same physical borders. In the United States, there’s a
national culture embodied in the symbolic concept of “all-American”
values and traits, but there are also other cultures based on
geographically different regions—the South, Southwest, West Coast,
East Coast, Northeast, Mid-Atlantic, and Midwest.
Subcultures
Many groups are defined by ethnicity, gender, generation, religion, or
other characteristics with cultures that are unique to them. For
example, the ethnic Chinese business community has a distinctive
culture even though it may include Chinese businesspeople in several
countries. This is particularly evident throughout Asia, as many people
often refer to Chinese businesses as making up a single business
community. The overseas Chinese business community tends to
support other Chinese businesses and forge business bonds within the
community with partners in locations spanning Indonesia, Malaysia,
Singapore, and other ASEAN (Association of Southeast Asian Nations)
countries. This group is perceived differently than Chinese from
mainland China or Taiwan. Their common experience being a minority
ethnic community with strong business interests has led to a shared
understanding of how to quietly operate large businesses in foreign
countries. Just as in mainland China, guanxi, or “connections,” are
essential to admission into this overseas Chinese business network. But
once in the network, the Chinese tend to prefer doing business with
one another and offer preferential pricing and other business services.
Organizations
Every organization has its own workplace culture, referred to as
the organizational culture. This term defines simple aspects of the
work environment, such as how people dress (casual or formal), how
they perceive and value employees, or how they make decisions (as a
group or by the manager alone). When we talk about an
entrepreneurial culture in a company, it might imply that the company
encourages people to think creatively and respond to new ideas fairly
quickly without a long internal approval process. One of the issues
managers often have to consider when operating with colleagues,
employees, or customers in other countries is how the local country’s
culture will blend or contrast with the company’s culture.
For example, Apple, Google, and Microsoft all have distinct business
cultures that are influenced both by their industries and by the types of
technology-savvy employees that they hire, as well as by the
personalities of their founders. When these firms operate in a country,
they have to assess how new employees will fit their respective
corporate cultures, which usually emphasize creativity, innovation,
teamwork balanced with individual accomplishment, and a keen sense
of privacy. Their global employees may appear relaxed in casual work
clothes, but underneath there is often a fierce competitiveness. So how
do these companies effectively hire in countries like Japan, where
teamwork and following rules are more important than seeking new
ways of doing things? This is an ongoing challenge that human
resources departments continually address.
Licenses and Attributions
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Language from Challenges and Opportunities in International
Business is available under a Creative Commons AttributionNonCommercial-ShareAlike 3.0 Unported license without attribution as
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this work and it is available under the original license.
Understanding How Culture Impacts Local
Business Practices
Professionals err when thinking that, in today’s shrinking world, cultural
differences are no longer significant. It’s a common mistake to assume
that people think alike just because they dress alike; it’s also a mistake
to assume that people think alike just because they are similar in their
word choices in a business setting. Even in today’s globalizing world,
there are wide cultural differences, and these differences influence how
people do business. Culture impacts many aspects of business
•
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the pace of business
business protocols such as how to physically and verbally meet
and interact
decision making and negotiating
managing employees and projects
the propensity for risk taking
marketing, sales, and distribution
There are still many people around the world who think that business is
just about core business principles and making money. They assume
that issues like culture don’t really matter. These issues do matter—in
many ways. Even though businesses are focused on the bottom line,
people do business with partners they like, trust, and understand.
Culture determines all of these key issues.
A simple issue, such as local flavor preferences, can impact even the
largest companies. The influence of cultural factors on business is
extensive. Culture impacts how employees are best managed based on
their values and priorities. It also influences the functional areas of
marketing, sales, and distribution.
It can affect a company’s analysis and decision on how best to enter a
new market. Do they prefer a partner (tending toward uncertainty
avoidance) so they do not have to worry about local practices or
government relations? Or are they willing to set up a wholly owned
unit to recoup the best financial prospects?
When you’re dealing with people from another culture, you may find
that their business practices, communication, and management styles
are different from those you are accustomed to. Understanding the
culture of the people with whom you are dealing is important to
successful business interactions and to accomplishing business
objectives. For example, you’ll need to understand the following
components of cultural variation:
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how people communicate
how people view time and deadlines
how people are likely to ask questions or highlight problems
how people respond to management and authority
how people perceive verbal and physical communications
how people make decisions
To conduct business with people from other cultures, you must put
aside preconceived notions and strive to learn about the culture of
your counterpart. Often the greatest challenge is learning not to apply
your own value system when judging people from other cultures. It is
important to remember that there are no right or wrong ways to deal
with other people—just different ways. Concepts like time and ethics
are viewed differently from place to place, and the smart business
professional will seek to understand the rationale underlying another
culture’s concepts.
For younger and smaller companies, there’s no room for errors or
delays—both of which may result from cultural misunderstandings and
miscommunications. These miscues can and often do affect the bottom
line.
Spotlight on Cultures and Entrepreneurship
With global media reaching the corners of the earth, entrepreneurship
has become increasingly popular as more people seek a way to
exponentially increase their chances for success. Nevertheless,
entrepreneurs can face challenges in starting to do business in nations
whose cultures require introductions or place more value on large,
prestigious, brand-name firms.
Conversely, entrepreneurs are often well equipped to negotiate global
contracts or ventures. They are more likely to be flexible and creative in
their approach and have less rigid constraints than their counterparts
from more established companies. Each country has different
constraints, including the terms of payment and regulations, and you
will need to keep an open mind about how to achieve your objectives.
