Cross-cultural Issues in Ethics and CSR

Capitalism has been successful enough in generating output and raising productivity. But the experiences of different countries are quite diverse. The recent experiences of Eastern Asian economics - most notably Japan - raise deep questions about the modeling of capitalism on traditional economic theory. Japan is often seen - rightly in a particular sense - as a great example of successful capitalism, but it is clear that the motivation patterns that dominate Japanese business have much more content than would be provided by pure profit maximization ... Indeed, there is some truth, oddly enough, even in the puzzling witty claim by The Wall Street Journal that Japan is ‘the only communist nation that works’. It is as one would expect, mainly a remark about the non-profit motivations underlying many economic and business activities in Japan. We have to understand and interpret the peculiar fact that the most successful capitalist nation in the world flourishes economically with a motivation structure that departs firmly - and often explicitly - from the pursuit of self-interest, which is meant to be a bedrock of capitalism. (Amartya Sen, 1993, p. 32)

As discussed in previous sections, sustainability requires that CSR and ethics are at the top of global leaders’ agenda. However, sustainability is not an issue that has the highest priority for all leaders of the world. As can be seen from Figure 10.2. CEOs’ perception of the importance of sustainability for the future of their business success varies by region (Lacy et al., 2010, p. 18). In this section we will explore cross-cultural differences in the attitudes and practices concerning CSR and ethics.

Approximately 15 per cent of the world population live in so called weak governance zones with weak institutions that fail to protect property and intellectual rights, enforce rules and regulations and eliminate red tape (Huber-Grabenwarter and Boehm, 2009).

As a result, companies may be tempted to use bribery and other corrupt practices as a political risk insurance to protect investments. Similarly, they may be lured to manipulate rules in their favour, avoid enforcement of regulations, gain lucrative contracts or resource extraction permits, or simply to cut through red tape and administrative hold-ups. (Huber-Grabenwarter and Boehm, 2009, p. 47)

Regional differences in the extent to which sustainability is important to the future success of businesses. (Lacy et al., 2010, p. 18)

Figure 10.2 Regional differences in the extent to which sustainability is important to the future success of businesses. (Lacy et al., 2010, p. 18)

Conducting business in different cultural contexts that undermine the importance of ethics and CSR has become one of the key challenges in today’s global environment: 'Ethical decision-making in the global context, sitting as it does at the top of the global competencies model, is increasingly the acid test applied by a multiplicity of stakeholders to judge global management competency’ (McNett and Sondergaard, 2004, p. 167, emphasis added).

What is the evidence showing that ethics is on top of the global business agenda for cross-cultural managers?

  • • The number of companies in the Global 200 list that have business code of conduct increased dramatically over the years: from 2 per cent in 1997 to 85 per cent in 2007 (Kaptein, 2009).
  • • Some of the large global organizations now have a Chief Ethics Officer in their top management team.
  • • Increasing numbers of organizations (e.g., 77 per cent US, 55 per cent Asian Pacific, 32 per cent Western European) integrate ‘whistleblower protection programmes’ to fight fraud and corruption (Aldrighi, 2009).
  • • There is a growing body of academic research literature on ethics and CSR in cross-cultural context as evidenced by the level of debate in publications journals such as the Journal of Business Ethics.
  • • There are numerous non-profit organizations that guide cross-cultural managers to conduct business with high ethical standards, such as the International Business Ethics Institute ('http://www.business-ethics.org/i. Center for International Business Ethics ('http://www.cibe.org.en/en/i and European Business Ethics Network (iittph/www.eben.org/i.
  • • There are international standards and codes to ensure ethical and responsible practices in global business, such as ISO 14000 (standards for environmental protection), ISO 26000 (standards for corporate social responsibility), SA8000 (standards for workplace practices to comply with international labor conventions and human rights), the UN Global Compact (principles of reponsible and sustainable corporate conduct), AA1000

Assurance Standard (evaluation standards used to evaluate the extent to which an organization is accountable to its multiple stakeholders), International Labour Organization (ILO) and Organization for Economic Cooperation and Development (OECD) guidelines for MNCs and the ETI (Ethical Trading Initiative; a UK- based code to improve the working conditions of people producing consumer goods).

The number of MNCs following these standards and guidelines is increasing over the years: ISO 14000 - 46 per cent; ILO convention - 35 per cent; UN Global Compact - 33 per cent; OECD Guidelines for Multinational Enterprises - 22 per cent; Ethical Trading Initiative - 17 per cent; SA 8000 - 17 per cent; AA1000 - 10 per cent (Knight, 2009, p. 100).

Cross-cultural managers face ethical dilemmas in a wide range of operations, including production, marketing, negotiations in bids, HRM practices and employee headh and well-being. Look at the examples in Thinking across cultures 10.1.

