Management 160
Ethics
The root word of ethics is ethos (Greek) – the beliefs of a people or community. Ethics relates to behaviour that is considered moral or right in that culture. It follows that there will be ethical differences between cultures and belief systemsand particularly in international business the question arises of whether to follow the ethics of the home culture of that of the host culture. Ethics is not a question of the legal system; it may not be illegal to do something but it may be immoral. Ethical questions often have no clearly right or wrong answer.
This does not necessarily mean that the entrepreneur is free to make whatever decision he likes. It may be prudent to consider what effects a business practice will have on employees, customers and the wider public. Even is one does not consider the morality of an action in its own right, others’ reaction on moral grounds could have a dramatic effect on business (Remember the Ikea problem of taking pictures of women out of it publicity in order to be culturally sensitive in Saudi Arabia. They were heavily criticised in Europe and N. America for perceived unethical behaviour).
Ethics is sometimes referred to as corporate social responsibility (CSR) – meaning that firms go beyond their legal obligations and consider obligations to customers, investors, communities and the environment.
There are 5 main ideas of business ethics:
• The Friedman view
• The cultural relativist view
• The righteous moralist view
• The naïve moralist view
• The utilitarian view
The Friedman view (Milton Friedman, economist 2011)
Simply states that a firm’s only responsibility is to maximise profits for the shareholders while operating within the law. In such as case a firm could move operations from a country that has strict health and safety legislation or strict environmental legislation to a country that has less strict laws. It can operate legally in that country but probably at much less cost. This would increase profits and fulfil be ethical in this view.
The cultural relativist view
This says that a company should use the local ethics wherever it operates. Relativism proposes that there is no Truth (capital T) but many truths depending on the beliefs of a people and its culture. A firm that uses child labour in accordance with local labour laws would justify it on grounds of meeting that society’s standards.
The righteous moralist view
This view says that the home country’s standards should apply when doing business abroad. It assumes that the home country has a superior set of ethics. A company that refuses to bribe officials in a country where this is the norm would be taking a righteous moralist view. It could go too far in some people’s opinion – should a Canadian firm operating in a low income country pay the same wage and with the same benefits as in Canada? Although people might think that this is fair – are they willing to pay the higher costs for goods that would result? Would the righteous moralist stay in business long if his methods were not used by his competitors?
The naïve moralist view
In this case the entrepreneur just does what everyone else is doing. If other firms routinely pay bribes so will the naïve moralist. The problem here is how far do you go? If the norm is to employ child labour does this make it acceptable?
The utilitarian view
This means to maximise good outcomes and minimise bad ones. Utilitarian thinking is based on such principals as ‘The greatest happiness of the greatest number’ (of people) . Here the manager decides that although she might be against bribing the official, she will do it because it will lead to the factory being built and lots of good jobs for local people.
The text refers to this as the basis for cost benefit analysis and risk assessment – that is a firm should only take an action if the benefits outweigh the costs. This is not just financial costs and benefit – a monetary figure can be put on environmental cost (such as noise pollution or water pollution) or benefits such as travel time saved from building a new road. In terms of risk, the chances of an oil spill for example might be included. The problem is that assessment of the future is difficult, the process is complex and not without bias. A firm set to make millions out of a project may be more likely to downplay risk and exaggerate benefits; its opponents would do the reverse.
Religion
Most ethical systems have a basis in religious beliefs – Confucianism a major exception. In terms of the effects on business the text refers several times to Max Weber (a German sociologist from the early 1900s). He proposed the idea that capitalism was to some extent a product of the Protestant (Christian) work ethic. He also suggested that Religions like Hinduism and Buddhism are less likely to lead to entrepreneurship – there is too much emphasis on the spiritual and not so much on the material things of life. There may be some truth in this – Bhutan, a Buddhist country, actively works to increase its country’s GDH (Gross Domestic Happiness) rather than its GDP. However given that India is one of the world’s fastest growing economies it casts doubt on Weber’s analysis. The text also draws attention to Islam and Confucianism and how they also promote entrepreneurship.
In terms of religion and its effects on business, it seems that the best approach is to consider the cultural aspects of religion and how this might affect behaviour in negotiations or the products being manufactured (alcohol) for example. As far as whether or not a business activity is likely to be successful it is impossible to make generalisations based on the predominant religion in a country