In reality, understanding cultural differences is important whether
you’re selling to ethnic markets in your own home country or selling to
new markets in different countries. Culture also impacts you if you’re
sourcing from different countries, because culture impacts
communications.
Your understanding of culture will affect your ability to enter a local
market, develop and maintain business relationships, negotiate
successful deals, conduct sales, conduct marketing and advertising
campaigns, and engage in manufacturing and distribution. Too often,
people send the wrong signals or receive the wrong messages; as a
result, people get tangled in the cultural web. In fact, there are
numerous instances in which deals would have been successfully
completed if finalizing them had been based on business issues alone,
but cultural miscommunications interfered. Just as you would conduct
a technical or market analysis, you should also conduct a cultural
analysis.
It’s critical to understand the history and politics of any country or
region in which you work or with which you intend to deal. It is
important to remember that each person considers his or her “sphere”
or “world”) the most important, and that this attitude forms the basis of
his or her individual perspective. We often forget that cultures are
shaped by centuries of experience and that ignoring cultural
differences puts us at a disadvantage.
Spotlight on Impact of Culture on Business in Latin America
The business culture of Latin America differs throughout the region. A
lot of this variation has to do with the size of the country, the extent to
which it has developed a modern industrial sector, and its openness to
outside influences and the global economy.
Some of the major industrial and commercial centers embody a
business culture that’s highly sophisticated, international in outlook,
and on a par with that in Europe or North America. They often have
modern offices and businesspeople with strong business acumen and
international experience.
Outside the cities, business culture is likely to be much different as
local conditions and local customs may begin to impact any interaction.
Farther from the big cities, the infrastructure may become less reliable,
forcing people to become highly innovative in navigating the
challenges facing them and their businesses.
Generally speaking, several common themes permeate Latin American
business culture. Businesses typically are hierarchical in their structure,
with decisions made from the top down. Developing trust and gaining
respect in the business environment is all about forging and
maintaining good relationships. This often includes quite a bit of
socializing.
Another important factor influencing the business culture is the
concept of time. In Latin America, el tiempo es como el espacio. In other
words, time is space. More often than not, situations take precedence
over schedules. Many people unfamiliar with Latin American customs,
especially those from time-conscious countries like the United States,
Canada, and those in Northern Europe, can find the lack of punctuality
and more fluid view of time frustrating. It’s more useful to see the
unhurried approach as an opportunity to develop good relations. This
is a generalization, though, and in the megacities of Latin America,
such as Mexico City, São Paulo, and Buenos Aires, time definitely equals
money.
In most Latin American countries, old-world manners are still the rule,
and an air of formality is expected in most business interactions and
interpersonal relationships, especially when people are not well
acquainted with one another. People in business are expected to dress
conservatively and professionally and be polite at all times. Latin
Americans are generally very physical and outgoing in their expressions
and body language. They frequently stand closer to one another when
talking than in many other cultures. They often touch, usually an arm,
and even kiss women’s cheeks on a first meeting.
In business and in social interactions, Latin America is overwhelmingly
Catholic, which has had a deep impact on culture, values, architecture,
and art. For many years and in many countries in the region, the
Catholic Church had absolute power over all civil institutions,
education, and law. However, today, the church and state are now
officially separated in most countries, the practice of other religions is
freely allowed, and Evangelical churches are growing rapidly.
Throughout the region, particularly in Brazil, Indians and some black
communities have integrated many of their own traditional rituals and
practices with Christianity, primarily Catholicism, to produce hybrid
forms of the religion.
Throughout Latin America, the family is still generally the most
important social unit. Family celebrations are important, and there’s a
clear hierarchy within the family structure, with the head of the
household generally being the oldest male—the father or grandfather.
In family-owned businesses, the patriarch, or on occasion matriarch,
tends to retain the key decision-making roles.
From Mexico City to Buenos Aires—whether in business or as a part of
the vibrant society—the history and culture of Latin America continues
to have deep and meaningful impact on people throughout Latin
America.
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Practices from Challenges and Opportunities in International Business is
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Ethical and Cross-Cultural Negotiations
Are hardball tactics OK to use? Sometimes a course of action is legal
but is ethically questionable. A good rule of thumb is that hardball
tactics should not be used because the negotiation is likely not to be
the last time you will interact with the other party. Therefore, finding a
way to make a deal that works for both sides is preferable. Otherwise, if
you have the complete upper hand and use it to dominate
negotiations, it’s likely that at a future date the other party will have
the upper hand and will use it to retaliate against you. What’s more,
your reputation as a negotiator will suffer. As the famed industrialist J.
Paul Getty said, quoting his father, “You must never try to make all the
money that’s in a deal. Let the other fellow make some money too,
because if you have a reputation for always making all the money, you
won’t have many deals.”
Ethics establish a way of doing what is right, fair, and honest. If your
counterpart feels you are being unfair or dishonest, he or she is less
likely to make any concessions or even to negotiate with you in the first
place.
Here are some tips for ethical negotiations (Stark & Flaherty, 2003):
•
•
•
Be honest.
Keep your promises.
Follow the platinum rule. The golden rule tells us to treat others
the way we want to be treated. Author Tony Alessandra goes a
step further with the platinum rule: “Treat people the way they
want to be treated.” Caring about others enough to treat them
the way they want to be treated helps build long-term
relationships based on ethics and trust.
Negotiation around the Globe
Not understanding cultural differences is another common mistake.
Some cultures have a higher or lower threshold for conflict. For
example, in countries such as Japan or Korea, the preference is for
harmony (called wa in Japan) rather than overt conflict (Lebra, 1976).
Americans and Germans have a much higher tolerance for conflict as a
way of working through issues. In a st…