Thinking across cultures 10.1 Ethical Dilemmas in Cross-cultural Context

  • • In some countries laws prohibiting advertisements of cigarettes are less restrictive than others. Should cigarette-producing companies relax their rules in these countries and shrink the size of the warnings on the packages?
  • • In some countries there are no laws or regulations to prevent discrimination in hiring practices on the basis of gender, age, religion, ethnic and educational background. Should MNCs who are equal opportunity employers operating in these countries feel free to ask questions in the job application form that would be inappropriate at home but highly common in the local context?
  • • Child labour is unfortunately still very common in the majority of less developed countries. In some countries children cannot attend school because of poverty. Children who do not go to work usually engage in criminal activities (e.g., theft) to provide for the family. As an organization completely against child labour, should you consider hiring children in such countries to keep them away from crime and let them contribute to family income?
  • • According to a new regulation production facilities can continue only if organizations go through a rigorous assessment conducted by government officials. It is known that the assessment takes a very long time (almost a year) and there is no guarantee that your company will pass it. It is also known that the process is shorter and easier if government officers are pleased to receive gifts as a token of appreciation for their time and care. Bribing government officials is strictly prohibited under the MNC’s rules, ffowever, not pleasing officials would risk production and hence the employment of 1200 workers who would live in extreme poverty if they lose their job. What would you do?

Sources: Francesco and Gold (2005); Lane, DiStefano, Maznevski (2006); Punnett, (2004)

  • • What would you do if you faced each of these dilemmas? (Please make sure that you write down your approach for each dilemma.)
  • • Does your approach differ according to the dilemma you are facing or will you be consistent across cases? Explain why you prefer to be ‘flexible’ or ‘consistent’ in your approach.
  • • Compare your approach with one of your colleagues. What are the similarities and differences? Why do you think your approach was similar or different? Consider the role of age, gender, education, personality,

Cross-cultural management involves many such ethical dilemmas. No matter how carefully one behaves at home, it is difficult to apply the same level of care elsewhere. It is wrong to assume that some countries are immune to problems arising from violation of ethics. In today’s fierce global competition, managers are pressured to produce 'numbers’. Therefore, unethical conduct can occur in every cultural context; the difference lies in the degree.

Table 10.1 Differences in perception of corruption and likelihood of engaging in bribing behaviour.

Country

Bribe Payers Index 2011

Corruption Perceptions Index 2010

Percentage of participants who paid lirihe h the last 12 months for services’"

Belgium

8.7

7.1

Data not (Nailable

Canada

0.5

8.9

4

Netherlands

0.8

8.8

2

Switzerland

0.8

8.7

2

Germany

0.6

7.9

2

United Kingdom

0.3

7.6

1

Japan

0.6

7.8

9

Australia

0.5

8.7

2

France

0.0

6.8

7

Singapore

0.3

9.3

9

United States

8.1

7.1

5

Spain

8.0

6.1

5

Hong Kong

7.6

8.4

5

South Africa

7.6

4.5

56

South Korea

7.0

5.4

2

Taiwan

7.5

5.8

7

Comity

Bribe Payers Index 2011

Corruption Perceptions index 2010

Percentage of particgtants who paid hrihe in the last 12 months for services*

Italy

7.6

3.9

13

Brazil

7.7

3.7

4

India

7.5

3.3

54

Mexico

7.0

3.1

31

China

6.5

3.5

9

Russia

6.1

2.1

26

Notes.

Bribe Payers Index: Transparency International’s Bribe Payers Index ranks the likelihood of companies from leading economiesto win business abroad by paying bribes. A score of 10 denotes the lowest likelihood of companies from this country to engage in bribery when doing business abroad while a score of 0 denotes the highest likelihood of companies to engage in bribery when doing business abroad.

Cormption Perceptions Index: Transparency International’s Corruption Perceptions Index measures the perceived level of public sector corruption in countries and territories around the world. In 2010, it scores 178 countries worldwide from 0 (highly corrupt) to 10 (highly clean).

*Data was taken from the Global Corruption Barometer 2010/2011. Transparency International’s Global Cormption Barometer tracks worldwide public opinion on corruption. The 2010/11 Barometer reflects the responses of more than 100,000 people in 100 countries.

© Transparency International 2010, 2011. All Rights Reserved.

Table 10.1 shows the scores of selected countries on two indices: the Bribe Payers Index (BPI) which records the likelihood of firms from the world’s industrialized countries offering bribes abroad

fhttp://www.transparency.org/news room/in focus/2008/bpi 20081 and the Corruption Perception Index (CPI) which records perceived levels of public sector corruption (http ://www.tr anspar encv. org/policy_ resear ch/surveys_

indices/cpi/2010). The last column in Table 10.1 also shows percentage of respondents who paid a bribe in the last 12 months in any form to institutions or organizations providing services in healthcare, education, justice, protection, trade customs and so on (Global Corruption Barometer, 2010 http://www.transparency.org/research /gcb/overview).

Unfortunately the scores in CPI and BPI are not 10, the so-called completely clean countries, for any of these countries. Countries differ in degree of cleanliness and we will explore the factors that can explain these differences in the next section.

 
Source
< Prev   CONTENTS   Source   Next >