Fall 08
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J o e l T h o m | K a r l i M c D o u g a l l | M i c h a e l M a c d o n a l d | R u p a m R i s h i

Introduction
In the 1970s, Ford Motors came to a crossroads: the value of the bottom line or the value of human life. The study and application of business ethics is key to understanding Ford’s course of action. Understanding how ethical perspectives have evolved, as a function of time and culture, is essential to determining how they will shape business practices in the future. People of certain cultures may act in a way that they find acceptable, while others would act otherwise, thus creating ethical dissonance and divergent practices. Through comparative analysis showcasing the differences in cross-national ethics, we seek to better understand the root cause and implications of such dissonance, identify specific differences, and determine the effect this has on businesses.
With that in mind, the assigned articles create a middle ground to build upon, creating an opportunity for the supplementary articles to expand outward and address unanswered questions.
The Foundation of Business Ethics
In the article The Dynamics of Business Ethics: a Function of Time and Culture , Svensson and Wood (2003) provide a foundation for comparative studies in the realm of business ethics.
They lay the groundwork for ethics by first referencing its definition; however, they cite three notable academics, who each provide a different understanding. On that notion, it should be recognized that there is no single definition of ethics, but rather a collection of ideas and perspectives on what constitutes ethical practice. They further go on to say that it is “impossible to have a universally accepted definition of ethics;” however, they allude to a consensus suggesting that ethics is founded upon public acceptance of behaviours and practices (Svensson and Wood, 2003, p. 350). The remainder of the articles examined provides further insight into the varying perspectives on what constitutes ethical behavior. Svensson and Wood (2003) merely provide a better understanding of why.
Svensson and Wood (2003) uncover two dependent variables that directly influence the
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existence and development of ethics: time and culture. These two variables greatly impact what is considered acceptable and unacceptable. As time progresses, some actions that would have been considered acceptable are no longer considered acceptable, which is exemplified through their reference of the notorious Ford Pinto case (Svensson & Wood, 2003). Essentially, Ford placed a value on the lives of their prospective customers as opposed to fixing what was a manufacturing issue with the design of the Pinto. More specifically, in a head-on collision, Pintos were found to combust due to a poorly manufactured gas tank that was too easily punctured. With respect to the second component, culture, it was found that Hofstede’s dimensions showcased correlations among ethical practices and behaviours. It was noted that, culture influences ethics on a variety of scales: interpersonally, inter-organizationally and intra-organizationally (Svensson & Wood,
2003). With this in mind, it is difficult to differentiate these two variables, as they are highly dependent upon one another in the evolution of ethics.
Through their research, Svensson and Wood (2003) have identified the business ethics gap, a concept linked to the micro-level of society. Essentially, this highlights the departure between society and an organization’s view of what constitutes ethics (Svensson & Wood, 2003). It is preferred that a company has a positive business ethics gap, allowing the company to be “a step ahead” of the current values, norms and beliefs in the marketplace (Svensson and Wood, 2003, p.
354). The existence of this gap is what drives the evolution of ethics. Rather, if all organizations remained stagnant in their beliefs, there would not be anything to strive for. Moreover, many organizations are constantly pushing one another for more. For instance, 20 years ago, climate change initiatives were not a strategic focus in many organizations; however, they have since become common practice and are vital to operations. Although ethics is shaped by a societal consensus and it cultivates organizational culture, there is not necessarily congruence with society.
This idea alludes to the findings uncovered by Bucar et al. (2003) and Ralston et al. (1994).
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Article One: Ethics and entrepreneurs: An international comparative study
The article, Ethics and entrepreneurs: An international comparative study by Bucar, Glas and Hisrich (2003), demonstrates the differences in ethics from both an international perspective and between managers and entrepreneurs.
Ethical differences across nations can be explained by the social contract theory. As described by Bucar et al. (2003, p. 262), the social contract theory is based on a social contract between businesses and society, in which a business must “serve the interests of society.” The social contract is shaped by a country’s political, economic and social institutions, which, in turn, specify how one must act within the nation (Bucar et al, 2003). When these institutions have political and economic systems of higher quality and are more efficient, they demonstrate higher levels of ethical behavior (Bucar et al., 2003). Thus, Bucar et al. (2003) presented the hypothesis that the U.S. would have the highest ethical standards, followed by Slovenia and Russia.
Ethical differences between managers and entrepreneurs can be described by the stakeholder theory, in which perspectives differ due to the their interactions with other stakeholders in the business (Bucar et al., 2003). The interactive social contract theory (ISCT)
(Donaldson & Dunfee, 1999), which is a derivative of the social contract theory, claims that a country’s political, economic and social institutions shape the contractual obligations of the stakeholders in a business. These theories led Bucar et al. (2003) to the hypothesis that a greater proportion of entrepreneurs than managers will portray themselves with more ethical attitudes in business.
This article is useful in that it presents the views from different researchers on the implications of both the social contract theory and the stakeholder theory to describe ethical behaviours. These different points of view led them to test their own hypotheses by presenting a questionnaire consisting of binary questions and scenarios to entrepreneurs and managers in the
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U.S., Slovenia and Russia (Bucar et al., 2003). The results varied between the nations and between the entrepreneurs and managers. Furthermore, their study confirmed both of their hypotheses and in addition, their findings supported the ISCT (Bucar et al., 2003).
The low response rate of the questionnaires, is concerning, in both the U.S. and Slovenia and of those who did participate in the questionnaire, many did not complete the scenario section
(Bucar et al., 2003). With that in mind, the questionnaires may sway individuals to report ethical behaviour, but in reality, act differently (Bucar et al., 2003). In addition, little detail is given as to how these differences will affect businesses and their interactions with businesses in other countries, leaving the reader wondering about the implications of such findings. Despite these downfalls, the results still highlight that differences between nations and between managers and entrepreneurs do exist. Moving forward, we must now discuss specific examples of how ethics vary from culture to culture.
Article Two: Ethical Perceptions of Organizational Politics: A Comparative Evaluation of
American and Hong Kong Managers
According to Ralston, Giacalone, and Terpstra (1994), the impact of cultural differences on ethics is often regarded as an unexplored area. Moreover, when this issue is analyzed, the scope of the research is often very limited as the emphasis is largely placed on corporate codes of ethics, managerial values, and bribery, thus ignoring ethical perceptions of organizational politics altogether (Ralston et al., 1994). Therefore, the authors have attempted to avoid the commonly discussed topics in business ethics (i.e. insider trading and affirmative action) and take a more progressive approach by discussing perceptions of ethics.
The article Ethical Perceptions of Organizational Politics: A Comparative Evaluation of
American and Hong Kong Managers by Ralston et al. (1994) presents a cross-cultural analysis of ethics by focusing specifically on managers in the U.S. and Hong Kong. These managers were
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asked to evaluate the ethics of using various political strategies to attain influence within their organizations (Ralston et al., 1994). Analyzing managers from two distinct and arguably contrasting cultures, helps the Ralston et al. (1994) provide a more balanced perspective.
Upward influence can be defined as “attempts to influence someone higher in the formal hierarchy of authority in the organization” (Webster, 2013). To facilitate research in this area, the author’s developed the Strategies of Upward Influence (SUI) instrument (Ralston et al., 1994).
Although the article does not address how this instrument was created—information that would have helped evaluate the validity and reliability of this tool—it does identify two taxonomies for upward influence: job tactics and Western values (Ralston et al., 1994). A total of seven job tactics were identified (i.e. good soldier and strong-arm coercion) to describe manager behaviour and four dimensions of Western values (i.e. organizationally sanctioned behaviours) for comparing acceptable and unacceptable behaviour using an American perspective (Ralston et al.,
1994). By specifically utilizing an American perspective, the authors cannot expect to evaluate
“Eastern” cultures and attain adequate results. Although it could be argued that Hong Kong has an extensive Western influence and therefore, applying these dimensions is suitable, this point goes unmentioned by the authors.
Based on these two distinct taxonomies, a number of hypotheses were tested on reasonably comparable groups consisting of U.S. and Hong Kong based professionals (Ralston et al., 1994). Data was collected via mailed out surveys. This is a potential drawback for the study.
For example, surveys could get lost and not be completed adequately due to a lack of clarity in instructions or participants not being truthful. Moreover, the answers to these surveys provide surface level insight, as the researchers are unable to follow up on participant responses and further inquire why particular job tactics and/or values are predominant versus others.
With that being said, the results from the study highlighted a number of cultural
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differences between the two groups of managers in respect to their perception of ethical behaviour
(Ralston et al., 1994). In addition, the findings were quite consistent with cross-cultural values.
For example, Americans are regarded as being individualistic and therefore, demonstrated a stronger tendency for being good soldiers and using rational persuasion (Ralston et al., 1994).
Similarly, in regards to the Western values dimensions, Hong Kong managers reported destructive legal/illegal behaviours as being acceptable; a finding, which is consistent with the belief in the East, that face and ethical behaviour is dependent on the situation (Ralston et al.,
1994).
The findings from this study are significant as they address what managers in different cultural settings perceive as ethical. Moreover, further research should be conducted to provide a more in-depth perspective on why these perceptions exist, beyond understanding cultural influence. Organizational climate can be analyzed to determine if these perceptions are a result of policies and procedures put in place within the company or broader societal norms. Moreover, it would be interesting to see if large corporations follow the mantra, Think Global, Act Local , for not only their products and services, but ethical standards as well. Ultimately, dismissing differences in what is considered the norm for ethical practices and standards or only considering a limited amount can cause an organization to forgo economic growth and stability.
The scope of the two assigned articles limits our findings to four countries specifically, which, in turn, decreases the transferability for our Factbook application. In addition, the articles argue that differences do exist and how they differ. Now we must answer the question: How are businesses reacting to these differences?
Thus, to be able to apply our findings to our Factbook, an article delving into how these differences impact businesses is necessary.
Implications for Businesses
The article , Ethics and Cultures , by Janice Beyer and David Niño (1999) discusses the
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efforts that are being made by companies to instill ethics into their business practices. Beyer and
Niño (1999) mention that the old way of practicing business included a large degree of singlemindedness with an ultimate goal of profit-maximization. However, this is no longer the way in which companies become successful in business. On the contrary, many high performing companies shared “core beliefs that transcended pure economic pursuits, such as serving employees, society, and communities,” while producing the finest products and winning the highest degree of customer satisfaction possible (Beyer & Niño, 1999, p. 296). Beyer and Niño’s
(1999) article discusses all of the changes involved with this shift towards more ethical business practices.
An increasing number of firms are making efforts to move in the direction of utilizing more ethical business practices which can be seen at both an intra-organizational and interorganizational level (Beyer & Niño, 1999). At an intra-organizational level, managerial cultures are key to instilling ethical norms and setting the tone for standard behaviour. Ultimately, the culture of a company is shaped by the behaviours and beliefs of their managers (Beyer & Niño,
1999). At an inter-organizational level, many companies are making an effort to develop a variety or inter-organizational, multinational organizations to set ethical standards for their business practices (Beyer & Niño, 1999). Many companies are attempting to do this in an effort to create universal ethical principles by which all international companies can follow (Beyer & Niño,
1999).
The efforts made by these companies are very encouraging; however, some companies may take part in these efforts for more symbolic, rather than substantive purposes (Beyer & Niño,
1999). In order to account for this, two types of organizations have been created to monitor and promote ethical practices. Firstly, international companies can form voluntary organizations to encourage and ensure that ethical values are instilled in their everyday business operations (Beyer
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& Niño, 1999). Additionally, there are international agreements and codes that multinational enterprises must follow. Secondly, social activists compose organizations to focus attention on pressing ethical issues and to stop certain practices (Beyer & Niño, 1999). It has been proven that the pressures created by these concerned social activists are crucial in effecting real social reform
(Beyer & Niño, 1999).
Beyond all of this, Beyer and Niño (1999) claim that to properly implement ethical business practices three tasks must be accomplished: communication, monitoring, and sanctions.
Communication involves properly informing the company about the expected behaviours included in the implementation (Beyer & Niño, 1999). Monitoring includes properly observing and evaluating this behaviour upon implementation, and sanctioning involves taking the necessary preparation to encourage agreement (Beyer & Niño, 1999). It is reasonable to expect the largest corporations to make the earliest efforts, as they are the most visible and therefore, are more likely to be scrutinized by stakeholders (Beyer & Niño, 1999). In addition, they have the largest amount of resources to enforce these efforts and are likely to end up acting as moral examples for potential firms looking to follow in their footsteps (Beyer & Niño, 1999).
Strategic Conclusion
To conclude, it is imperative that ethics be looked at from multiple perspectives. What we see as ethical in Canada may not be considered ethical in another country, given divergent concepts of acceptable practice. While seeking out foreign or international opportunities, it is important for managers to be aware of and consider prevalent social attitudes. Given the evolution of acceptable practices over time, it is important to consider both the timeliness and cultural components of situations involving ethical decision-making. With that in mind, ethics is a very situational concept, often inclusive of an extreme grey area. Some instances will be much more obvious to decide what is right or wrong, but not always. Furthermore, engaging a broader
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audience, including stakeholders, will allow managers to make decisions that better reflect that of society—that which follows the prevailing social attitude.
Factbook Application
The assigned and supplementary articles for this theory session provide some key insights on how ethical standards are a function of time and culture and therefore, can be used as a reference point for comparing one industry between two countries. A macro level analysis can be conducted to analyze the country pairs and determine the following: (1) what are the prevailing cultural values and what influence do they have on ethical practices, (2) are the prevailing ethical norms a result of political systems and economic policies, and (3) does the country primarily engage in business ventures with countries displaying similar ethical standards.
A micro level analysis can be conducted to analyze your respective industries by answering the following: (1) which of the job tactics identified by Ralston et al. (1994) are prevalent among employees, (2) which stakeholders do employees primarily interact with (3) are the prevailing ethical standards a result of organizational climate or broader societal norms, and
(4) do organizations from this industry exclusively conduct business with firms exhibiting similar ethical practices.
With respect to the ever-present Hofstede framework, it is necessary to consider how each of the cultural dimensions compares between countries. These may help identify the root cause of differences in ethical perspectives, should there be any. Referring back to the study of the US and
Hong Kong, drastically different cultural dimensions are attributable to the distinction in levels of acceptance for certain practices (Ralston et al., 1994). However, one should refrain from solely relying on cultural dimensions as indicators of differences in ethical standards. Rather, the analysis of ethics should take into consideration multiple facets.
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References
Beyer, J.M., & Niño, D. (1999). Ethics and Cultures in International Business.
Journal of
Management Inquiry, 8 (3), 287-297. Retrieved from http://jmi.sagepub.com
Bucar, B., Glas, M. & Hisrich, R. (2003) Ethics and entrepreneurs: An international comparative study. Journal of Business Venturing, 18 , 261-281. doi: http://dx.doi.org/10.1016/S08839026(01)00083-0
Donaldson, T. & Dunfee T.W. (1999). Ties that bind--A social contracts approach to business ethics.
Boston, MA: Harvard Business School Press.
Feldman, S.P. (1988) Playing with the pieces: deconstruction and the loss of moral culture.
Journal of Management Studies. 35 (1), 59-79.
Ralston, D. A., Giacalone, R. A, & Terpstra, R. H. 1994. Ethical perceptions of organizational politics: A comparative evaluation of American and Hong Kong Managers. Journal of
Business Ethics , 13 , 989-999.
Svensson, G & Wood, G (2003). The Dynamics of Business Ethics: a Function of Time and
Culture - Cases and Models. Management Decision, 41 (4), 350-361.
Upward Influence - Definition and More from the Free Merriam-Webster Dictionary. (2013).
Dictionary and Thesaurus - Merriam-Webster Online . Retrieved from http://www.merriam-webster.com
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